DSCC - Page 14

Display analyst firm DSCC released a new market report on the OLED market, in which they have some very interesting estimates on the OLED market. OLED revenues reached over $5 billion for the first time in Q3 2017, and DSCC sees a huge 88% jump in the final quarter of 2017 (to $10 billion) as Samsung starts to supply flexible OLEDs to Apple.

Flexible OLED revenues are the main driver of the growth in OLED smartphone shipments, with revenues rising 37% in Q3 2017 and are expected to grow 140% (Q/Q) in Q4 2017. Flexible OLED unit share out of the entire OLED smartphone market reached 33% in Q3 and will reach 49% in Q4. In terms of revenues, the market share will grow from 66% in Q3 to 80% in Q4.

DSCC estimates that 88 Million smartphone OLED displays were shipped in Q3 2017, which represents a 4% drop from Q2 2017 and a 13% drop from Q3 2016 - mostly due to delays in iPhone X shipments. Flexible OLED shipments were up 25% from Q2 2017 (30.4 million units).

Shipments are expected to grow significantly in Q4 2017, though, to reach 151 million units. Flexible OLEDs shipments (78.3 million) will grow 157% from last quarter and 544% from last year, and will surpass rigid OLED shipments (73.3 million) for the first time.

DSCC released a new market report which tracks the OLED materials market. According to DSCC's estimates, the OLED material revenues will reach $905 million in 2017 and will grow at a 20% CAGR to reach $2.25 billion in 2022. Note that these numbers do not include royalty payments.

DSCC sees the small/medium display materials growing at a 22% (from $586 million in 2017 to $1.56 billion in 2022) - and growing faster than OLED TV materials (CAGR 16%) as ink jet printing, which will begin to be adopted in 2020 will result in more efficient OLED deposition.

Samsung recently announced its financial results for Q3 2017, and Specifically regarding its OLED business, SDC increased its sales of flexible OLEDs, but prices of rigid OLED panels declined. DSCC estimates that the utilization at Samsung's OLED fab fell from mid-80% to mid-70% mostly due to delays in shipments to Apple.

The low utilization rate resulted in a decline in OLED operating income, which fell 37% from Q2 2017. Revenues actually increased (as you can see in the chart above), but pricing pressure on rigid OLED panels meant that SDC's OLED operating margins fell from 22.5% in Q2 2017 to 12.4% in Q3 2017. DSCC estimates however that OLED profitability will rebound quickly as Apple are likely to increase iPhone X shipments and as utilization and yield improve. The higher demand for higher-cost flexible OLEDs are likely to enable SDC to return its operating margin to over 20%.

In July 2017 LG Display announced that it has decided to build a 8.5-Gen (2200x2500) OLED line in Guangzhou, China, to make OLED TV panels. This is the first time a Korean company plans to produce OLEDs outside of Korea, and the Korean government is still considering whether to approve this plan as it sees OLED as a strategic technology Korea' economy.

Beyond lower-wages in China compared to Korea and the proximity to the huge Chinese market, LG is looking for a subsidy from the local government. LG Display's Guangzhou OLED line is supposed to be a joint-venture with the local government, where LGD will hold a 70% share.

LGD's current OLED TV panels use a bottom-emission architecture, but according to DSCC LGD is aiming to shift their production process to a top-emission design starting in 2019. LG currently has a pilot capacity of about 3,000 monthly top-emission substrates, and plans to start mass production (with over 10,000 monthly substrates) in 2019.

DSCC says that top-emission will be required for 65" 8K panels as a bottom-emission design will not be bright enough with such a high density. The shift to top-emission will increase the aperture ratio (=brightness) by around 10%.

LG Display currently produces all its OLED TV panels using an evaporation (VTE) process. Market research company DSCC says that ink-jet printing is more efficient than current VTE processes as it will result in simpler displays (no need for color filters, for example, as used by LG's current WRGB displays). Ink-Jet printing will also enjoy lower depreciation costs and lower indirect expenses such as water and electricity.

DSCC estimates that an ink-jet printed 55" OLED TV panel will cost 17% less to produce compared to a VTE produced panel. An ink-jet printed panel will theoretically be significantly brighter (as the color filters absorb a large portion of the light), however solution-based OLED materials have traditionally lagged behind evaporation ones (Merck though says that the latest soluble materials are on-par with evaporation ones).

Market research company DSCC has updated their OLED models, as the company sees more capital spending then before and a larger OLED market going forward.

The OLED market in general will grow 57% in 2017, according to DSCC, to reach $23.2 billion. Growth will continue to be strong with a 50% increase in 2018 (to $34.9 billion) and a CAGR of 27% from 2016 to 2022. In 2022 the market will surpass $60 billion.

According to IHS, sales of quantum-dot enhanced LCD TVs, or QLED TVs, dropped 48% in Q2 2017 compared to Q1 2017. Total sales in Q2 amounted to only 351,000 units - down from 671,000 in Q1 2017. OLED TV sales, meanwhile, increased from 29% from 212,000 units to 282,000 units.

Following this report, Business Korea speculates that Samsung Electronics may have to change its premium TV strategy, as it faces market share lose in this very important segment and may lose its leading position in the total TV market.

DSCC expects the OLED market to rapidly grow in the near future, as AMOLED production capacity will increase at a CAGR of 41% from 2016 (5.3 million square meters) to 2021 (29.4 million square meters). OLED revenues will reach $21 billion in 2017 (a rise of 46% compared to 2016) and will reach $46 billion in 2021.

Smartphones are still the largest OLED application by far - with a 86% market share (revenues) in 2017 and 81% in 2021. The second largest application by revenues are OLED TVs, and other applications follow with a small market share - but one that will increase as supply looses in the future. If we look at shipments, then smartphones acount for 94% of OLED shipments, and the 2nd and 3rd applications are VR headsets and smart watches. OLED TV shipments will reach 6.5 million in 2021 (rising at a CAGR of 49% from 2016 to 2021).