Rising OLED Use Fuels Industry Growth

The demand for OLED panels has seen a notable resurgence, fueled by various factors that include the steady release of production capacity and an elevated penetration rate of these panels into the marketAs the landscape of the OLED panel industry continues to evolve, domestic manufacturers in China have made significant strides in the production of small to medium-sized OLED displaysThe flexible OLED market is on an upswing, amplifying investments in high-generation production lines that, in turn, are accelerating the process of localizing upstream materials and equipment.

Currently, OLED panels have become ubiquitous in smartphones, with global production capacity expected to grow at a double-digit rate, potentially reaching a 20% increase by 2024. The planning and rollout of high-generation OLED production lines are anticipated to lower the costs associated with medium-sized OLED screens furtherThis technological advancement is also expected to enhance the quality and performance of OLED panels, broadening their application scope across various devices, including tablets, laptops, and vehicle displaysThe continuous expansion and increasing dependence on OLEDs suggest an ongoing shift in market boundaries and user engagement.

Chinese manufacturers are significantly boosting their market share in the small and medium OLED panel arena while pushing forward the construction of high-generation OLED production linesBy the end of 2023, China's OLED production capacity is projected to reach an impressive 27 million square metersWith the global OLED display market forecast to expand to $54.4 billion by 2024, the domestic OLED industry chain in China is maturing rapidly, showcasing a trending replacement of OLED materials and equipment with local alternativesThis shift indicates a growing inclination toward Chinese capabilities in meeting domestic and international demands.

In terms of technology differentiation, OLED panels can be categorized into Active Matrix OLED (AMOLED) and Passive Matrix OLED (PMOLED), with the former being superior owing to its intricate driving methodologies

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The complexities of AMOLED technology offer features such as higher contrast ratios, improved resolutions, thinner designs, wider viewing angles, and faster response timesConsequently, AMOLED is increasingly integrating into an array of devices, effectively replacing older technologies like LCDs.

Taking a closer look at consumer behaviors, the adoption of OLED displays has surged among mainstream smartphone brandsApple's iPhone 12 series fully integrated OLED panels, while other top manufacturers similarly adopted OLED technology in their high-end modelsWith the anticipated positive outlook for the consumer electronics sector, OLED prices have experienced an uptick, aligning with the launch of new flagship devices and year-end promotional eventsMajor smartphone series from Apple and manufacturers like Samsung have transitioned entirely to OLED technology, reflecting a trend where over half of Samsung's devices now use OLED panelsThis trend is further promoted by the desire of brands like Xiaomi, OPPO, and vivo to incorporate OLED displays into 30%-40% of their smartphone models, thereby enhancing their devices' visual and functional appeal.

Statistics reveal that in the fourth quarter of 2023, the global shipments of AMOLED smartphone panels surged by 30.9% year-on-year and 35.1% quarter-on-quarterNotably, flexible AMOLED smartphone panels represented a whopping 77.8% of this market, indicating a robust growth shift from previous yearsThe worldwide shipment of AMOLED smartphone panels is forecasted at about 690 million units in 2023, rising 16.1% from the prior year, with the penetration of AMOLED technology in global smartphone markets surpassing 50% for the first timeFurthermore, shipments of flexible AMOLED panels achieved 510 million units, showcasing a remarkable 29.8% growth, predominantly driven by Chinese manufacturers whose share jumped from 33.8% in 2022 to 48.2% in 2023.

Looking ahead, projections suggest that by 2024, the shipment of flexible AMOLED smartphone panels could elevate to 580 million units, maintaining a year-on-year growth of 13.7%. The optimistic forecast for the global OLED production capacity underscores the widespread acceptance and integration of this technology across various devices and sectors, with estimates placing the shipment of smartphone OLED panels at an impressive 730 million units by 2025. The smartphone penetration rate for OLED is expected to exceed a significant 60% during this period.

As of 2022, China's contribution to the global market share of foldable smartphones reached 26%, with foldable and LTPO technology becoming standard for high-end flagship devices

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By 2025, the domestic output of foldable phones is expected to skyrocket to 17 million units, as more brands venture into this increasingly popular segmentThis rapid growth could see the global shipments of foldable smartphones hitting approximately 34 million units by 2024, providing a fresh impetus for the OLED display industry's expansion.

Industry experts predict that Apple will continue to incorporate OLED panels in its computers and tablets, which is expected to amplify OLED's market penetration furtherBy 2028, shipments of OLED display panels for laptops and tablets may reach around 72.3 million units, achieving a penetration rate of 14% in that segment.

As the OLED sector prepares for a major capacity expansion, the scene was shaken in March 2023 when Japan's OLED manufacturer JOLED declared bankruptcyIn the same year, global shipments for 9-inch and smaller AMOLED panels hit 842 million units, marking an 11% increase from the year priorSAMSUNG Display and LG Display took the lead in market shares, capturing 43% and 10%, respectively, albeit with decreases compared to 2022. Chinese companies collectively held a market share of 43%, with BOE Technology Group increasing its share from 12% in 2022 to 15% in 2023.

However, the manufacturing of OLED panels still faces challenges, particularly with limitations imposed by vacuum deposition technology, which hinders yield rates and subsequently inflates production costsLarger screen sizes exacerbate these issues further, indicating that the application of OLED in larger screens—like computers and televisions—has not yet achieved critical massCurrently, the penetration rate for these larger screens is less than 3%. Analysts predict that using eighth-generation production lines could reduce manufacturing costs for medium to large OLED screens by nearly 50%.

Smartphones remain at the core of OLED panel application

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In Q1 2020, South Korean Samsung controlled a staggering 90.2% of the OLED smartphone market, leaving Chinese manufacturers with less than 10%. However, with continuous advancements from Chinese firms such as BOE, Visionox, and Tianma, the competition landscape has shifted dramatically in recent yearsBy 2023, South Korean enterprises' market share in OLED smartphone panels dropped to around 53%, while the combined share of Chinese companies climbed to 43%.

In particular, BOE’s AMOLED business sector has become a vital component of its display device operations, with a reported shipment of nearly 120 million flexible AMOLED panels in 2023. The revenue contribution from OLED smartphones and innovative application products constituted 25%, amounting to approximately ¥36.76 billionBOE remains focused on the high-end segment of flexible AMOLED, especially highlighted through their endeavors in foldable screensIn the first quarter of 2024, their shipment volume is anticipated to maintain an upward trajectory surpassing last year's figures, with an annual target of 160 million units, translating to a growth of over 30%. Despite high operational and research costs, the overall OLED sector remains in a loss stateMoving forward, BOE is investing in the construction of an 8.6-generation production line in Chengdu, featuring advanced LTPO and Tandem technologies aimed at high-value IT products.

In parallel, the burgeoning material and equipment segments within the OLED display arena are experiencing rapid advancementsBy the year 2022, the market for OLED materials reached a valuation of $2.09 billionBy 2023, the market share for domestically produced OLED organic materials hit approximately 38%, with general layer materials comprising about 17%, whereas emitting layer materials accounted for less than 6%. Recent developments in red, green, and blue emitting materials have favored the utilization of phosphorescent materials with 100% internal efficiency for red and green lights, while blue lights employ fluorescent materials with 25% efficiency

In Q4 of 2023, a spike in demand from OLED terminal brands led to a substantial increase in the sales of green light materials, marking a record quarterly revenue for that financial year.

Moreover, Wade Electron has unveiled new thin polarizer products for OLED applicationsThese specialized polarizers, which include wide-view angle, brightness-enhancing, and rounded polarizers for AMOLED technology, are priced higher compared to regular functional polarizersThe transmission rate of its polarizers has improved from previously recorded levels, with ongoing developments targeting rates exceeding 45%.

As the display industry embarks on a robust recovery phase starting from the second half of 2023, the demand for materials has surged, leading to Dinlong's reported 17.46% sequential revenue growth and a staggering 174.9% year-on-year increase in Q4 of 2023. Ruijun New Materials has plans to invest ¥800 million towards establishing a base for OLED sublimation materials and high-end fine chemical projectsDongcai Technology's optical-grade polyester-based film project designed for OLED display technologies is nearing completion, with a committed annual production of 20,000 tonsThe capabilities for producing domestically-sourced liquid crystal and OLED materials have now reached global standards, and as the bargaining power of Chinese firms in the OLED panel marketplace strengthens, the demand for reduced costs and resource allocation for raw materials are likely to stimulate ongoing developments toward domestic substitutes for OLED materials.

From a cost structure perspective, manufacturing equipment constitutes the largest cost driver for OLED panels at about 35%, with organic materials accounting for 23% and driver chips at 7%. Equipment focusing on OLED manufacturing remains upstream and encompasses etching, developing, coating, and packaging technologies

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