Samsung’s OLED Fab Utilization Rebounds, Dramatic Revenue Growth Expected in Q3’18
The Q2’18 issue of DSCC’s Quarterly OLED Shipment and Fab UtilizationReport shows that Samsung Display’s utilization has begun to improve significantly as the build has started for new smartphones from Apple, Samsung and other brands. As shown in Figure 1, SDC’s rigid fab utilization is expected to exceed 80% in June, up from 76% in May. The rigid production primarily occurs in their A2 fab, which has monthly substrate input capacity of 175K substrates per month. A2 glass input bottomed in February and has increased every month since as the price gap between rigid OLEDs and LTPS LCDs has continued to narrow. 5.5”-6” rigid OLED prices are expected to fall to as low as $23 in Q3'18 in the case of lower specification panels with a price difference vs. LTPS LCD falling to around $5. Since OLED phones are typically priced quite a bit higher than LTPS LCD phones, rigid OLED phones offer greater profit potential for smartphone brands. Therefore, we expect rigid OLED fab utilization to remain high through the rest of the year.
In the near term, panel suppliers including Samsung likely wished they added more rigid instead of flexible OLED capacity. Flexible OLED fab utilization has also rebounded, but fell much further than rigid capacity at 31% in April. However, it improved to 37% in May as input started for 5.85” panels for the next iPhone. In June, utilization rose to 52% as input started for the new 6.46” iPhone X Plus. We expect utilization to continue to improve through the rest of the year for this fab as well. The improvement in utilization in both rigid and flexible fabs should boost returns for materials suppliers and laser suppliers such as UDC and Coherent.
An important question for Samsung’s flexible fabs is how much does utilization decline in Q1’19 after the initial build for the next iPhones and do they have to idle any capacity in 1H’19 as they did in Q1 and Q2 2018. A lower price gap with rigid OLEDs and LTPS LCDs and form factors that take advantage of their flexible capability such as curved, foldable or rollable will certainly help to boost demand and prevent future idling of capacity. OLED penetration into less seasonal markets will also help.
In terms of SDC’s Q2’18 revenues, we expect their revenues to bottom in Q2’18 as shown in Figure 2, falling 16% Q/Q while rising 2% Y/Y to $4.4B. It should be noted that it takes around 2 months from glass input at the fab to revenue recognition due to module assembly occurring in Vietnam. Thus, the surge in May and June won’t be reflected until Q3’18. In Q3’18, we expect SDC’s OLED revenues to jump 52% Q/Q and 35% Y/Y to $6.7B, the second best quarter in their history. In Q4’18, another 6% Q/Q growth is expected to $7.1B, but that will be down 11% vs. Q4’17 due to the higher prices for the flexible OLED phones shipped in that quarter. For 2018, we show SDC’s OLED revenues up 11% for the year to $23.4B, remarkable results given the challenges they have had to overcome at the start of the year.
For results and forecasts for other panel suppliers and applications, please see the latest issue of our Quarterly OLED Shipment and Fab Utilization Report.