DSCC Increases Display Capex Forecasts on New Fabs in China and Rising Capital Intensity
DSCC has increased display equipment spending for the 2018-2024 period by 5% to $93B in its latest Quarterly Display Capex and Equipment Market Share Report as new fab projects emerge and capital intensity continues to rise. 2019 spending was down 27%, the second straight year of a double-digit decline, with OLED spending down 48% and LCD TV spending flat. In 2020, an 8% increase is expected with OLEDs up 59% and LCDs down 24% factoring in install delays from the coronavirus. Mobile OLED spending is a bright spot up 363%. New projects have been added that boost the 2021 and 2022 outlook such as HKC’s H5 fab which has already started issuing awards to equipment suppliers. Equipment spending on this project is expected to exceed $2.5B. In addition, the first RGB IJP OLED mass production fab in China, China Star’s T9 was added and SDC’s A5 mobile OLED and BOE and LGD’s OLED TV capacity were increased over the forecast.
DSCC’s Latest Display Equipment Spending Forecast
Increasing Complexity and Rising Capital Intensity
Increasing complexity and capital intensity are driving the equipment spending forecast higher in mobile OLEDs as market leader Samsung Display looks to maintain its differentiation vs. its competitors, take advantage of its manufacturing prowess by introducing more complicated panels and capture more value per panel, often at the expense of materials suppliers. In mobile displays:
- First, Samsung pioneered the introduction of Y-OCTA, an integrated touch sensor process that adds up to 4 masks to deliver a thinner, more flexible touch sensor. Most flexible OLED manufacturers are adding this process to existing fabs and incorporating it in new fabs.
Samsung’s Y-OCTA Patent with Touch Electrodes (142 and 143) Over the TFE Layer (140)
- Second, Samsung and others are introducing low temperature polysilicon oxide (LTPO) transistors to their mobile OLED smartphone panels in 2H’20 to reduce power consumption in higher refresh rate panels by enabling variable refresh. The addition of an oxide TFT is also expected to add up to 4 additional masks.
LTPO with Top Gate IGZO TFT
- Third, to enable under panel cameras with no holes in the display, Samsung is introducing new laser drilling steps to increase transparency. Laser cutting has also gained increased penetration additional steps in hole punch panels.
- Fourth, to boost its foldable OLED display performance, Samsung is looking to replace a circular polarizer which is relatively thick, with a color filter which can be very thin in its color on encapsulation (COE) process. The function of the polarizer is to reduce ambient light reflection which it does very well. However, it adds 50-100µm in display thickness and makes foldable displays less foldable. They are also somewhat costly and can contribute to yield loss. In the COE Process, an RGB color filter is patterned on top of the Y-OCTA and thin film encapsulation (TFE) layers and can minimize ambient reflection when used with a black matrix. A portion of the ambient light incident on the color filter will be reflected based on the underlying color as shown in the figure below, while the other fraction that undergoes a backside reflection from the OLED surface would be blocked by the black matrix (BM). Any ambient light directly incident on the BM would be absorbed. The result is reduced reflection without the use of polarizers. The COE stack would be <5µm resulting in a significant reduction in thickness and foldability, resulting in a tighter radius with less delamination in future foldable displays. This process will also boost complexity and capital intensity as an additional 5 masks would be required. In addition, because of the low temperature required to protect the underlying layers, the photoresist would not likely be able to be hardened by a hard bake and instead hardened by photolithography requiring a higher dose and slower throughout leading to more litho tools. In fact, we believe 7 additional litho tools would be required for the COE process per 30K.
Samsung Display’s COE Structure
Thus, in the case of flexible OLEDs, we are seeing the # of litho tools more than doubling as these processes are adopted.
Similarly, in TVs, we are also seeing rising capital intensity. Examples include:
- Oxide TFT structures used for OLED TVs require around 2X as many masks as existing a-Si LCD TV panels;
- WOLED TV panels from LG Display require expensive OLED deposition tools for the bottom emission tandem structure with 4 emitting OLED layers, but only produce white light. Color filters are still needed to add color as in LCDs resulting in much higher capex.
- QD-OLED structures have an even more challenging frontplane with a top emission microcavity tandem structure with 3 emitting fluorescent blue layer stacks, thick quantum dot (QD) color converters to convert the blue OLED to red and green and a color filter to minimize blue absorption. It is also expected to require a yellow reflective film to recycle the light emitted in the wrong direction by the QDs, a quarter wave film to minimize ambient light reflection and encapsulation of both the OLED material and the QDs. SDC is also expected to introduce laser drilling at its new QD-OLED fab to connect the main electrode and auxiliary electrode after the OLED deposition.
- Dual cell LCDs require a second TFT backplane, equaling oxide TFTs. They also require 4 glass substrates, 3 polarizers and 2 LC layers.
- LCD TVs with miniLEDs can require an LTPS backplane for the miniLED backlight.
Equipment Spending Forecast by Technology/Application/Country/Supplier and More
Getting back to the equipment forecast, by frontplane type, OLEDs account for a 72% share from 2019-2024 or $53B with LCDs at $21B and a 28% share. OLEDs are expected to lead annually from 2020. LCD investment is now forecasted to end in 2022 after some investments were pulled in which were pushed out last quarter on the deterioration of market conditions. They were pulled in on LGD and SDC discontinuing LCD production faster than previously expected which has led to rising prices and improving market conditions. Looking at non-mobile OLED spending from 2019-2024, we show WOLED leading with a 52% share followed by QD-OLED with a 30% share and RGB IJP with an 18% share.
OLED vs. LCD Spending Share
OLED TV Equipment Spending by Technology: 2019-2024
Looking at spending by application, while the mobile share fell to just 11% in 2019, it is expected to enjoy at least a 40% share annually through 2024 with over $7B in spending annually from 2020-2022. TV spending is expected to decline in 2020 and 2021 before rebounding in 2022 as OLED TV spending is expected to pick up. Looking at OLED spending by application, TVs should lead in 2019 and 2023 with mobile OLEDs accounting for a 63% share of the 2019-2024 spend helped by rising capital intensity.
Equipment Spending by Application
By country, China is expected to dominate spending from 2019-2024 with a 79% share, up from 75% last quarter, due to the addition of the HKC H5 and CSOT T9 fabs among others. Korea’s share should surge in 2022 and 2023 on increased OLED TV spending. Its 2019-2024 share is expected to reach 20%. In LCDs, China’s share is even more dominant at 100% from 2019 – 2022 with no spending forecasted from 2023. In OLEDs, China is expected to lead Korea with a 70% to 28% share advantage, gaining 5 points vs. last quarter on projections for increased OLED TV spending in China.
Equipment Spending by Region
By manufacturer, BOE is expected to lead in display equipment spending from ‘19-’24 with a 24.2% share followed by China Star at 19.6%, Samsung at 15.7%, LGD at 10.8% and JKC at 10.1%. In just OLED, BOE is expected to lead with a 23% share followed by SDC at 22%, China Star at 16% and LGD at 15%. In just LCDs, we now show HKC leading with a 36% share followed by China Star at 28% and BOE at 26%.
By equipment type:
- Backplane equipment - We show backplane equipment accounting for a 50% share from 2019-2024. exposure leading with a 23% share on $8.5B in revenues over this period followed by CVD with an 11.2% share, dry etch at 11.1%, coater/developers at 7.1% and PVD at 7.0%, Market shares by supplier were provided for 26 different backplane segments. AMAT led the backplane market in 2019 with a 14.2% share followed by Nikon at 12.2%, Canon at 8.9%, TEL at 8.7% and Invenia at 4.2%. In 2020, we show AMAT continuing to lead with a 13.7% share followed by Nikon at 11.1%, Canon at 10.1%, TEL at 7.1% and ULVAC at 3.6%.
- OLED frontplane equipment - We see $16.7B in OLED frontplane equipment spending from 2019 to 2024 accounting for a 23% share. FMM VTE tools are expected to lead with a 31% share followed by open mask VTE systems with a 15% share, inorganic encapsulation with an 11% share and IJP at 5%. The IJP share came down on lower prices and fewer units than expected at SDC’s QD-OLED fab. Market share was provided for 17 different segments. In 2019, LG PRI led with an 18% share followed by YAS at 16%, Tokki at 11%, Panasonic at 10% and AMAT at 4%. In 2020, Canon Tokki is expected to enjoy a dominant 36% share followed by AMAT at 13.3%, ULVAC at 4.0%, Kateeva at 3.4% and SEMES at 3.1%.
- Similar info is provided for color filter, cell and module equipment.
The top 10 overall suppliers for 2019 were led by AMAT with a 9.0% share on revenues of $912M. Interestingly, if you shift their revenues by 1-quarter due to different revenue recognition approaches, DSCC’s 2016 – 2020 revenues for AMAT are within 2% of their published 2016-2020 revenues. Nikon was 2nd on its strong G10.5 litho position followed by Canon/Tokki, TEL and LG PRI. This is by far the highest LG PRI has ever been ranked and is a result of their share of the open mask evaporation tools sold to LGD. Of the top 10, only LG PRI, V Technology, Invenia and YAS enjoyed Y/Y growth.
Top 10 Display Equipment Suppliers for 2016-2019
For 2020, Canon is expected to reclaim the top position on 11% growth in exposure equipment, nearly 400% growth in FMM VTE equipment and its first open mask VTE equipment sale at over $250M. AMAT is expected to gain share with a 19% increase in revenues. Nikon is expected to lose share as their LCD spending falls sharply, TEL is expected to maintain the #4 position while ULVAC jumps to #5 on an FMM VTE system sale and stable PVD revenues resulting in 24% revenue growth. SEMES jumps to #10 on 71% growth thanks to IJP and organic TFE sales to SDC’s QD-OLED fab.
Top 10 Display Equipment Suppliers for 2016-2020
DSCC’s Quarterly Display Capex and Equipment Market Share Report segments the display equipment market into 77 different and unique market segments with equipment supplier market share provided for 67 of them. Laser drilling was added this quarter for use in QD-OLEDs. This data can be sorted in a pivot table by quarter, year, units or revenues, bookings or billings, frontplane technology, backplane technology, fab generation, country, manufacturer, application and substrate type among others. This information is critical for equipment suppliers and their component suppliers to track the health of their businesses as well as for panel suppliers to track the competitiveness of their suppliers.
For more information on this report, please contact Gerry@displaysupplychain.com.