The sometimes-credible Taiwanese tech newspaper DigiTimes has come out with a new rumor about Apple’s next-generation iPhone. In a spot of bad news, it was reported that Apple’s display partners have ran into problems in manufacturing the in-cell touch screens that the company’s iPhone 5 is expected to have.

DigiTimes reported that as an added incentive, Apple has offered $10 to $15 worth of subsidies per good panel to Japan Display, LG Display and Sharp. Despite this, yields still remain too low. It claimed that the best performer – Japan Display – only had a 50% success rate in making good panels.

Due to this, the Taiwanese rumormonger estimated that total production of these panels stood at around 4 to 5 million units in July, which falls sharply below Apple’s expected target of 20 to 25 million units.

According to some analysts, Apple may be forced to turn to an old supplier – TPK, which made the traditional touch panels for the older iPhones – to make up the backlog. However, DigiTimes sharply disagreed, saying that such a move would delay the new smartphone’s launch.

While DigiTimes has had a bad rap for releasing inaccurate rumors about upcoming Apple devices, it was the first to report that the next-generation iPhone would have in-cell touch screens, which integrate the touch sensors into the TFT panel, thereby reducing thickness. This report was apparently confirmed by KGI’s Ming-Chi Kuo and The Wall Street Journal.

Poor display yields aren’t the only component manufacturing issue that has been reported with respect to the next-generation iPhone. Several weeks back, a rumor emerged that battery makers were finding it difficult to produce power packs that matched Apple’s standards.