According to a report from Taiwan’s TechNews, despite running at a loss in the first half of the year, BOE believes that its target of shipping 120 million OLED panels still has a chance of being achieved. As the industry enters the traditional off-season in the fourth quarter, strict adherence to production capacity by panel manufacturers is expected to help stabilize panel pricing.

BOE mentioned that the price increases witnessed over the past few months were primarily driven by panel manufacturers, who maintained their bargaining power in price negotiations. This upward pricing trend continued into the third quarter. However, as the industry enters the off-season in the fourth quarter, some price fluctuations may occur. Nevertheless, panel manufacturers are expected to adjust their production capacity downward, making any potential price reductions manageable.

Furthermore, next year holds a brighter outlook for panel demand, with the average TV size projected to increase to 51.6 inches, compared to 50.2 inches in 2023, driving an 8% annual growth in TV demand for the coming year, compared to this year’s 3%. Replacement cycles are expected to contribute to overall demand for laptops and monitors next year.

In the first half of this year, BOE shipped approximately 50 million flexible OLED panels, marking a 76% year-on-year increase. The largest customer accounted for 43% of the total shipments. BOE believes there is still an opportunity to achieve the annual target of shipping 120 million panels. While the OLED business experienced an overall loss in the first half of this year due to increased capacity from second-tier suppliers and intensified entry-level competition, recent months have seen signs of a bottoming-out rebound in prices. Coupled with seasonal order increases, profitability is expected to continue to improve next year.

(Photo credit: BOE)

Based on a recent analysis by TrendForce, LG Display is encountering a challenge with its supply of 6.7-inch panels and chassis for the iPhone 15 Pro Max. The issue revolves around tolerance, leading to the development of a growing dark spot (GDS) once the components are assembled. Unfortunately, this problem has hindered the successful passage of quality verification tests. Consequently, LGD’s production timeline is anticipated to face a one-month delay, awaiting the resumption of shipments following the completion of revalidation later this month. To manage the reduced panel supply during this interim period, Samsung Display (SDC) will step in and provide supplementary support.

From the standpoint of downstream assembly facilities, the adjustments in supply have the potential to impact production operations in Zhengzhou for approximately two weeks. It’s projected that by ramping up production subsequently, these effects can be mitigated.

On a different note, BOE has successfully achieved its goal for this year by participating in the development of panels for both the iPhone 15 and 15 Plus. However, owing to recent quality concerns necessitating mask adjustments, they might encounter a significant decrease in shipments. Simultaneously, since SDC is a key supplier for these two new models as well, they will step up to fill the void created by BOE’s supply shortfall.

Taking a historical perspective on BOE’s involvement in supplying iPhone panels, their journey began with the iPhone 12, providing components for repairs, and subsequently transitioning into regular supply for the iPhone 13. Their prowess in LTPS and OLED technology has been acknowledged. However, with the introduction of the iPhone 15 and 15 Plus models, which incorporate the Dynamic Island design featuring a center-hole punch, the demands placed on the panels have become more stringent. The alteration in mask design is likely a pivotal factor that requires additional time for BOE to optimize panel yield and quality.

TrendForce underscores that the issue pertaining to panel quality only marginally affects the overarching shipping schedule for the iPhone 15 series. Its main consequence lies in the reshuffling of panel suppliers, while SDC continues to assert its dominance as the primary supplier of new model iPhone panels this year, accounting for nearly 70% of the market share.

TrendForce’s latest report, “AMOLED Technology and Market Status”, reveals that OLED, the next generation of digital displays, has not only taken hold of the smartphone market but is also beginning to make its move into other applications. Organic OLED materials are the core of the industry supply chain, accounting for 23% of the cost of making smartphone panels. An increasing penetration rate has allowed the global value of OLED materials to be estimated at US$2.23 billion in 2022, with a YoY growth rate of 30%. Production values are expected to reach US$3 billion by 2025, owing to the support of manufacturers.

OLED light-emitting components are either based on polymers or small-molecule materials. Polymers have poor solubility in organic solvents, which results in impure color and poor film uniformity. However, when combined with printing technology, the high aperture ratio can fit more materials and compensate for the poor lifespan and efficiency of polymers. Small-molecule materials have purer color and exhibit higher brightness, which can be applied to larger-generation OLED production. However, they are currently limited to developing FMM and vapor deposition machines.

OLED production begins with synthesizing intermediates from raw monomers. Then, the intermediates are processed to become precursors before finally being sublimated and purified into terminal OLED materials. When raw monomers are synthesized chemically into intermediates, there’s a gross margin of about 10–20%. These are mainly supplied by Chinese manufacturing companies such as Jilin OLED Material, Ruilian New Materials, Aglaia Tech, and Shenzhen Mason. Terminal materials are produced via sublimation and purification and their structure will not change through subsequent production. Therefore, the chemical structure, processes, and formulas are essential to trade secrets for terminal material manufacturers. The purity of these materials after sublimation is expected to be very high, meaning that technological barriers are also very high, allowing for gross margins as high as 60–70%. The technology and patents are concentrated within a few foreign manufacturers. However, the booming market has led to an influx of upstream manufacturers, gradually breaking down past technological barriers. Some Chinese manufacturers have been able to achieve mass production of precursors and terminal materials, and are now actively competing in the supply chain and driving growth.

Apart from two electrodes, the structure of an OLED component consists of organic light-emitting materials, including the main host (light-emitting layer), guest material (dopant), and functional layers (with electron or hole transport properties). DuPont and LG Chemical are the major manufacturers of red OLEDs, while Samsung DSI and Merck mostly produce green OLEDs. UDC has a monopoly on red and green phosphorescent dopant materials due to patent barriers. Blue light-emitting materials used to be primarily supplied by Idemitsu Kosan and Merck. Recently, LG’s next generation OLED evo TV uses deuterium-based blue emitter materials—supplied by DuPont and LG Chemical—to improve blue light-emitting efficiency. Its precursors are supplied by Ruilian New Materials.

Besides established manufacturers like Tokuyama, Idemitsu Kosan, and LG, Chinese manufacturers are also beginning to enter into the market to supply functional layers, such as Laite’s Red Prime. Samsung and UDC are planning to commercialize blue phosphorescent materials in 2024 in order to address the lifetime issues of blue OLEDs. Many new technologies, such as South Korean materials manufacturer, Lordin’s, patented Zero Radius Intra-Molecular Energy Transfer (ZRIET) rely on the efficiency of energy transfer between the main host and dopant, which is highly dependent on the distance between them. When that distance approaches zero, the quantum efficiencies of the molecules will not be affected at all. Therefore, efficiency can be improved by controlling the speed of energy transfer between the internal molecules of the material. Lordin has synthesized a material that maintains the respective characteristics of the main and dopant materials as well as a high energy transfer rate, which is expected to produce OLEDs that will be four times more efficient.

TrendForce believes the next stage of mobile terminal products will shift from folding smartphones to smart wearables, IT, and automotive applications, which will place more stringent demand on OLED components. The layout of panel manufacturers is becoming clearer thanks to brand endorsements. LG, Samsung, and BOE are all aggressively competing for priority for the Tokki G8.7 evaporation machine to gain an advantage in expanding application. The accelerated commercialization of blue phosphorescent materials and more innovative technologies, such as Samsung’s vertical evaporation developed with ULVAC, eLeap lithography, and printing processes to improve the aperture ratio will help push the expansion of OLEDs in the display industry. Meanwhile, costs will become more competitive as more Chinese manufacturers enter the market.

In 2021, shipments of notebook computer panels increased quarter by quarter with record highs posted in each quarter. In addition to strong demand for display terminals, panel makers continued to invest in capacity and resources for notebook computer panel production. With notebook panel shipments hitting a record high in 2021, panel makers also set fairly aggressive BP targets for 2022.

Panel makers shipped 187.7 million notebook panels before the COVID-19 outbreak in 2019 and up to 287.9 million in 2021, an increase of more than 50% in two years. In 2022, panel makers planned to grow by an additional 14.1% to 328.5 million units. With such high expectations, the sudden shipment revisions in 1H22 were urgent and violent, catching panel manufacturers off guard.

In 1H22, terminal demand and inventory problems materialized at the same time

The Russian-Ukrainian war in 1Q22 had a dramatic impact on oil production capacity. In addition, strong terminal demand in the past few quarters drove up the prices of various commodities, causing the annual growth rate of inflation to climb, in turn changing interest policies from central banks to focus on suppressing terminal demand and inflation, and leading to plummeting terminal demand.

Shipments of whole devices in 1Q22 were lower than single-quarter shipments of any quarter in 2021, meaning pandemic-induced demand had weaker since the outbreak of COVID-19. However, China imposed restrictions to prevent resurgences of the pandemic in 2Q22. These measures affected the assembly capacity of notebook computer OEMs, and also reduced 2Q22 notebook computers shipments by 17.7%. Looking into the background of 2Q22, when China’s lockdown measures were implemented, brands did not scramble to request OEMs resume production and supply as they had in the past two years. Instead, brands lowered their annual BP and component orders, reflecting that when brands express a bearish attitude regarding waning pandemic-induced boons and pessimism towards future demand, canceled orders in the supply chain is unavoidable.

Before 1Q22, panels have always resided on the top 3 list of notebook computer components. Therefore, notebook computer brands have adopted overbooking and accumulated inventory in the past two years to respond to strong terminal demand and support performance. The average supply-demand ratio for the past 12 years of whole notebook computer panel devices fell at 12.5%. The supply-demand ratio exceeded the long-term average of more than 18% beginning in 3Q21, reaching an ultra-high level of 28% in 1Q22. A relatively high supply-demand ratio means that panel inventory on the brand side accumulated to a certain extent in 2H21 and rose sharply in 1Q22. A higher inventory level will lead to future revenue support when demand is strong but, when market demand reverses, high inventory becomes a heavy burden on financial reports.

In 2Q22, notebook computer panel shipments dropped by 24.3% QoQ, and this quarterly decline was much higher than the 17.7% QoQ decline in shipments of whole devices. This means that brands have begun to curb inventory and greatly reduce panel purchases. Looking at a wider perspective, the beginning of every downward economic cycle related to consumer electronics is accompanied by demand reversal and inventory problems. The Russian-Ukrainian war was only the last straw that led to this reversal．

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According to TrendForce research, after smartphone panel shipments peaked at 1.95 billion in 2018, overall shipments declined gradually year over year. After 2020, due to the impact of the COVID-19 pandemic, shipments fell sharply to 1.796 billion units. In 2021, as the pandemic festered along with serious shortages of components overall, downstream customers continued to raise inventories to allay possible risks of shortages, driving the scale of panel shipment upwards again to 1.888 billion units. Looking forward in 2022, as mobile phone shipments are expected to remain flat, overall smartphone panel shipments have the opportunity to maintain a similar level to that in 2021, reaching approximately 1.872 billion units, a decline of only approximately 0.9%.

Judging from the shipment scale of major panel makers, BOE has become the global leader in smartphone panel shipments and it has an opportunity to maintain a scale of 502 million panels in 2022. SDC ranks second and it is expected to grow to the level of 479 million units in 2022, of which all shipments are AMOLED panels. Third to fifth consist of Tianma Microelectronics, Innolux, and TCL. From the perspective of the previous five manufacturers, the three major panel manufacturers in China alone contributed approximately 52.1% of global smartphone panel shipments, meaning that China has become an important hub for the production of mobile phone-related components and assembly, followed by South Korea panel companies at 28.5%, Taiwanese panel companies at 10.5%, and Japanese panel companies at 8.9%.

The proportion of AMOLED panels is still growing in the mobile phone panel market. As a-Si LCD panels fulfill demand for the low-end entry-level market and LTPS LCD panels nestle between the two, the market is becoming increasingly crowded. From the perspective of AMOLED technology trends, in response to changes in mobile phone specifications, AMOLED is currently developing in the direction of power conservation and folding. Therefore, technologies such as LTPO backplane and COE form the key development directions of several major panel manufacturers at this stage. Excluding SDC , which maintains certain leading advantages and is the benchmark for other panel manufacturers, panel specification requirements required by brands such as Apple for the iPhone will also have a significant impact on the development direction of AMOLED panel specifications. At present, China’s production capacity is mainly based on flexible AMOLED panels, while SDC has invested resources in both rigid AMOLED and flexible AMOLED panels. According to the overall AMOLED panel shipment plan for 2022, shipment scale is expected to be approximately 703 million units, or 15.4% YoY.

In the past, LTPS panels were produced predominantly by Japanese panel manufacturers. In the early days, due to these companies’ close partnership with Apple, LTPS panels were primarily used in mid-to-high-end smartphone models, which also led to a wave of LTPS LCD production line expansion. However, as the technology matured, coupled with the successive rise of Chinese panel plants and the growth of Chinese mobile phone brands, the primary panel manufacturers in the overall LTPS LCD supply have gradually switched from Japanese to Chinese panel companies and prices and costs have also continued to improve and decline. Overall LTPS LCD panel factory shipments are forecast to reach approximately 494 million units in 2022, a YoY decline of 10.7%.

a-Si LCD panels were an important foundation in the development of the entire smartphone panel market. However, with the rise of LTPS LCD and the subsequent increase in AMOLED panel production capacity, a-Si panels have gradually retreated to the low-end entry-level mobile phone market. a-Si LCD is mainly based on the HD resolution and the bulk of supply still comes from Chinese panel manufacturers, of which BOE is the main panel supplier. It is worth mentioning, due to fierce competition in the low-end mobile phone panel market, most Japanese and Korean panel manufacturers have successively reduced their supply of a-Si panels. Among Taiwanese panel manufacturers, AUO has also continued to reduce the supply of its a-Si panels. Shipments of a-Si LCD panels in 2022 is forecast at approximately 675 million units, a decline of 7.0% YoY.

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