Next iPhone to Slim Down

HONG KONG— Apple Inc. AAPL -2.17 % 's next iPhone, currently being manufactured by Asian component makers, will use a new technology that makes the smartphone's screen thinner, people familiar with the matter said, as the U.S. technology giant strives to improve technological features amid intensifying competition from Samsung Electronics Co. SSNHZ 0.00 % and other rivals.

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Apple's next iPhone, currently being manufactured by the company's Asian component makers, will boast a thinner screen of the likes used by its rival Samsung. Above, the Apple store in Hong Kong. European Pressphoto Agency

Japanese liquid-crystal-display makers Sharp Corp. SHCAY 3.03 % and Japan Display Inc.—a new company that combined three Japanese electronics makers' display units—as well as South Korea's LG Display Co. are currently mass producing panels for the next iPhone using so-called in-cell technology, the people said.

The technology integrates touch sensors into the LCD, making it unnecessary to have a separate touch-screen layer. The absence of the layer, usually about half-a-millimeter thick, not only makes the whole screen thinner, but improves the quality of displayed images, said DisplaySearch analyst Hiroshi Hayase.

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The current iPhone 4S is 9.3 millimeters thick, according to Apple's official website.

For Apple, the new technology would also simplify the supply chain and help cut costs as it would no longer need to buy touch panels and LCD panels from separate suppliers.

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Getty Images

It was previously reported that the new iPhone will likely come with a screen larger than the current iPhone's 3.5-inch display. A thinner screen could help offset an increase in weight due to the larger size.

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Technological progress at LCD makers such as Sharp, Japan Display and LG Display is crucial for Apple, given that Samsung has been pushing its organic light-emitting displays as one of the unique features of its Galaxy phones. Samsung's flagship smartphone, the Galaxy S III, comes with a 4.8-inch OLED screen and is thinner than the current iPhone.

The vast majority of OLED screens used in mobile devices today are supplied by Samsung. OLED screens, which don't require backlighting, tend to be thinner than conventional LCD panels.

While Apple and Samsung together dominate the lucrative market for high-end smartphones, the companies are under constant pressure to meet high expectations for more-powerful, capable devices that are easier to carry.

The G4 was a small cube-shaped personal computer sold without a monitor. Getty Images

A thinner screen in the next iPhone could make the whole device slimmer, or make extra room available for other components such as batteries. But in-cell touch screens are harder to manufacture than conventional LCD screens.

The people familiar with the situation said that LCD makers are finding the manufacturing process challenging and time-consuming as they scramble to achieve high yield rates.

Analysts have said that the new iPhone is expected sometime in the fall.

In May, people familiar with the matter said that the new iPhone will likely come with a screen larger than the current iPhone's 3.5-inch display. A thinner screen could help offset an increase in weight due to the larger size.

The LCD industry has been working on the in-cell touch technology for several years. For LCD panel makers like Sharp, Japan Display and LG Display, Apple's iPhone provides the environment where they can demonstrate their latest technological progress to show that LCD screens can continue to evolve and stay competitive against OLED displays. In the meantime, Sharp, Japan Display and LG Display have also been developing OLED displays.

At the same time, the adoption of in-cell technology is bad news for makers of conventional touch panels used in many smartphone screens now. Taiwan's Wintek Corp. 2384 -6.63 % and TPK Holding Co. 3673 -2.26 % , which supplied the touch-panel layer of the iPhone 4S screen, didn't get orders for the next iPhone, people familiar with the situation said.

—Jessica E. Vascellaro in San Francisco contributed to this article.

Write to Juro Osawa at juro.osawa@dowjones.com and Lorraine Luk at lorraine.luk@dowjones.com