Do Flexible OLEDs Have a Differentiation Problem?
I recently gave a talk at the 2018 Flex Conference where I discussed the current utilization challenges faced by Samsung’s flexible OLED fab. Of course, many of these challenges have been caused by the introduction of full-active or bezel-less LTPS LCDs. Until full-active LCDs were introduced, it was easy to tell which smartphones were flexible OLEDs. They were the ones without a bezel. The whole front of the smartphone was the display. Samsung even called the display on their Galaxy S8 an infinity display and it used a flexible OLED. As another speaker pointed out, the flexible OLED can be bent behind itself, as shown in Figure 1, and allow the electronics such as the display controller to be located behind the display rather than creating a bezel at the bottom of the display. This capability can result in a smaller and lighter smartphone. On the other hand, it worsens the panelization and therefore can increase the cost of producing this display. The 5.85” flexible OLED that the user sees, may really be a 6.1” OLED with 0.25” not viewable which increases the cost by the number of displays lost per substrate which can result in a 10% cost increase. In addition, the chip on film (COF) packaging used to connect the flexible display to the electronics is also more expensive. So, part of the reason why Apple’s iPhone X flexible OLED is more expensive is due to the desire to minimize the bottom bezel. Other brands do not waste the active area of the flexible display by bending it behind itself. But, is this capability observable to the average user? Do they care? Are they willing to pay a large premium for it? Do they recognize that only flexible OLEDs can achieve a no bezel look at the bottom of their smartphone? Does it really translate to a weight and thickness advantage?
Figure 1: Bending the Flexible iPhone X to Save Space
In fact, if you compare the 5.85” iPhone X flexible OLED with the 6.0” Oppo F5 LTPS LCD as shown in Figure 2, the Oppo F5 is actually 22g or 13% lighter and has the same thickness despite a larger viewable display, a larger battery (3200 mAh vs 2716 mAh) and a larger camera (16 MP vs. dual 12MP sensors). It has nearly as large of a screen to body ratio as Apple at 78% vs. 83%. Its resolution isn’t as high and of course its contrast isn’t as good, but the iPhone X costs more than 2X as much. The Oppo F5 looks like a great phone. The iPhone demonstrates the additional cost to deliver near perfection from a screen to body ratio, but is the extra mile really worth a 152% higher price? In price sensitive markets like China, which approach will do better? While there is only one iPhone X, there are many phones similar to the Oppo F5, making it difficult for flexible OLED smartphones to succeed there.
Figure 2: iPhone X vs. Oppo F5 Specs
In looking at how Chinese smartphone brands market their displays on their smartphones, there is no differentiation between a rigid OLED and a flexible OLED. Yet, the flexible OLED carries around 23% higher capex costs, lower yields and significantly higher material costs from the polyimide, thin film encapsulation, more expensive cover glass and potentially more expensive packaging materials. As shown in Figure 3, the flexible OLED is priced significantly higher, more than 3X the price of a rigid OLED and more than 4X the price of a LTPS LCD. You would think that smartphone brands would try to differentiate the products they are paying such a premium for given their higher costs and higher prices. Maybe Samsung or the OLED Association needs to brand and differentiate flexible OLEDs in some way so they are perceived as greater value to consumers and smartphone brands.
If you look at Figure 4, it is quite difficult to determine which smartphones are the flexible OLEDs, which are the rigid OLEDs and which are the LTPS LCDs. With the advent of full-active LTPS LCDs, they all look alike. In fact, most people cannot tell which are which. Yet, the panel price differences are dramatic. The exact type of display for each smartphone is shown in Figure 5. As a result, it is riskier to go with the flexible OLEDs as it means brands must sell at higher prices against lower priced products that look similar and are not clearly differentiated. At a 40% gross margin, the $56 price difference between the flexible and rigid OLEDs translates to a $93 street price difference and the $64 price difference between the flexible OLED and LTPS LCD translates to a $107 street price difference. This significant price difference is an even bigger risk in price sensitive markets like China.
Based on the fact that there is some differentiation and premium assigned to OLEDs vs. LCDs and that the price difference between rigid OLEDs and LTPS LCDs is so small, one would think rigid OLEDs would be more popular in price sensitive markets in China. From what I have seen, rigid OLEDs were slower to adopt the bezel-less look in the 5.5” and smaller configurations and LTPS LCDs were available from multiple sources, so full active LTPS LCDs have taken some share from rigid OLEDs resulting in low utilization at Samsung’s rigid OLED fab. However, now that Samsung is employing bezel-less at 6” and even 5.5” and the price gap is narrowing, Samsung is likely to take some share back. Nonetheless, there is little rigid capacity coming online. A large majority of the new mobile OLED capacity coming online is for flexible displays as shown in Figure 6. This is due to the Chinese government willing to subsidize it and the promise of foldable OLEDs.
Figure 3: Flexible OLED, Rigid OLED and LTPS LCD Prices
Figure 4: Flexible OLED, Rigid OLED and LTPS LCD Smartphones – Which is Which?
Figure 5: Flexible OLED, Rigid OLED and LTPS LCD Smartphones – Which is Which?
Figure 6: Mobile Capacity Share – Flexible OLEDs Taking Over
In my talk, I pointed out that the current flexible OLED utilization challenges at Samsung, shown in Figure 7, won’t be easily rectified as Samsung is overly dependent on a single model from a single brand and Apple is not likely going to lower its price. Few high volume, high-end new smartphones will be introduced in the 1H’18 other than the Galaxy S9/S9+ at the end of this month and the S9 is not expected to be aggressively priced. Therefore, 1H’18 will be tough for Samsung Display. As their capacity is rising (shown monthly in our Quarterly OLED Shipment and Fab Utilization Report), demand is falling, thus, costs will be higher and margins will be lower. This situation will likely be resolved in 2H’18 on better positioning due to lower prices resulting in more design wins and less dependence on a single customer and model. At the same time, the current weakness will result in Samsung pursuing other OLED applications and foldable displays more aggressively.
While the current implementation of flexible displays offers limited differentiation, the differentiation and value of foldable OLEDs will be obvious and enable flexible OLED suppliers to boost prices and margins. Let’s hope we see foldable OLEDs in 2018. We are currently working on a foldable report that discusses the challenges associated with producing foldable OLEDs at high yields. I have learned a lot so far and look forward to publishing it this quarter.
Figure 7: Samsung's OLED Fab Utilization