The OLED Association, an industry-based organization, provides a forum for the interchange of technical and global market information and regularly updates its members on developments.
LGE the leader in premium TV sales
IHS puts LG Electronics as leading the global premium TVs market based on sales of its OLED, TVs that have been gaining popularity for their top-notch quality and relative affordability. The firm’s home electronics division recently set a milestone by logging a record-high operating margin of 14 percent in the first quarter of this year, riding on the successful sales of its premium OLED TVs. At the same time LG Display claimed it barely broke even on OLED TV panel sales. When LG Electronics launched its OLED TVs in 2013, a 55-inch model was priced at around 15 million won (USD 13,395). 5 years later in 2018, the cheapest model in the same size is priced at 2.39 million won, around one-sixth the original cost. IHS Markit predicts the annual global demand for OLED TVs will grow from just 340,000 units in 2015 to 2.54 million in 2018 and all the way to 9.35 million units in 2022. But LG Display is targeting 3 million TV panels in 2018.
AUO and Innolux report Q2 results – revenue down yoy
Suffering from an oversupply of large panels and the correlated reduction in panel prices, Innolux announced Q218, revenues of NTD 66.5 billion, down 0.4 percent on quarter and 21.4 percent on year. Typically, Q1 is the lowest quarter, but revenues dropped even as shipments of large-size panels were up 14 percent sequentially to 31.99 million units, while those of small- to medium-size applications were down only 0.4 percent to 68.28 million units. For June 2018, consolidated revenues were NTD 24.8 billion (USD 816.6 million), up 12.6 percent on month but down 11.7 percent on year. In June, shipments of large-sized panels reached 11.67 million units, up 4.1 percent sequentially; shipments of small- to medium-size panels totaled 23.98 million units, up 6.8 percent sequentially.
Having already raised its quotes for the mainstream TV panel size segments, Innolux expects demand for small- to medium-size panels to rebound in Q3, and the downward spiral of panel price to end, even as the Chinese increase their small/medium capacity in OLEDs.
AU Optronics continues to struggle with lower panel prices and reported preliminary Q218 revenue at NTD 75.05 billion up 0.8 percent sequentially, but down 11.1 percent y-o-y, a roughly flat H1. Q3 consensus (revenue) is NTD 76.697 billion, roughly 2.2 percent above Q2, and H1 sales represent 47.1 percent of full year consensus of NTD 31.4 billon, a bit below the 5-year average of 49.26 percent, which makes the H2 a bit more back-end loaded. June results were NTD 24.83 billion, 3.5 percent sequentially and down 13.5 percent y-o-y. Large panel shipments were 9.63 million, up 2 percent sequentially and up 6.6 percent y-o-y, while small panel shipments were 13.58 million units, down 10.8 percent m-o-m and up 3.3 percent y-o-y. 2017, which was a well-balanced year for AUO, saw a sales peak in August, with similar peaks in September in earlier years, making Q3 the best quarter for AUO in most years. It is expected that Q3 will be the peak quarter this year, unlike 2016, which was an anomaly.
WitsView also reported that some panel makers have raised their July quotes for 32-inch TV panels by USD 3 per unit reflecting peak-season demand. Propelled by the upturn in the prices of 32-inch panels, quotes for 40- to 43-inch panels are likely to stay flat or edge up slightly in the near term, while prices for 55-inch models will stabilize in August, said the market research firm.
South Korean government invests in the next big thing for displays
The South Korean government is running a major R&D project in the Gen 5 display sector that hopes to surpass OLEDs, a Gen 4 display technology. This means that a serious crisis signal is facing the Korean display industry. China already surpassed Korea in LCD production capacities in 2017. China is expected to take up 39 percent of world OLED production in 2020, closely trailing Korea, which is expected to account for 57 percent of global production. The problem is that Korea’s technology in the next-generation display field such as foldable and rollable displays is still at the toddler stage. LG and Samsung have patents on rollable display devices, but there are still a lot of hurdles to clear until mass production.
Moreover, as the era of the Fourth Industrial Revolution accelerates, the use of displays is going beyond TVs and mobile phones to automobile windshields and textiles. IHS forecasts that the global display market which stood at USD 123.2 billion in 2017, will grow to USD 301.1 billion in 2035. This is why the government’s Display Innovation Promotion Group (tentative name) which will be set up as early as September is aiming to secure commercialization technology for next-generation displays ahead of other matters. When autonomous cars are commercialized, they will have displays that will nearly fill windshields from the right to the left side. But now the current level is cutting and attaching LCDs. If we develop flexible display production technology, we will be able to preempt the new display market for displays for buildings and houses among others. Another task for the Korean display industry is to foster Korea’s material and equipment industries, which are backward compared to those of developed countries.
In the case of TFT-LCD panel makers, Korean companies have a 24 percent market share, which is less than half of Japan’s (56 percent). In the OLED sector, Korean companies have a 17 percent market share in polarizers but have not recorded meaningful results in other items. The Ministry of Trade, Industry, and Energy believes that it is urgently needed to foster the Korean material and equipment industries so that Korean companies will be able to outclass Chinese companies closely trailing them by pruning production cost. The Ministry of Trade, Industry, and Energy expects this project to empower Korea to widen the display technology gap with China to more than 3 years.
Samsung to build Gen 8.5 pilot line for OLED/QD TVs
Samsung Display is working with toolmakers to prepare pilot production of OLED/QD- based TV panels for H2 2019, according to a report by Korean ETNews. In February 2018, rumors started circulating that Samsung had resumed its OLED R&D program, and that the company was focusing on QD-OLED – OLED displays with quantum dot conversion films. Korean ETNews now reports that Samsung is working with Canon and Kateeva to develop production equipment where blue fluorescent OLED material is evaporated using Canon/Tokki VTE tools and QD films are applied by using Kateeva’s ink-jet printing method. They are reportedly aiming for Gen 8 production equipment, which is similar to LG Display’s current production line for OLED TVs, allowing them to mass-produce 55- to 65-inch displays.
This method will allow Samsung to steer clear of LG Display’s patents and create OLED TVs without needing a color filter or FMM. Samsung is planning to start pilot production in H2 2019 in order to assess production yields and other factors. It will take additional time to set up full-scale mass production, if the company decides to move ahead. The company believes that soluble organic material emitters (RGB) have not matured sufficiently in lifetime and efficiency and fluorescent blue is currently the best option to have RGB OLED TV without FMM or a color filter. It is likely that Samsung will also use amorphous oxides and not LTPS, which they used in their prior attempt to make OLED TVs. The adoption of this approach would be a big blow to UDC’s market share in OLEDs. If this technique is proven cost and performance effective, it could also be adopted by CSOT, BOE, and possibly LG and no phosphorescent material would be used in OLED TVs. A 10 million OLED TVs market would be equivalent to 1 million smart phones displays, cutting UDC’s revenue potential in half.
These are desperate times for Samsung’s premium TV segment as the company has seen its share in the premium TVs segment plummet from more than 50 percent to less than 10 percent, according to market data. In the last 2 quarters, sales of OLED TVs have surpassed those of QLED LCD TVs, and OLED is expected to enter the mid-range territory in the coming years. Samsung is currently relying on LCD TVs because it has no alternative, and if the QD-OLED project proves unsuccessful, the company’s future panel business is likely to disappear. Samsung is also developing displays based on micro LED technology.
A strong quarter for LCD TV sales does not necessarily portend a strong market
Despite better-than-expected Q1 demand for TFT-LCD TV sets and TV panels, IHS warned market players to adopt a more conservative outlook in demand growth for the coming quarters. Earlier market expectations assumed that demand would slow in Q1 prompted by the observation that TV set makers would put a hold on panel purchases based on hopes that panel prices would drop further. Such a view was largely attributed by the development of Chinese panel makers planning aggressive investments over the next 2-3 years. But panel makers managed to sell more panels than originally forecasted for Q1 because panel prices declined much faster than expected. According to IHS, TV panel unit shipments increased by 13.3 percent in Q1 compared to a year ago, while TV set shipments rose 7.9 percent during the same period. LCD TV panel shipments are expected to grow faster than the LCD TV set shipments, expanding the accumulated gap between the two even further. The accumulated gap between LCD TV panel and set shipments in Q2 and Q3 of 2018 is expected to be higher than past 10 years, reaching 8.3 percent and 8.4 percent, respectively, up from 7.9 percent in Q1. Furthermore, the gap is expected to remain high until 2019.
The main reason for the higher gap is the aggressive investment in Gen 10.5 fabs. TFT LCD capacity, in terms of area, will soar in the next 4 years. As capacity is expected to increase more than demand, panel suppliers are likely to push to sell panels at lower prices while set makers are hesitant in buying panels expecting the price to drop even further. When the accumulated gap in panel-set shipments is high, an inventory correction usually follows. If TV set makers’ panel purchasing drops, it will likely cause a cash flow issue to panel suppliers, and they would likely need to reduce the utilization rate to control the supply.
TFT LCD panel prices still dropping
Large LCD panel prices have been going down and the pricing pressure has pushed some panel producers into the red. Typically, high utilization means high margins, but at the bottom of the cycle, high utilization forces lower prices and a short-term strategy of selling at cash cost. This focus on maintaining high utilization rates, coupled with relatively weak demand and a continuing increase in Chinese
fab capacity gave brands a legitimate reason to reduce orders and prices continued to fall.
We may now be at an inflection point as production of displays for holiday CE products is about to begin, and display industry’s y-o-y growth begins to turn positive in Q318 even with relatively modest TV panel shipment growth. Some of this can be attributed to maintenance that is done to fabs during the early summer, which limits capacity to a degree, but the bulk of the display revenue increases are a result of production of panels for displays that will be used for various CE products heading into the holidays. This is a critical period for the panel space, and despite the somewhat weak results in recent years Q3 tends to be the most important from a sales standpoint.
Some panel producers have lowered utilization in June, either voluntarily to reduce inventory or to do maintenance, and that will help to stabilize panel prices to a degree, but Chinese panel producer BOE has decided to take a more aggressive approach to the price decline issue, as BOE is the leader in the production of 32-inch TV panels where prices have fallen 32.3 percent this year and 42.9 percent since their peak in October 2016.
Over the last 2 months, BOE changed the production schedule in one of their Gen 8.5 fabs from 32-inch TV panels to 55-inch TV panels, in an attempt to limit the supply of that panel size. BOE is now, along with fellow Chinese panel producer ChinaStar also a big supplier of 32-inch panels, pushing an increase in 32-inch panel prices. In the long term, the industry must face an increase in large area capacity of over 25 percent as the new Gen 10.5 fabs reach MP. The pressure will be on the Gen 8.5 fab owners as the 65-inch panels are more cost-effective when built on the Gen 10.5. The result will be an arbitrary increase in 55-inch and smaller panels further increasing the pressure to reduce ASPs.
Chinese TV brands increase TV panel purchases by ~16 percent YTD
IHS reported that the major Chinese TV brands increased their purchase of LCD TV panels by 16 percent YTD, to 60 million panels in the first three quarters from 51 million in 2017. Panel purchases in 2015 and 2016 were 44.6 million and 54.1 million, respectively. Q4 is typically the largest, representing as much as 31 percent of the annual total.
32-inch panel prices increase due to contrived shortage
BOE dominated the production of 32-inch TV panels, and shifted a portion of its production away from 32-inch panels toward 55-inch with relatively little notice to customers. As it would take other panel producers a bit of time to fill the gap a shortage was created in the 32-inch size. 32-inch panels tend to be used for entry-level sets in emerging markets, and have been declining in price for some time, particularly since Q316. 32-inch panel prices are close to cash costs for some producers, who generally are able to bring material costs down by between 1.5 percent and 2 percent per quarter. BOE management, facing another quarter of low profitability on this panel size, shifted production to a more profitable panel size, 55-inch. The change came right before the beginning of the holiday build period (July through November), when TV buyers must build inventory levels to meet yearly sales goals. As BOE and ChinaStar dominated the 32-inch category, shifting their production created a shortage right at the time when TV panel buyers began their holiday buying.
As a result of BOE’s strategy TV panel buyers bid up 32-inch panel prices to meet holiday season demand causing a disproportionate jump in 32-inch panel prices of 11.1 percent m-o-m in July, giving BOE and ChinaStar, who dominate the 32-inch panel space despite the reduction, a windfall. The reaction of the brands was to grab panels before prices rose further, with the average price (including the last few months’ worth) keeping them whole. In July, 32-inch panel prices rose by 11.1 percent indicating that buyers took no chances and essentially bought 32-inch panels at any price to fill quotas.
Most other TV panel prices also rose, as panel buyers feared the same scenario developing for other panel sizes, except for 55-inch panels, the ones BOE had shifted production to last month. Now that supply increased in this size, buyers saw no need to chase price increases. The rise in other TV panel prices was simply buyer-panic, a common malady among TV panel buyers; some of the substantial increases were more defensive than practical. Panel makers did reduce utilization during May as prices were dropping and panel makers pushed out inventory at very low prices, which helped to reduce overall panel inventory, making it easier for panel producers to ask for price increases. TV brands have been less than optimistic about the holiday season this year, with little new technology to sell and the potential for trade war tariffs and potential boycotts overlaying what is already a relatively unexciting scenario. Until July, TV brands experienced declining panel prices, which still gave them reasonable profitability, but with panel prices rising, profitability comes into question.
July pricing for other panel segments was benign. On a 12-month basis almost all TV panel sizes are still close to their 12-month lows and between 25 percent and 43 percent off their 12-month highs, so we still have a long way to go to consider this a real recovery in panel prices, but the display space is, if nothing else, a cyclical business, and cycles can be short. On the supply side, nearly all TV panel production lines at most flat panel makers will be operating at full capacity, pushing the global TV production capacity to grow 6.8 percent on quarter and 9.3 percent on year in Q318 and major sources of increased capacity include BOE Technology’s Gen 10.5 line, CEC-Panda LCD Technology’s two Gen 8.6 lines, and AUO’s Gen 8.5 line. By the size of TV panel, quotes for 32-inch panels are likely to edge up 10 percent quarterly as overall demand is expected to be 1.6 percent higher than makers’ supply capacity. Prices of 39.5-inch to 43-inch panels will also continue to move upward in Q3 on tight supply that has been persistent since July. Quotes for 55-inch models, which have become steady in July, will go up slightly in August and September. However, prices of 65-inch panels will see a steady trend in Q3, as the supply and demand for such models will become more balanced.
CSoT confirms work on Gen 11 Fab and the allocation of 20,000 substrates per month for OLED TVs
Last month CSoT, a subsidiary of TCL announced plans to establish a Gen 11 LCD+OLED TV fab in Shenzhen, China. The new fab will use Oxide-TFT backplanes, and the OLED portion will be allotted 20,000 substrates/month out of a total of 90,000. The fab will start mass production in 2021. CSoT is progressing in its ink-jet printing project and the company is collaborating with Kateeva for the IJP tool and Sumitomo Chemical, Merck, and DuPont for the soluble material. They are also working with Tianma in addition to University research groups in China. It is not clear if all these groups joined Guangdong Juhua Printing Display Technology, which was established in 2016 by CSoT and Tianma. CSoT believes that ink-jet printing of OLED TVs will be feasible within 3–5 years, which means that it could be used in the new Gen 11 fab, but it is likely that the fab will initially use an evaporation-based process.
Mini and micro LEDs
Micro LEDs come with less than 100 microns, per side, and may be as small as 3–5 microns per side. Mini LEDs are around 100 µm and up, although the upper limit has not been defined but could be 0.5 mm. The primary used of mini LED is in direct backlit LCDs, where more local dimming areas can be created to improve contrast ratio. Companies, such as AUO and Innolux have shown LCDs with mini LED backlights from a few inches in diagonal, and intended for VR applications, up to TV sizes. Samsung has used mini LEDs in direct addressing TVs where no LC is used. These mini LED-backlit displays can support HDR and high brightness with very little halo effect if they are well-designed. The first application seems to be deep black for automobile applications as a forerunner to OLEDs, which have not completely met all the auto specs. Unfortunately at SID Display Week, manufacturers called LCDs with mini LED backlights mini LED displays, except for Samsung, which called it mini LED and micro LED.