The deal will see Apple prepay $500 million to the South Korea-based electronics manufacturer sometime this month in exchange for a guaranteed supply of LCD screens for Macs and/or handheld products over the next 5 years.
LG, which sits behind Samsung as the world's second-largest maker of flat panel displays, already supplies Apple with 70 percent of its LCD panels, HI Investment & Securities analyst Park Sang-hyun told Reuters. He expects prices for the parts, which have been falling rapidly during the recent global slowdown, to pick up in the near future.
The strategic agreement between Apple and LG is reminiscent of a similar deal forged between the iPhone maker and five memory suppliers back in 2005, which has afforded the Cupertino-based firm a competitive edge in the digital media player and cell phone markets.
Under the terms of that deal, Apple prepaid a total of $1.25 billion to Hynix, Intel, Micron, Samsung Electronics and Toshiba in order to secure an ample supply of NAND flash memory through 2010.
By padding its memory suppliers with funds up front, it's believed that Apple was also able to obtain more favorable pricing on the components, which has helped it apply margin pressure to rival media player and cell phone makers who've struggled to offer similar storage capacities in their competitively-priced offerings.