Warning signs for the active-matrix organic light-emitting diode (AMOLED) panel market, which has grown rapidly since 2010, are flashing. Growth of the premium smartphone market started slowing down. Use of AMOLED panels in other applications remains insignificant. Samsung Display Co. (SDC), the sector leader, is beleaguered, but the followers are not in a situation to easily overrun Samsung Display. In the meantime, the LCD panel market has kept on rolling: low-cost a-Si TFT LCD panels are taking over the tablet PC market. Using the quantum dot technology, color gamut of TV-use LCD panels has enhanced to the level of OLED panels. The gap in between LCD and OLED panel markets gets wider and wider.
Under such circumstances, this column delves into the challenges each AMOLED panel maker is facing and the possible solutions.
Samsung Display – Growth of the premium smartphone market slowing down
Sales of the Galaxy S4 and the Galaxy Note3 in 2013 were much less than what the market had expected. Samsung Electronics Co. (SEC) had secured a large quantity of components including AMOLED panels, betting that the sales of Galaxy S4 and the Galaxy Note3 would sharply exceed those of their previous models – the Galaxy S3 and the Note2. But due to the sluggish sales, it cut the volume of component orders dramatically. This seemed to contribute to the sharp drop in sales of Samsung Display, which supplies AMOLED panels, in the fourth quarter of 2013.
Such a weak demand for AMOLED panels has been already predicted. Consumption has slowed down in advanced markets. Emerging markets have risen as new consumer markets. Performance of smartphones has leveled upward, sapping demand for a new device. All these were the signs that demand for low-to-mid-end smartphones would grow in the emerging countries. Such atmosphere will hardly change this year.
The only possible difference would be that the upward leveling of performance will make cost and performance competition among smartphone makers even fiercer. Thus, Samsung Electronics will have to make a major adjustment in their sales strategy for the Galaxy series this year. It will be definitely difficult for the company to keep the high-end smartphone strategy, going against the market movements, after it suffered a big blow last year.
SEC appears to have expanded the mid-to-low-end smartphone lineups and established a strategy to strengthen personal applications besides smartphones. This is a multi-product strategy to hold consumers who are not happy with skyrocketing smartphone prices as well as attracting their interest.
Such agony that Samsung Electronics has been in was also confirmed in its affiliate Samsung Display. The display maker, whose earnings have been dependent on the success of the latest Galaxy S and the Note series for the past years, expects the shipments of previously-launched panels to increase, on top of the state-of-the-art AMOLED panels, as the tech guru is taking a conservative stance about the outlook for the high-end smartphone market. The prediction must have been based on the fact that sales of the Galaxy S3, which was released in 2012, have continued steadily through 2013, leading the shipments of 4.8-inch HD AMOLED by SDC to exceed 30 million units.
Also Samsung Electronics launched its first wearable device Galaxy Gear in the second half of last year, which led to the introduction of a 1.x-inch panel production line at Samsung Display. Despite very poor sales of the smart watch, SEC is planning to launch an enhanced model in the first half of this year, and SDC would hope the upcoming product to boost its own sales.
In addition, SEC plans to unveil a tablet PC installed with AMOLED screens again, after tablet sales more than doubled in 2013 from a year earlier. The Galaxy Tab 7.7, which made a market debut in 2011 and adopted AMOLED panels for the first time in the industry, failed to drum up interest because of the then low brand recognition of SEC’s tablets and high price tags. However, the explosive sales growth seen last year encouraged SEC to expand the tablet lineups this year. This will help SDC make an inroad into the tablet segment again and lift its factory operation rate which fell in the fourth quarter of 2013.
LG Display – Can it reshape the market with a hidden card?
In the first quarter of 2013, LG Electronics Inc. mass produced a 55-inch OLED TV for the first time in the world, opening the era of large-size OLED. Further, LG mass produced flexible smartphones employing plastic OLED in the third quarter of 2013 for the first time and surprised the OLED panel market.
It can be said for sure that OLED panel manufacturing technology, which LG Display Co. (LGD) had prepared and kept as a hidden card, was behind such a product release strategy. Although OLED TVs have so low yield rates and high manufacturing costs for panels that they cannot compete with LCD TVs yet, the introduction of curved OLED TV and flexible OLED TV are providing a fresh impetus to the dull TV market. In addition, the launch of the G Flex smartphone, which has battery, circuit board and frame all curved, seemed to give a chance of thinking hard about the form factor and the direction of technological development of smartphones.
Still, LG Display has difficulties in fabricating OLED panels. It is early to say the OLED panel business has a rosy outlook, given that LGD’s technological progress of OLED panels appears not to be in the final stage yet. OLED TV panels have low yield rates for the oxide TFT process and long tact time in the WOLED evaporation process, so it is hard to say they have entered the phase of efficient production. Therefore, it is expected that OLED panels are unable to achieve as much a competitive cost structure as LCD panels’ within this year. For plastic OLED panels, the highest resolution that LGD can realize is just 250 ppi (6-inch HD), which will become a factor of limiting plastic OLED development, apart from the yield rate of the overall process. To keep up with the current trend of the high-performance smartphone market, the evaporation technology needs to make a significant progress.
LGD is now rolling out plastic OLED via 3.5-generation low temperature poly silicon (LTPS) and final metal mesh (FMM) evaporation process. In the production lines, small- and medium-sized AMOLED on glass substrates had been churned out until 2012. After that, LGD switched the 3.5-generation LTPS process for OLED into plastic substrate-based process on the views that plastic OLED would fare much better in the small- and medium-sized AMOLED segment. It is premature to say whether such a strategy of LGD was successful or not, but it was no doubt that the G Flex smartphone, released last year, succeeded in differentiating itself from rival products with a form factor. Accordingly, plastic OLED is coming under the spotlight in the emerging wearable device market. A research study on next-generation displays after flexible display is expected to gain momentum.
Late movers – LTPS technological progress needed before reaching OLED
After Samsung Electronics made a big success with smartphones adopting AMOLED screens and OLED panels started being applied in large-size TVs, OLED was viewed as a threat to the LCD panel market. In response, most of LCD panel makers are in a rush to mass produce AMOLED panels. Further, with SEC and SDC almost dominating the small- to medium-size AMOLED market, other smartphone brands have been steadily looking for AMOLED panel suppliers other than SDC in an effort to free them up from the monopolistic market. In fact, the moves by panel makers in China, Taiwan and Japan to mass produce AMOLED panels can be seen as an effort to meet expectations of set makers. Once those LCD panel companies kicked off AMOLED panel shipments aggressively, SDC would see its position weakened sooner rather than later.
There are a couple of tricky problems to be solved for AMOLED panel production, however: first, securing LTPS TFT technology. For now, LTPS is the most reasonable technology to drive small- to medium-size AMOLED panels. But the number of TFT devices per pixel required for AMOLED is greater than that of LCD. Compared with LCD that drives liquid crystals with voltage, AMOLED that drives organic emission layers with currents requires more detailed TFT control technology. To mass produce AMOLED panels, technological development is needed beyond the level of LTPS LCD mass production. It is believed that the lack of LTPS technological progress has been blamed for very few outcomes from panel makers which had been confident in mass producing AMOLED panels from around 2010. In the manufacturing process that has not secured stable production of LTPS LCD production, it seems unlikely to produce AMOLED panels for the time being.
Second, evaporation technology enough to achieve high-resolution can be pointed out. SDC has discontinued using stripe pixels in its top-notch AMOLED panels since 2012. Although pentile pixels can realize as much high resolution as possible, there is a limit to achieving high resolution with a fine metal mask method. Under the current market situation that 5-inch full HD panels with the resolution of 400 ppi or above are classified as a high-end product for smartphones, late movers need to overcome the hurdles of high resolution and pentile pixel technologies. But it looks difficult to secure relevant technologies because of exclusive patent rights owned by SDC and others. Therefore, late movers may need to avoid patented technologies or seek cross-licenses, which are unlikely to happen though, considering the competitive landscape in the panel industry.
Breakthroughs for AMOLED panel industry in 2014
As discussed above, the AMOLED panel industry can achieve breakthroughs by entering a low- to mid-priced smartphone segment, diversifying applications including tablets and wearable devices, boosting price competitiveness against LCD panels, and accelerating technology development for high resolution/TV/flexible OLED. However, it is required to take caution against supply expansion, given that supply increase based only on a rosy outlook could cause a protracted slump as consumer demand for AMOLED panels remains uncertain. Despite the incestuous situation in the panel industry now, technology exchanges for mutual interests may help secure AMOLED panel technologies in a longer term perspective.