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
Q3 Display Capex a Record High, Equipment Market On Fire With New Highs Expected in Q4'16 and Q1'17 on OLED Spending
DSCC Founder and CEO
In the first issue of our recently published Quarterly Display Supply Chain Financial Health Report, we determined that Q3’16 capital expenditures from 9 publicly traded display manufacturers rose 69% Q/Q and 103% Y/Y to $5.7B as shown in Figures 1 and 2. We believe this may be the highest amount ever spent in a single quarter. However, it is likely that this figure will be eclipsed in Q4’16 and again in Q1’17 with OLED spending levels breaking new records in both of these quarters as quantified in our new Quarterly OLED Supply/Demand and Capital Spending Report. As shown in Figure 3, the OLED deposition equipment market is expected to grow sequentially in both Q4’16 and Q1’17.
Figure 1: Q1’15 – Q3’16 FPD Capex
Source: DSCC Quarterly Display Supply Chain Financial Health Report
Figure 2: Q1’15 – Q3’16 FPD Capex By Manufacturer
Source: DSCC Quarterly Display Supply Chain Financial Health Report
Figure 3: OLED Deposition Market Size, Q2’16 – Q4’17
Source: DSCC Quarterly OLED Supply/Demand and Capital Spending Report
Samsung indicated in its Q3’16 earnings release that its 2016 display capex would reach 10.9 trillion won. That is $9.4B people!! From Q1’16 – Q3’16, it only spent $5.05B, thus, it expects to spend $4.35B in Q4’16. Although it hasn’t released its 2017 capex spending yet, our Quarterly OLED Supply/Demand and Capital Spending Report shows that Samsung will spend 25% more on OLED deposition equipment in 2017 than in 2016. Sharp also announced that it intends to spend much more in the 2H of its fiscal year (Q4’16+Q1’17), $760M, than its first half when it only spent $120M.
In our about to be released Quarterly OLED Supply/Demand and Capital Spending Report, we show Samsung adding OLED capacity through 5 phases of investment between Q4’16 and Q2’17 at its A3 and V1 OLED fabs. Samsung is not alone in investing in capital-intensive OLED capacity in this period, although we have recently published that their OLED margins are significantly higher than their LCD margins justifying these investments. Clearly, Samsung is looking to maximize its OLED share. This report shows that Samsung will account for 45% of OLED deposition equipment spending from 2015 – 2017. Joining Samsung in investing from Q4’16 – Q2’17 are Japan Display, BOE, LG Display and Tianma with Visionox, JDI, Sharp, Samsung, BOE, Truly and LG Display investing in the 2H’17 as well. In 2018 and 2019, Samsung’s share of OLED spending is expected to fall to 20% due to the large number of players expanding capacity.
The Quarterly OLED Supply/Demand and Capital Spending Report report shows record OLED equipment spending in 2016 and 2017, each rising over 100%. The 2017 OLED deposition (evaporation and ink jet printing) market alone will exceed $2.5B, rising nearly 150% in 2016 and over 100% in 2017. The OLED deposition market is expected to continue to rise in 2018 as display manufacturers join Samsung in rapidly adding OLED panel capacity to meet smartphone, notebook, automotive, VR and other markets demand for OLEDs and their rigid/flexible/foldable/rollable form factors. We do show the OLED deposition market declining in 2019, but remaining above 2017 levels, for now.
The Quarterly OLED Supply/Demand and Capital Spending Report shows all OLED frontplane and backplane investments and capacity by phase by substrate size (both TFT and OLED), application (mobile vs. TV), yields, substrate type (rigid vs. flexible), deposition type (FMM vs. open vs. inkjet), encapsulation type (metal/glass/thin film), numerous capacity scenarios, supply/demand and numerous supply/demand scenarios. For equipment, it reveals OLED deposition tool shipments and revenues by quarter by substrate size, by customer by supplier for both the source and the system. Thus, OLED deposition tool market share is shown by quarter and design wins are revealed and forecasted. It also shows the impact of rollable and foldable demand on supply as these form factors allow much larger displays into applications like smartphones which can significantly impact the supply/demand situation.
For more information on the Quarterly Display Supply Chain Financial Health Report or the Quarterly OLED Supply/Demand and Capital Spending Report, please visit www.displaysupplychain.com, send an email to firstname.lastname@example.org or call 512-577-3672.
By Ross Young
DSCC CEO and Founder
In a strategic move to support the long-term vision of its display, TV and possibly other businesses, Samsung has reached an agreement to acquire QD Vision’s intellectual property for approximately $70M. This story has been reported by Korea’s ETNews, the web site SamMobile.com and elsewhere as an acquisition of QD Vision, but that is not accurate. It is only the IP, which consists of approximately 250 patents and patents pending as well as trademarks, which Samsung will be acquiring. When asked about the QD Vision IP, SamMobile quoted Samsung Advanced Institute of Technology CEO Jung Chil-hee who told reporters that QD Vision’s IP will become part of Samsung’s R&D efforts to produce increasingly advanced implementations of quantum dot (QD) TVs to compete with OLED TVs. We believe QD TVs have a bright future and I will talk about that shortly. However, first, let’s discuss what this means for QD Vision as well as the history of quantum dots.
Quantum dots, nanoscale particles of semiconducting material that can efficiently create highly saturated colors, were discovered by Dr. Louis Brus while working at Bell Labs in 1982. Both QD Vision and Nanosys were founded or co-founded by Dr. Brus’ MIT graduate students, Dr. Paul Alivisatos in the case of Nanosys and Dr. Moungi Bawendi at QD Vision, both of whom contributed significantly to Dr. Brus’ work.
Dr. Alivisatos is now Vice Chancellor for Research at UC Berkeley, Founding Director of the Kavli Energy Nanoscience Institute and Director Emeritus of Lawrence Berkeley National Laboratory. He recently won the National Medal of Science for his work on quantum dots. He studied under Brus in the early 1980s. He was the scientific co-founder of Nanosys in 2001 and also founded Quantum Dot Corp., which is now part of Life Tech.
Dr. Bawendi studied under Brus after Alivisatos and was an early scientific advisor to Nanosys from 2003. He licensed a number of his QD patents to Nanosys. Bawendi later co-founded QD Vision in 2004 along with Dr. Vladmir Bulcovic. Bawendi is currently a chemistry professor at MIT and runs a lab focused on the science and application of quantum dots. He is also the scientific founder of Quantum Dot Corp., now part of Life Tech, serves as Scientific Advisor to Lumicell and remained on the Scientific Advisory Board at QD Vision.
QD Vision was founded in 2004 and raised over $133M in 10 separate rounds from 11 different venture capital firms to commercialize QDs. The most recent round was November of 2015 at $22M. The VC firms backing QD Vision, according to Crunchbase, included BASF Venture Capital, Capricorn Investment Group, DTE Energy Ventures, Highland Capital Partners, In-Q-Tel, North Bridge Venture Partners, Novus Energy Partners, Novus Ventures, Open Innovation Ventures, Passport Capital and Tsing Capital. Unfortunately, it appears these firms will not make money on their investment.
QD Vision tried to commercialize QDs through their edge-lit quantum dot optic, Color IQ, which works with edge lit TVs and monitors. The QDs are packaged in resin in an edge lit tube placed between blue LEDs and a light guide in an edge lit backlight. QD Vision was the only company to commercialize this QD edge optic solution. According to QD Vision Co-Founder Seth Coe Sullivan, in Color IQ, concentrations of red and green converting QDs are engineered to pass tri-chromatic white light that's optimized for spectrally narrow color filters to maximize the throughput of the filters and deliver a wider color gamut as opposed to yellow phosphor LEDs found in most LED TVs which deliver a spectrally wider bichromatic light that is getting chopped into tri-chromatic light by the color filters which produce a narrower color gamut as shown in the Figure below. This results in brighter displays and a wider color gamut. The Color IQ approach uses less QD material than other approaches resulting in a lower cost solution. Sealing the QDs in a high precision glass tube acts as the barrier against moisture and oxygen. However, a significant portion of the light doesn’t make it into the light guide, although some of it can be recaptured by adopting reflectors. Companies that adopted QD Vision’s Color IQ included Hisense, Philips/TPVision, Seiki, Sony and TCL for TVs and Philips and AOC for monitors. In the case of TVs, while Color IQ and edge lit solutions resulted in extremely thin LCDs and a lower cost solution, the high end of the market has moved to direct lit LEDs and local dimming which aren’t compatible with Color IQ. In the case of monitors, there has been some negative reviews such as by Meko which found in a Philips Color IQ monitor that the white point was well of the desired 6500 setting at 7200 – 7400 and there was a large area of the screen that was 20% less bright than the center and slightly blue. So, QD Vision has been struggling. In fact, the Color IQ factory in Taiwan was shut down and the Philips monitor was re-designed without QDs. So, QD Vision has been struggling with its products not gaining acceptance.
The real winner of the QD market so far has been Nanosys, founded 3 years before QD Vision, whose QD films can be found in nearly 20 different Samsung SKUs in TVs ranging from 43” to 88” and have also been adopted by other leading brands including Hisense, TCL, Vizio and others. Nanosys’ Quantum Dot Enhancement Film (QDEF), which can be used in either edge-lit or direct-lit backlight solutions, replaces a diffuser film and places red and green QDs inside a film and blue LEDs illuminate the film. As with the edge-lit optic, the film generates tri-chromatic light at a desired white color point that allows the optimized color filter to produce a wider color gamut than it would if it was receiving broad spectrum bichromatic light from yellow phosphor based LEDs. While this approach uses more QD material and should be more expensive than the edge-lit approach, the higher volumes have enabled Nanosys to rapidly reduce cost. We believe over 4M QD TV panels will ship in 2016, up from around 1M in 2015 and the market should double in each of the next 3 years led by Samsung. As Samsung increasingly pushes wide color gamut and high dynamic range, Nanosys will be a major beneficiary. In addition, in its 2nd generation of QD films, Nanosys is using a lower cost barrier film, which is further reducing costs and prices to TV brands. Nanosys also has 7 different suppliers led by 3M and Hitachi Chemical, which compete against each other to deliver the Nanosys film solution. In addition, Samsung and Nanosys have also created a second QD source, Hansol, under a license and royalty agreement with Nanosys to ensure there are no disruptions of supply for the #1 TV brand.
So, if Samsung and Nanosys are doing so well together, why purchase QD Vision’s IP? Well, QD films are not the only implementation of QD displays. QDs have an interesting roadmap, which include implementations that can improve brightness and power performance, lower cost, etc. These implementations could even expand QDs usage into mobile displays as well. QDs can become emissive displays on their own and follow the path created by OLEDs in terms of form factor, share some of the same equipment, etc.. The different QD implementations include:
So, what does this have to do with acquiring QD Vision’s IP? We have heard that QD Vision may have some important IP in QD LEDs and QLEDs. In fact, they even own the trademark for QLEDs. So, Samsung is purchasing QD IP to gain freedom to operate in these areas and advance its own R&D efforts. If the future of displays and TVs is QD, it will be helpful for Samsung to acquire 250 QD-related patents and trademarks. It will gain the upper hand vs. its competitors who may have to take a license from Samsung and pay a royalty to produce or use displays that compete with Samsung’s QD implementations that were owned by QD Vision and now Samsung.
In addition, it is likely that Nanosys’ QD material will still be used in these implementations as Samsung has been working with Nanosys on its QD film products, is an investor in Nanosys through Samsung Ventures and is believed to be working with Nanosys on other implementations. Furthermore, Nanosys also has a very strong IP position in quantum dots and holds nearly 300 patents worldwide in QDs including certain patents exclusively licensed by MIT and UC Berkeley. In fact, Nanosys is suing QD Vision for infringing on its patent protected photoluminescent QD materials. Nanosys claimed that when QD Vision’s own technology failed, the company chose to infringe on Nanosys’ patents over taking the time to innovate on their own. Nanosys is seeking an injunction to stop QD Vision’s infringement and the destruction of existing inventory, enhanced monetary damages and a full recovery of attorney’s fees. However, there may not be much for Nanosys to recover other than the proceeds paid by Samsung for the IP. The biggest losers may be the venture capitalists who appeared to have backed the wrong QD supplier. Investing in next generation technologies is a risky business.
Samsung appears to be thinking long term about how QDs will be used in the future and they were smart to pick up more QD IP. In addition, QLEDs may not be limited to TVs and high-end monitors. QLEDs could potentially extend to a wide range of applications including mobile, depending on what we learn about their performance, ability to be printed or patterned at very high resolutions, impact of higher temperatures and flux, manufacturability, yields, required voltages and current, etc. With Samsung already enjoying a large lead in OLEDs, it now appears well positioned to build a similar lead in QD displays.
Meanwhile, now that QD Vision has sold off its IP, one has to wonder if this is the end of QD Vision with other assets such as manufacturing equipment, etc. potentially sold off as its investors look to limit their losses. Or, will they pivot into other applications where they may have a stronger IP position. We will have to wait and see.
Nanosys' QD Roadmap