Counterpoint - DSCC - Page 9

DSCC updated its capacity and demand outlook for the OLED industry. DSCC says that the oversupply situation for smartphone OLEDs will continue to effect the industry for years ahead.

According to DSCC the reason for the oversupply is Samsung's near-monopoly on flexible OLED phone panels - and the fact that the company keeps prices high and prefers high profit margins even though it leads to low utilization rates. DSCC sees China's capacity (which includes LG's Gunagzhou fab) share to rise from 5% in 2017 to 30% in 2020 and finally to 49% in 2025.

DSCC posted an update to their OLED (and LCD) fab capacity and utilization rate estimations. DSCC thought that Samsung's rigid OLED lines will remain in high utilization (almost 90%) in 2020, but the coronavirus pandemic lowered demand for OLEDs, and Q2 saw a sharp reduction in production of both flexible and rigid OLEDs. Looking into the rest of 2020, DSCC expects demand for OLED to rise.

DSCC also sees flexible OLED capacity almost overtaking LTPS LCD capacity by the end of 2020. Both flexible and rigid OLED capacity is increasing, while LCD production is reduced (in 2019 JDI shutdown its Hakusan LCD plant which reduced LTPS LCD capacity by 7%).

DSCC says that OLED revenues in Q1 2020 were $6.7 billion (up 24% from Q1 2019, but down 18% from Q4 2019). Both Samsung and BOE gained market share in the quarter, as LGD had a weak quarter.

DSCC sees the entire OLED market reaching $33 billion in 2020 (up 18% from 2019). Smartphone OLED sales will reach $26.6 billion, mostly led by a growth in flexible OLED sales. The OLED TV market will grow 19% to 4 million units in 2020. DSCC sees the laptop OLED market increasing significantly in 2020.

DSCC posted an interesting blog post, in which they detail what they believe to be Apple's iPhone 12 smartphone family specifications.

So we start with the iPhone 12, which will use a 5.42" 2348x1048 (476 PPI) flexible AMOLED display, produced by Samsung Display. DSCC believes the iPhone 12 will use a Y-OCTA integrated touch. DSCC believes that while BOE did not manage to get its panel to the iPhone 12, it may become a supplier in 2021 to the iPhone 12s - if all goes well with the iPhone 12 Max (see below).

DSCC updated its OLED material market estimates, saying that AMOLED stack material sales will grow from $951 million in 2019 to $2.69 billion in 2024 - a CAGR of 23%. These new estimates take into account DSCC's reduced input area forecast due to the slowdown in demand cased by the Covid-19 pandemic.

DSCC says that incremental improvements in material utilization and price reductions, material costs per square meters will decline in the future. The unyielded cost of producing a square meter of a WOLED TV panel will decline from $95.21 in 2019 to $56.11 in 2024.

DSCC says that the future will bring significant growth for foldable OLED displays - fueled by lower panel prices as production increases and yields improve, lower device prices and improved display reliability as devices improve.

DSCC sees meaningful improvements in devices starting in the second half of 2020. In 2020 around 5 million foldable devices (mostly smartphones) will ship, generating almost $1 billion in revenues. From 2020 to 2025, foldable display shipments will rise to 77 million units (a CAGR of 132%) and revenues will reach almost $8 billion (CAGR of 113%).

DSCC says that OLED area shipments will grow in 2020 to around 10.5 million square meters, up from 8 million square meters in 2019 - a growth of around 31%. In terms of revenues, the OLED market will grow 35% in 2020 to reach $37.6 billion. DSCC says that in 2020, 731 million OLEDs will be produced (up 27% from 2019).

Smartphone revenues will reach $30.7 billion in 2019 (up 35% from 2019) while TV revenues will grow 28% to $3.2 billion. Smartwatch revenues will increase 11% in 2020 to $2 billlion. The revenues for all other OLED applications are expected to increase by 69% in 2020 to $1.6 billion, mainly driven by laptop OLED displays.

DSCC says that OLED panel revenues in Q4 2019 reached $8.1 billion, down 2% from Q3 2019 and pretty much the same as in Q4 2018. In terms of units, DSCC says that in Q4 2019 124 million smartphone panels were shipped, 31 million wearable panels and 998,000 TV panels.

Smartphone revenues in Q4 2019 were down 2% from Q4 2018 (due to lower average sales price for both rigid and flexible panels, the number of panels actually increased 4%), and revenues for TVs were up 30% (to $752 million). Smartwatches remain the 3rd largest market for OLED panels, and experienced strong growth in 2019, but it seems as if the growth may have plateaued (in Q4 the revenues were down 7% from last year).

DSCC updated their display industry forecasts, saying that as LCD prices continue to fall it revises the capacity forecast downward by 6% as Display makers are delaying and cancelling LCD investments. DSCC's OLED capacity forecast is also reduced by 4% - and is now growing at a CAGR of 19% from 2016 to 2025 (the main reason is the cancellation of Visionox V2 phase 2 and LGD's E6 Phase 3).

DSCC says that OLED TV roadmap is still not clear as Chinese makers are not ready to commit to OLED TV production. DSCC does see next-generation TV capacity coming online in the future - which could be inkjet-printed OLEDs, OVJP, MicroLEDs and other potential technologies. But the next-generation display market is certainly not clear yet and DSCC sees an extended forecast during which demand will outpace supply (especially as average TV size continues to grow).

DSCC says that OLED panel unit shipments will reach 1.06 billion by 2023. The growth will peak in 2020 (with a 27% unit growth and 25% revenue growth from 2019). Overall revenues for OLED panels will grow from $26.5 billion in 2018 to $46.2 billion in 2023.

DSCC says that it lowered its OLED TV forecast for 2020-2023, as LGD is delaying both its Guangzhou 8.5-Gen fab ramp up and its P10 10.5-Gen line by one year. New LCD technologies, including dual-cell LCD and miniLEDs will also hurt the growth of the OLED TV market. DSCC further reports that LG Electronics will not be able to reach its 2 million OLED TV goal in 2019 - and have asked LGD to supply it with only 2.5 million OLED TV panels in 2020 (the original plan was to supply 3.5 million panels to LGE).