One of the exciting attributes of OLEDs is that they can be manufactured to be flexible. Although truly flexible products remain unproven in the market and this involves additional capital expenditures for panel makers and potential for lower yields, panel manufacturers are rapidly adding flexible OLED capacity despite the risk. The risk is that these flexible/rollable/foldable products won’t warrant a premium to offset the additional capex costs or will have such low yields in production that no brand or OEM will look to employ them in a high volume consumer product. However, panel manufacturers must believe this risk is worth taking as they are building flexible OLED fab capacity as fast as they can. Of the 26 fab investments that will take place in 2016 and 2017, 21 of them will either be all flexible or have both flexible and rigid capacity. Brands and OEMs must be expressing significant interest in these products to generate all of this investment as they could breathe new life into stagnant markets. Analysts are also excited about these products such as the Meritz analyst who projects that tri-foldable 9.6” smartphones would sell for around $1800, which could certainly grow the size of the smartphone market and the growth outlook for smartphone brands.
In our new Quarterly OLED Supply/Demand and Capital Spending Report, we are tracking flexible vs. rigid OLED capacity. In fact, this report shows that flexible OLED capacity will overtake rigid OLED capacity in Q4’17 on an input basis and in Q1’18 on an output basis as shown in Figure 1. Most of the new mobile capacity being installed in Korea will be flexible, while most Chinese mobile OLED manufacturers will start out as rigid and then add flexible capacity in later phases or in later fabs. This report also includes scenarios for foldable and rollable capacity that accounts for likely yield loss and larger sizes associated with those form factors. In fact, this report includes 10 different capacity scenarios that take into account when different tiers of manufacturers will have flexible, foldable and rollable capacity.
Figure 1: Rigid vs. Flexible Mobile OLED Output Capacity (Area Basis)
Source: DSCC’s Quarterly OLED Supply/Demand and Capital Spending Report
It is interesting to note that many analysts have expressed concern of a significant oversupply in the OLED market. However, we do not see that. In fact, we believe OLED supply will be tight through 2019, as Apple and Samsung look to rapidly switch all of their production from LCDs to OLEDs. This report shows foldable products starting in 2019 will dampen OLED supply growth due to their larger sizes and lower yields. The fact that the highest yielding OLED manufacturers will be pursuing foldable products will reduce the blended yield for the industry. Only in our aggressive capacity growth scenario do we see a double-digit OLED surplus, and that isn’t until 2021 despite over 60 different fab investments between 2016 and 2021.
With LCDs lacking flexible capability, this report shows that LCD smartphones will fall at an 11% CAGR from 1.2B panels in 2016 to fewer than 750M panels in 2021. OLEDs are projected to overtake LCDs in 2019 in the smartphone market and exceed over 1B smartphone panels in 2020.
Who will be the winners in the flexible OLED transition? As we showed in our Quarterly Display Supply Chain Financial Health Report, Samsung has already demonstrated that flexible OLEDs can be more profitable with their OLED operating margins more than 7X higher than their LCD operating margins in Q3’16. Panel manufacturers have an opportunity to generate above average margins until these products are commoditized and there is a lot of runway until that occurs due to the amount of innovation that is likely to occur in flexible OLEDs such the amount of flexibility that can be offered and introduction of larger flexible/foldable/rollable products, etc.
Brands that can tie up exclusive supply of these potentially hot products are also likely to be winners. Apple and Samsung are clearly trying to do this and other brands will likely follow their lead. However, it won’t be until 2018 that other brands will likely be able to offer flexible products at these kinds of high volumes and Apple and Samsung will certainly look to prevent that from happening for as long as they can.
A number of FPD equipment and materials manufacturers are also going to be winners from the flexible display revolution due to the higher capex associated with flexible OLEDs:
Flexible displays will be a key focus at the 2017 SID/DSCC Business Conference. The agenda can be found at http://www.displaysupplychain.com/siddscc-business-conference.html. There are a few speaking slots remaining, contact email@example.com if you are interested.
Figure 2: LCD vs. OLED SmartPhone Panel Share
Source: DSCC's Quarterly OLED Supply/Demand and Capital Spending Report
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