Apple reportedly turns to Samsung after LG’s iPad 2 panels experience issues

Apple has reportedly suspended new orders for iPad 2 panels with LG Display and move to rivals Samsung and Chimei Innolux after the display manufacturer’s recent shipments to Apple experienced quality issues, Digitimes has revealed.

According to industry sources, LG’s panel shipments in July were a million units short of its original monthly goal, despite moving operations to its 6G LCD plant to produce the 9.7-inch panels for Apple’s tablet devices in the second quarter of 2011. The company had planned to up production from 3 million units in the second quarter to 4 million units in the third.

As a result, the sources believe LG’s revenues in the third quarter are likely to be impacted, as Apple has suspended new orders and turned to its rivals to meet demand.

The issue seems to revolve around the failure of drop tests, which saw the backlight units fail. This, coupled with lower yield rates (a level of usable panels from a mass-produced batch of displays), saw Apple look elsewhere for its iPad 2 panels.

Digitimes says that Apple’s competition with Samsung could see orders limited:

However, Samsung’s Galaxy Tab has head-on competition with the Apple iPad 2 in the end market. This would prevent Apple from sourcing more panels from Samsung, the sources added.

CMI was certified as one of the panel suppliers for the iPad 2 in second-quarter 2011 and has geared up for production since then. The maker shipped a little over 450,000 units of iPad 2 panels in Jul, the sources said.

Apple is also embroiled in a legal fight with Samsung over claims that the Korean vendor has copied iPhone and iPad designs. Samsung has been forced to stop sales of its Galaxy Tab 10.1 device in Australia and Europe. Samsung may see this as an opportunity to increase revenue in the short-term, as it fights Apple in the courts.

CMI is an affiliate of Foxconn, meaning it could become a regular supplier thanks to its links to the leading manufacturer of the iPad 2.

However, sources have indicated that LG would be able to retain its leading role if it can resolve its quality issues.