Analysts had blamed a shortfall in supplies of display for leaving Apple with too few iPhones to meet burgeoning demand at its launch this month.

At the end of August three weeks before the new iPhone went on sale, Sharp, which was supposed to be mass producing at its Kameyama plant in central Japan, had fallen behind schedule, a source earlier told Reuters.

Sharp, the source said, was struggling to improve low production yields, raising the question of whether Apple would be prepared to sweeten financial incentives to secure an acceleration of production.

Apple also buys screens from Japan Display and Korea's LG Display.

Apple began offering the iPhone5 on Sept 21, selling over 5 million in the first three days, topping the iPhone 4S, which sold more than 4 million units in its first weekend. On the fourth day, Apple said it had run out of its initial supply and many pre-orders were scheduled to go out in October.

"The iPhone 5's 4-inch low-temperature polysilicon (LTPS) touch-panel display with in-panel switching (IPS) is exceptionally difficult to produce at high yields," Deutsche Securities analyst Yasuo Nakane said in a report on Sept 14.

Nakane estimates iPhone screen capacity at Japan Display and LG Display at eight million a month each, and at six million at Sharp. Displays for Apple's first lot of new iPhones likely came from only LG and Japan Display, Nakane added.

Sharp and Japan Display do not publicly admit to the relationship even though Apple, in a list of component makers published last year, identified both Japanese companies as suppliers.

The Sharp executive made the comment at a press briefing in Osaka, western Japan, speaking on condition he wasn't identified. ($1 = 77.6950 Japanese yen)

(Reporting by Tim Kelly and Yoshiyuki Osada; Editing by Muralikumar Anantharaman)

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