Market updates - Page 37

DSCC says that in January 2019 flexible OLED utilization rates dropped to 39% - due to seasonal weakness and Apple's slow iPhone sales. CLSA says that February will another bad month and utilization rates will even drop slightly to 37%. In March things will improve to almost 50% - following the launch of Samsung's Galaxy S10.

Looking at the entire quarter, DSCC sees utilization rates dropping from 68% in Q4 2018 to 41% in Q1 2019. Glass input for all flexible OLED fabs will be down 3% from last year. Rigid OLED utilization rates have been up in 2019 - from 44% in December 2018 to 49% in January 2019, and DSCC sees it continuing to climb in Q1 2019, as a result of increased adoption of rigid OLED by Chinese smartphone makers.

CLSA released an interesting investment note and details Samsung Display's 2019 plans and expectations. Samsung's A3 flexible OLED line suffered from low utilization (52% in 2018) and Samsung hopes to improve this to 70% in 2019. Samsung shipped 145 million flexible OLEDs in 2018 and aims to sell 215 million in 2019 (a 48% increase).

In 2018 Samsung shipped 7 million flexible OLEDs to Chinese phone makers, and it aims to increase this to 40-45 million in 2019 (CLSA is skeptical of Samsung's ability to meet its target - even though the company seeks to cut its prices and offer volume discounts and offer the lower specification panels to mid-range smartphones). CLSA sees SDC's average flexible OLED price declining 15% in 2019.

UBI Research estimates that the OLED market will reach $32.2 billion in revenues, up from 13.8% from 2018. UBI says the the growth will come from new applications - including foldable smartphone displays, 8K OLED TVs and rollable OLED TVs. Increased yields by Chinese AMOLED makers will also contribute to the growth.

AMOLED revenues in Q4 2018 reached $7.9 billion (down 3.7% from Q3 2018 and 10.4% from Q4 2017). In the whole of 2018, revenues reached $28.3 billion, up 7.1% from 2017 ($26.4 billion). UBI sees the oversupply in the flexible OLED market to continue as high prices prevent adoption in mid-end smartphones.

At CES 2019, LG Electronics announced its first rollable TV (and the world's first rollable OLED device), the 65" Signature OLED TV R. Market analysts from IHS estimate that producing each 65" rollable OLED TV will cost over $3,000 - more than three times the cost of production of LG's regular 65" OLED TV panels.

LG's new TV can roll up into its base, and has three viewing options - full view, line view and zero view. In Line View, there are six different modes, in which the TV can show the weather, the time, a home dashboard and more. Like the rest of LG's 2019 OLED range, the OLED TV R is based on the company's 2^nd-gen Alpha 9 intelligent processor the enables LG's ThinQ AI to offer new display algorithms and Amazon's Alexa and Google's Assistant.

DSCC says that production costs for a 55" QD-OLED TV panel at Samsung Display's 8.5-Gen fab will reach almost $800 in 2019. While this will fall to around $450 in 2022, Samsung will still lose money on every panel sold if DSCC has its price and cost estimates right.

It is important to note that most of the cost is depreciation costs - which means that in terms of cash on each panel, SDC's margins will actually be around 40%. Part of the reason for he high cost of required equipment is the need to use 12 TFT masks.. SDC is apparently looking to reduce the mask number which will lower production costs.

LG Display reported its financial results for Q4 2018 - it reported an operating profit of ₩279 billion ($250 million USD) due to strong shipments of IT panels and OLED TVs. LGD however gave a weak outlook to 2019 (for its LCD business).

LGD says that it will invest $7.1 billion in 2019 in capacity expansion, and $3.5 billion in 2020. It will divert all of its investments into OLED displays - with 60% going to large area OLED TV production and 40% going to small/medium pOLED production.

DSCC released its cost and prices estimates for Samsung's smartphone OLEDs. For rigid OLEDs production costs range from $23 for a 5.5" FHD AMOLED to $32 for a 7.21" 2244x1080 one (see chart below). For some of its rigid OLEDs, SDC enjoys a high operating margin of 30%.

Flexible OLEDs are of course much more expensive - a 5.5" 2560x1440 panel costs almost $70, while a 6.46" 2688x1242 panel costs around $90 (as can be seen in the chart below). As in rigid OLEDs, the larger displays have a higher operating margin (up to 26% for the 6.46" panel).

You can compare DSCC's production costs estimates with the recently released IHS production costs here. IHS estimates a 5.7" rigid OLED at $18.62 (DSCC: 5.8" at $23) and a 5.8" flexible OLED at $22.61 (DSCC: 5.5" costs $70 - that's quite a difference!).

DSCC says that Samsung's foldable 7.3" 2152x15236 AMOLED panel (the one that will be used by Samsung's first foldable OLED device) currently costs almost $180 produce (and SDC will actually lose a bit on every panel sold).

SDC will be able, though, to quickly lower its production costs which will reach around $90 for each panel in 2022. Cost reductions will enable SDC to maintain a good profit margin on these foldable displays from 2020 onwards. The main reason for the current high prices are SDC's low yields on foldable AMOLEDs.

DSCC says that the upcoming Samsung Galaxy S10 will come in three models:

• The Galaxy S10 Light will use a 5.75" 2340x1080 flexible AMOLED display
• The Galaxy S10 will sport a 6.11" 3120x1440 flexible AMOLED
• The Galaxy S10 Plus will sport a large 6.44" 3120x1440 flexible AMOLED

DSCC also details the production cost and panel price at SDC, for the large GS10+ 6.44" AMOLED display - and how it changed from Q1 2018 (with a forecast of up to Q4 2019).

Market research firm DSCC says that BOE managed to dramatically increase its yields - which have tripled to over 30% by the end of 2018. The company is expected to continue and improve its yields which will reach, according to DSCC, to almost 60% by the end of 2019.

The increased yields enabled BOE to increase its flexible OLED production at its first B7 line from 125,000 units per month in Q3 2018 to almost 1 million panels per month in Q4 2018. BOE's main customer is Huawei - with its Mate 20 Pro. The increased yields means that panel production costs are falling - and DSCC actually expects BOE's production costs to fall below SDC's by the end of 2019 as BOE's fab costs are subsidized - as can be seen in the image below.