OLEDs are potentially a dream come true to the smartphone industry, enabling manufacturers to raise prices by improving display performance, increasing display sizes and enabling innovative form factors like curved, flexible, foldable, rollable, etc. We expect OLEDs to enable greater differentiation in the smartphone industry for years, which should keep prices high. OLED panel suppliers should be major beneficiaries, as smartphone brands will be clamoring for OLED panels for years until the market is saturated with OLEDs, and even then there will be opportunity to differentiate and create strong demand for more advanced form factors. With OLED demand expected to be tight until the market is saturated, which panel suppliers and brands are likely to benefit?
Figure 1 shows smartphone shipments in 2016 and 2017. As indicated, the top 5 players are Samsung and Apple and Chinese brands Huawei, Oppo and Vivo with the Chinese brands enjoying the fastest growth. As shown in Figure 2, in 2016, Samsung consumed most of the OLED smartphone panels at 264M or 72%. Oppo and Vivo each accounted for 11% of the OLED volumes. 0% of Apple’s panels were OLED with Huawei at just 2%.
Figure 1: Smartphone Shipments by Brand
Figure 2: 2016 Smartphone Display Procurement by Brand
In 2017, OLED smartphone panel shipments are expected to grow 42% to 525M. Samsung is expected to consume 55% of smartphone panel shipments in 2017 or 290M as shown in Figure 3. Apple is expected to consume 75M or 14% of OLED smartphone panel shipments followed by Oppo at 63M and a 13% share and Vivo at 55M and a 10% share. Oppo and Vivo have secured supply with Samsung. Conversely, Huawei’s share of OLED panel shipments is insignificant and is expected to remain behind that of Oppo and Vivo. Huawei is not engaged sufficiently with Samsung and will likely need to wait until BOE ramps from 2020 to capture significant OLED volumes. As shown in Figure 4 we believe it will take until 2020 for Huawei to secure enough OLED capacity to enable OLEDs to account for a majority of their panel procurement. We expect Apple to quickly ramp to 100% OLED, following Samsung, which will limit the number of OLED panels available for other brands as the OLED smartphone market climbs to over 1.2B units in 2021 as shown in Figure 5. In fact, we show Apple and Samsung accounting for 72% of 2016 OLED smartphone panel shipments, 70% in 2017, 72% in 2018, 64% in 2019, 57% in 2020 and 51% in 2021. Thus, the OLED smartphone market will basically move from a monopoly to a duopoly with Samsung and Apple controlling at least a 50% share through 2021. But what does the panel supplier situation look like? Can any panel suppliers disrupt this duopoly and who will be the 3rd OLED supplier to Apple?
Figure 3: 2017 Smartphone Display Procurement by Brand
Figure 4: 2016 - 2021 OLED Smartphone Panel Procurement Forecast
Figure 5: 2016 - 2021 OLED Smartphone Panel Procurement
In our Quarterly OLED Supply/Demand and Capital Spending Report, we track and forecast OLED fab glass input, yield and output by fab by application. This enables us to track each panel suppliers’ shipments by application. Mobile OLED output share is shown in Table 1. As indicated:
Table 1: Mobile OLED Output Share by Panel Supplier
With the FPD equipment market booming in 2017, we are often being asked by investors:
2017 vs. 2018 OLED Fab Activity
In 2017, we believe 250K substrates of monthly TFT/OLED input capacity will be installed as shown in Figure 1 and in the Q1’17 issue of our Quarterly OLED Supply/Demand and Capital Spending Report. This data is based on surveys of OLED manufacturers and equipment and materials suppliers. In 2018, the number is expected to rise slightly to 252K substrates. However, in 5.8” unyielded equivalents, the difference will be much more significant with 2017 at 47.3M per month vs. 2018 at 60.1M per month, a 27% difference also shown in Figure 1. This difference can be attributed to differences in substrate size with 2017 featuring 5 out of 19 installations below 6G. On the other hand, in 2018, just one installation out of 17 will be below 6G. In addition, there are expected to be two installations for TVs at 8.5G in 2018 vs. none in 2017. Thus, given that larger glass sizes result in higher tool prices, we should see a nice increase in fab equipment spending from 2017 to 2018 in OLEDs. We should also add that evaporation market leader Tokki will increase its capacity by two ½ G6 systems from 2017 to 2018 and its total capacity by 1 unit.
Figure 1: 2017 vs. 2018 OLED Installations (Install Basis)
How about on a PO or bookings basis? Assuming a 9-month lead time between PO and install, we show 2017 on a PO basis at 272K substrates of monthly input capacity vs. 2018 at 208K, a 31% difference as shown in Figure 2. We also show 2018 below 2016. However, we should note there is still likely a wide margin of error on 2019 fab schedules/2018 PO timing and, in many cases, PO to install timing has been longer than 9 months. In terms of 5.8” equivalents on a PO basis, we also show 2017 leading with 2018 and 2016 quite similar. So, it looks clear from our data that 2018 OLED spending will exceed, not fall below 2017, which will result in 2017 leading in bookings. Which quarter will be the peak quarter for OLED bookings? We show peak OLED equipment bookings occurring in Q3'17 with POs for well over 100K substrates of OLED equipment being issued.
Figure 2: 2017 vs. 2018 OLED Installations (PO/Bookings Basis)
2017 vs. 2018 LCD Fab Activity
In the case of LCDs, we believe 2017 will be a stronger year than 2018, although more capacity may get pulled in from 2019 if equipment makers are able to pull in their delivery timing. As shown in Figure 3, we expect 16% more LCD capacity installed in 2017 vs. 2018 in terms of # of substrates, but just 2% more on a 55” equivalent basis due to more 10.5G capacity being installed in 2018 than 2017. In 2017 and 2018, BOE will install 120K capacity at 10.5G with China Star installing 75K. These installations should consume all of Nikon’s 10.5G exposure tool capacity at their current rate of 1 tool per month. Nikon will need to significantly boost their output in order to enable LG Display, Foxconn or HKC to install 10.5G capacity in 2018. LG will reportedly have its 10.5G fab completed in Q2’18, but we still don’t see them installing equipment until 2019. However, as a result of these 10.5G projects in 2019, 2019 should be another strong year for LCD equipment spending. While 2017 may be slightly larger than 2018 in LCDs, we believe higher OLED spending will push the 2018 market above 2017.
Figure 3: 2017 vs. 2018 LCD Installations
For more detailed information on OLED equipment spending, please see our Quarterly OLED Supply/Demand and Capital Spending Report. For a detailed look at all equipment and panel suppliers financials, please see our Quarterly Display Supply Chain Financial Health Report. In addition, the OLED and LCD equipment market outlook will be a major topic at the SID/DSCC Business Conference on May 22nd.
Note, this article is a subset of a larger article that appeared in our newsletter.