Posts

[Analyst Column] LCD Industry Administration to Worsen after 3 Years

Choong Hoon Yi, Chief Analyst, UBI Research

BOE is intending to carry out a large amount of investment in order to operate Gen10.5 LCD line from 2018. Meanwhile, key set makers including Apple, Samsung Electronics, LG Electronics, and Panasonic are devising strategy to move from LCD to OLED for smartphone and premium TV displays. As such, it is becoming more likely for the LCD industry to be in slump from 2018.

At present, the area where LCD industry can create profit is LTPS-LCD for smartphone. The forecast smartphone market for this year is approximately 15 billion units. Of this, Samsung Electronics and Apple are occupying 20% and 15% of the market respectively. OLED equipped units are less than 2 billion.

However, from 2018 the conditions change greatly. Firstly, Apple, which has been using LCD panel only, is estimated to change approximately 40% of the display to OLED from 2017 earliest and 2018 latest. Apple is testing flexible OLED panels of JDI, LG Display, and Samsung Display, and recommending them to invest so flexible OLED can be applied to iPhone from 2017. The total capa. Is 60K at Gen6. As new investments for Gen6 line of Samsung Display and LG Display are expected to be carried out from 2016, supply is theoretically possible from 2017.

analyst-column1

If 5inch flexible OLED is produced from Gen6 line, under the assumption of 50% yield at 60K capa. 65 million units can be produced annually, and approximately 1 billion units if the yield is 80%. If Apple’s iPhone shipment in 2017 is estimated to be around 2.7 billion units, within the 50-60% yield range approximately 25% of the display is changed to OLED from LCD, and if yield reaches 80% around 40% will change. The companies that are supplying Apple with LCD for smartphone, LG Display, JDI, and Sharp, are expected to show considerable fall in sales and business. These 3 companies could be reduced to deficit financial structure just from Apple’s display change

Furthermore, as Apple is not producing low-priced phones, under the assumption that future iPhone could all have OLED display, Apple could cause the mobile device LCD industry to stumble after 3 years.

Samsung Electronics also is gradually changing Galaxy series display to OLED from LCD. Of the forecast 2015 shipment of 3 billion units, 50%, 1.5 billion units, has OLED display, but Samsung Electronics is expected to increase flexible OLED and rigid OLED equipped products in future. Particularly, as Apple is pushing for flexible OLED application from 2017, Samsung Electronics, whose utilizing OLED as the main force, is estimated to increase flexible OLED usage more than Apple. It is estimated that all Galaxy series product displays will be changed to OLED from 2019.

애널리스트2_(1)

Under these assumptions, of the estimated smartphone market in 2020 of approximately 20 billion units, Samsung Electronics and Apple’s forecast markets’ 7 billion could be considered to use OLED.

Samsung Display is strengthening supply chain of set companies using their OLED panels. Samsung Display is supplying OLED panels to diverse companies such as Motorola and Huawei as well as Samsung Electronics, and also expected to supply rapidly rising Xiaomi from 2016. If smartphone display is swiftly changed to OLED from LCD from 2017, Chinese display companies that are currently expanding TFT-LCD lines are to be adversely affected.

Additionally, in the premium TV market, LG Electronics mentioned that they will focus on OLED TV industry at this year’s IFA2015. As a part of this, LG Display is planning to expand the current Gen8 34K to 60K by the end of next year. Furthermore, in order to respond to the 65inch market, Gen9.5 line investment is in consideration. In the early 2015, Panasonic commented that they were to withdraw from TV business but changed strategy with new plans of placing OLED TV on the market in Japan and Europe from next year.

As Samsung can no longer be disconnected from the OLED TV business, there are reports of investment for Gen8 OLED for TV line in 2016. Although OLED TV market is estimated to be approximately 350 thousand units this year, in 2016, when Panasonic joins in, it is expected to expand to 1.2 million units. The OLED TV’s market share in ≥55inch TV market is estimated to be only 4% but in premium TV market it is estimated to be significant value of ≥10%.

애널리스트3

If Samsung Display invests in Gen8 OLED for TV line in 2016, from H2 2017 supply to Samsung Electronics is possible. As OLED Gen8 line’s minimum investment has to be over 60K to break even, it can be estimated that Samsung Display will invest at least 60K continuously in future.

Under these conditions, LCD industry can only be in crisis. Firstly, it becomes difficult for Sharp to last. Sharp, which is supplying TFT-LCD for Apple’s iPhones and LCD for Samsung Electronics’ TV, will lose key customers. Secondly, BOE, AUO, and JDI, the companies selling LCD panels to these companies, are not ready to produce OLED and therefore damage is inevitable.

BOE is carrying out aggressive investment with plans to lead the display industry in future with operation of Gen10.5 LCD line. Therefore, from 2018, as the main cash cow items disappear, administration pressure could increase.

Solution Process Panel, Cheaper To Produce than LCD

According to 2015 Solution Process OLED Report, published by UBI Research on October 14, solution process technology could produce 55inch OLED panel at approximately 43% cheaper cost compared to WRGB method.

The report added that this value is the result of analysis of 2015 Q2 55inch UHD OLED panel price and yield, which is slightly higher than current production price of 55inch UHD LCD panel. However, considering that the solution process OLED structure will become simplified and that yield of backplane and encapsulation can be improved, the OLED panels will be able to be produced at lower cost than LCD panel. The report also revealed that solution process OLED can be an alternative solution for large area OLED panel in achieving price competitiveness.

Solution process is a technology that can produce large area RGB pixel OLED panel using Gen8, or higher, equipment without cutting the mother glass. Key AMOLED panel companies are active in developing this technology.

However, as solvent is used in order to turn the existing evaporation material into ink, its purity is decreased leading to lower emitting efficiency and therefore lower lifetime. Despite these factors, key panel companies’ enthusiasm for solution process technology is due to the high emitting material usage efficiency without using color filter, and simple structure compared to WRGB OLED panel which leads to production cost decrease.

Panasonic has been most active in developing solution process applied OLED panel, and has presented several times in CES and IFA. BOE and AUO also have revealed solution process OLED panel produced via ink-jet manufacturing equipment, and CSOT is considering solution process development. Samsung Display and LG Display, leaders of AMOLED industry, are also actively developing the technology. LG Display has adopted Gen8 ink-jet manufacturing equipment, and Samsung Display has started solution process OLED panel development with a focus on ink-jet manufacturing equipment companies.

Material and manufacturing equipment companies as well as panel companies are leading the solution process technology development and commercialization. Kateeva agreed on technology collaboration with Sumitomo Chem. while Merck did the same with Seiko Epson. DuPont recently revealed that they enlarged solution process OLED material production facilities and began operation.

Following these participation by key panel, material, and manufacturing equipment companies in solution process technology development and commercialization, it is anticipated that the solution process OLED panel market will record rapid growth.

UBI Research’s 2015 Solution Process OLED Report forecast that solution process OLED panel market will actively begin mass production from 2018 and show approximately US$ 2,329 million in 2020.

151016_Solution process OLED panel, LCD보다 저렴하게 제작 가능

Korean TV Industry, Where to Go?

Choong-hoon Yi, Chief Analyst/ UBI Research /ubiyi@ubiresearch.co.kr

Korean TV industry, according to recent reports by media, is showing a red light not being able to escape the deficit structure.

Samsung Electronics and LG Electronics possess high market share in costly premium TV market. However, in 30inch grade market, the two companies struggle against economically priced sets. In order to maintain sales, Samsung Elec. and LG Elec. are managing diverse product portfolio but business profit keep falling. Due to this, LCD panel stocks produced by Samsung Display and LG Display are steadily increasing.

LCD panel business is sinking into a pit.

What is the reason that Korea’s LCD TV and LCD business values can only become worse?

This can be forecast from looking at Japan’s TV and LCD business. Until the early 2000s, Japan was one of the leaders in electronics. However, Japan’s TV business is gradually dying out. Japan’s leading companies, Sony and Panasonic’s TV business began to be deteriorate because of Korean mid-low price products. In succession, Sony ended up spinning off the TV business, and Panasonic stopped TV business other than for domestic supply. Korean TV companies began to dominate the market. However, only a few years since then, Korean TV industry is losing commercial value, pushed aside by mid-low price products manufactured by China and others.

Second is display investment. As Japanese TV industry began to crumble, Japanese display companies had no choice but to stop the investment. The companies could not see a way to make profit through investment even if TV market grew as client companies’ panel purchasing power fell. Korea is the same. Samsung Elec. and LG Elec.’s TV business profitability deterioration led toward Samsung Display and LG Display’s halting the investment. On the other hand, Chinse display companies began Gen10.5 line investment. TV industry relies on assembly business and business network and therefore initial investment cost is low. In comparison, display industry is high risk as it requires large scale investment from early stages. If the business profit falls without investment cost return, companies face great loss and business closure is also not easy.

The third reason that Japanese TV companies are dying out is because they could not produce premium TV. Sony, which lost its competitiveness in LCD TV, tried to strengthen its market leadership through 4K TV. However, the brand value was already down and with the lack of marketing value, Sony easily gave up the market to companies in pursuit such as Samsung Elec. and LG Elec. LCD TV already had no difference in quality whether it was produced by a Korean or Japanese company, and brand value order had switched. LCD TV quality produced by Chinese companies is already reached the top. They are no longer companies who produce cheaper knockoffs. Furthermore, LCD panel production technology of Korea, Japan, Taiwan, and China can now be deemed equal.

The final reason that stops Japanese TV business from securing market is that they failed to suggest differentiation point in premium TV. Fundamentally, differentiation is not possible for LCD TV. The biggest differentiation factors in the current TV market are picture quality and design. Any company can produce thin LCD TV and curved LCD TV. Panel size, resolution, and QD-LED using color gamut that LCD can actualize can no longer be differentiated technology. The difference of LCD panel and TV manufacturing technology between Korea, Japan, Taiwan, and China is already within a year. No matter what kind of product is released, market control has one year of expiration period. Considering the promotion period required in the market is approximately 6 months, the period where profit can be made is shortened even further.

So what is the solution for the Korean TV industry to survive?

As I have mentioned dozens of times for several years, what is left is OLED TV. What LCD cannot do in terms of picture quality and design, with OLED it is possible. Therefore, only the non-LCD products can enjoy the key factors of differentiation in premium TV market.

Existing premium TV is IPTV, a market that Japanese TV companies have been pursuing since early 2000s. Internet connection is possible through TV and allows for exchange of information in both directions. The basic concept of IPTV is watching TV while searching the information on TV via internet. But how useful is this concept at present? The usefulness of IPTV is becoming increasingly low as smartphone is used to search information, use the internet, and even watch TV. With no reason to use the internet via TV, TV companies should seriously consider whether TV with high white brightness is really needed. Rather than white TV with high brightness, it is time to place more importance in the functions of the TV itself. TV screen only uses 20-30% of full white brightness. Films, with outdoor shooting, falls under 20%, and for contents shot at night, black is more important.

Considering ‘blackness’ and design, anyone can find where the solution lies. If the foolish notion of trying to make OLED as bright as LCD is abandoned, there is hope.

LG-OLED-TV-SID-2015

LG OLED UHD TV, SID 2015

 

Samsung-OLED-TV-IFA-2013

Samsung OLED UHD TV, IFA 2013