AMOLED displays are the new hot trend in premium smartphones, first made popular by Samsung for the company’s Galaxy line and now to be the display technology of choice for the next iPhone from Apple upon release later this year. But AMOLED—which stands for the technology known as active-matrix organic light-emitting diode—is also increasingly being used by the television space, where it competes with full high-definition (full HD) display panels for market share.
Yet capacity for manufacturing AMOLED television panels is currently unable to keep up with an expected surge in demand. AMOLED television panels are used for ultra HD/4K television sets, which boast four times the resolution of full HD LCD television sets. As a result, ultra HD/4K units fetch much higher prices for panel makers, and the TV brands sourcing the displays from panel makers also command premium pricing for their retail offerings.
LG Display (LGD) is the lone supplier of AMOLED television panels, so the gap between what it can produce compared to what the market needs is an important issue for the South Korean maker. While the gap between supply and demand opens up fresh investment opportunities for LGD in the AMOLED television panel space, there are also risks to be considered in the equation.
AMOLED TV panel market outlook
Shipments in 2016 of AMOLED TV panels rose to 900,000 units, up a phenomenal 114% from 420,000 units the year before. In comparison, shipment of full HD TV panels declined during the same time, shrinking that technology’s market share of TV panels. For TV brands, TVs featuring full HD screens do not fetch the same high prices of AMOLED TV screens characteristic of ultra HD/4K television sets, and so brands have pulled back on orders of full HD TV panels.
Given the new prominence of ultra HD/4K sets, LG Display is changing strategy. The manufacturer will discontinue production in 2017 of full HD TV panels, which it also makes, focusing instead on increasing shipments to the market of AMOLED panels, specifically in the 65-inch size.
This bodes well for TV brands like LG Electronics, LGD’s internal customer, as well as for other competitive television brands, including Japan’s Sony and Panasonic, as well as China’s Konka, Changhong, and Skyworth. These brands have all announced ultra HD/4K lineups featuring AMOLED panels, promoting the premium sets as possessing much better performance than full HD LCD televisions.
Issue 1: current capacity is lower than demand for 65-inch AMOLED TV
By the fourth quarter of 2018, LGD is expected to produce approximately 62,000 sheets per month for AMOLED television panels, according to the IHS Markit AMOLED & Flexible Display Intelligence Service. At its Gen 8 fabs, LGD can manufacture 372,000 panels monthly in the 55-inch size, equivalent to 4.5 million panels annually; or 134,000 panels monthly, equivalent to 1.6 million panels annually, if the size targeted was the 65-inch instead.
Given the figures above, this means that at Gen 8 only one panel can be produced in the 65-inch size, compared to three panels in the 55-inch. That ratio can be even more lopsided if production shifts to, say, the 77-inch—a new targeted size for the future—translating into lower production output overall as panel sizes increase.
These numbers are important because by 2019, global demand from TV brands for AMOLED television panels in the 65-inch is projected to reach 2.6 million units—much larger than what LGD can produce, at 1.6 million units, during that period.
Issue 2: Gen 8 not optimal for 65-inch AMOLED panels
One other issue is of significance in LGD’s production of AMOLED television panels in the 65-inch—the mismatch between production facility and glass substrate size.
Glass substrates produced at LGD’s existing Gen 8 fabs are not optimal for the 65-inch, as only 64% of the substrate area can be used. Instead, Gen 8 is best used for the 55-inch, a process that worked well for LGD when its Gen 8 facilities were built in in 2013 expressly for the 55-inch. With production shifting to the 65-inch, optimal output can no longer be assured or achieved.
This is because the optimal glass substrate size for the 65-inch is Gen 10.5, which is able to produce eight panels, compared to the current three panels possible with Gen 8. To this end, speculation is rife that LGD will soon deploy new Gen 10.5 fabs to obtain optimal production of AMOLED television panels.
Gen 10.5 opportunities and risks
Because Gen 10.5 is more efficient and economical for manufacturing AMOLED television panels, and with the panels priced much higher than LCD TV counterparts, panel makers besides LGD are considering investing in Gen 10.5 AMOLED television panel capacity—even if they must pour money into developing new equipment.
Yet Gen 10.5 AMOLED fabs may be risky for panel makers. While LGD, through Gen 8, has achieved the rare feat of being the only supplier to be successful so far with mass production of AMOLED television panels, success was also long in the making. LGD needed two full years to stabilize the yield rate for producing full HD panels at Gen 8, and it took another two years to do the same for ultra HD/4K panels.
Now with AMOLED, the new television panels represent a step up in technology above high-definition as well as ultra HD/4K panels. It’s not entirely clear, then, how long it might take for LGD to stabilize the yield rate for AMOLED at Gen 10.5, and success may not be possible within the same two-year time frame in which LGD had scored victory earlier with its Gen 8 fabs.
This time, the climb—for LGD, as well as for all others seeking to attempt the same—is much steeper.
David Hsieh is Director of Analysis & Research within the IHS Technology Group at IHS Markit
Jerry Kang, Senior Principal Analyst for Emerging Display Technologies & OLED within the IHS Technology Group at IHS Markit, also contributed to this analysis
Posted 23 May 2017