China Star recently ordered an unusual tool that it will use as part of a pilot line at its Gen 6 fab in Wuhan.  The tool, which is used to deposit ITO[1], an important material that acts as an electrode in OLED displays, uses a pulsed laser to deposit ITO at room temperature, different from typical ITO process tools that operate at higher temperatures.  This will help to avoid the issues that occur when using plastic substrates with high temperature processes, and is expected to also increase the transparency of the ITO layer, which is essential for getting light from the OLED stack.  The tool, which is being provided by Solmates (pvt), a spin-off of the University of Twente in the Netherlands, is able to produce 8” x 8” R&D displays, but is said to be able to be scaled to larger sizes.
This tool is part of the China Star pilot line, which is trying to develop an ink-jet process for printing large panel OLED displays, which are currently produced through a vacuum deposition process.  The vacuum deposition process has some very specific limitations that make it unable to be scaled to large size OLED displays, and the discovery of a process, either ink-jet or roll-to-roll, that would enable the direct deposition of patterned OLED materials on large size displays would be a very significant achievement for the OLED display space. 
Current OLED TVs are produced by depositing a number of layers of OLED materials across the entire substrate without patterning, and using a color filter to create the individual sub-pixels that are necessary to display images.  Unfortunately this increases the cost of the device and reduces the light output of the screen, as light levels are lowered by the color filter.  Small panel OLED displays however are not produced with a color filter and the OLED materials are patterned by using a fine metal mask to position the sub-pixels directly, however there are two problems to this process.  One, it is very inefficient, with materials also being deposited on the FMM and the evaporation chamber itself.  The efficiency of such systems are between 20% and 30%, and waste expensive OLED materials and need to be cleaned and the masks replaced regularly.  Further, as the masks must remain very thin but rigid so the OLED materials are precisely deposited, they cannot be made large, as they would not lay flat in the deposition chamber and pixels would be misaligned.
Ink-jet printing would allow the OLED materials to be deposited directly on the substrate without a mask, which would theoretically remove any display size limitations, and research continues through a variety of companies such as Kateeva (pvt), Dainippon Printing (7912.JP), Konica Minolta (4902.JP), and Tokyo Electron (8035.JP), but as yet the problems associated with ink-jet printing have not been solved.  The materials used in OLED displays have to be made soluble in order to pass through the high-speed print heads, which also means they have to dry quickly (panel process time is 90 seconds or less) and stay in shape and place while drying, and all must be done in an inert atmosphere to avoid degradation of the OLED materials, not an easy task.  That said, the Kateeva ink-jet tool has already been adopted for the deposition of encapsulation materials by Samsung Display, and research continues to refine the process and materials for the key deposition steps.  We note that ink-jet deposition systems, at least in the R&D stage, have a material efficiency of ~95%, which would yield significant savings in OLED material costs if proven viable
China Star seems to have a particular interest in developing an ink-jet process for large panel OLED displays and has joined forces with a number of equipment and material suppliers to that end and has shown a 31” printed OLED TV display a number of times recently.  As China Star knows it must compete directly with LG Display for share in the OLED TV market, they have taken a longer-term view, and hope to create what would be a very significant edge in the OLED TV space if they are able to move such a process from R&D to mass production.  Many have tried and many continue to try, so it will be interesting to see if China Star can come up with a workable solution that can be applied to a cost-effective mass production process.


[1] Indium tin oxide

​There have been a significant number of articles published in the US and foreign press concerning the potential for Sharp (6753.JP) to build a TV display production facility in the US, with some very specific details as to location and size.  That said, we have expressed our doubt as to whether a TV panel production line would be built in the US, particularly focusing on both the cost structure and the display infrastructure needed to make such a facility profitable.  Our alternative was a TV assembly plant, which would take display panels built by Sharp in Japan and assemble them into TV sets for US distribution, which could be a more logical and potentially more profitable use of the Trump administration and local government ‘encouragements’ that would be offered for such a project.  We note also that Sharp has previously licensed the Sharp brand name in the US to Chinese TV giant Hisense (600060.CH), who refused to relinquish such rights back to Sharp when it was acquired by Foxconn (2354.TT), which reduces the market opportunity for Sharp in the US.
However…the Japanese press is now indicating that Sharp is now considering building a small panel display plant, primarily for smartphone and industrial applications.  The project, which has been estimated at $7b (either for TV or small panel displays), continues to be negotiated between the company and the various state and city governments vying for the plant’s location, despite the press’s previous insistence that Pennsylvania had been selected as the state of choice.  That said, given the global nature of the smartphone business, such a plant would likely be producing smartphone displays that would also be shipped to China, which would be a considerable pricing burden against those produced on the mainland, and Apple (AAPL), who has encouraged other suppliers to set-up factories in the US in the past, has found that the efficiency of those facilities is considerably lower than what they see in Asia.  Even with Apple’s $1b advanced manufacturing fund that it recently set up to encourage US job growth, there remains the issue of cost structure for local projects such as the potential Sharp facility, and Apple has said publicly that it would likely continue to source phones overseas even if tariffs were imposed on smartphone imports as it does not believe the US is suitable for competitive smartphone production.
Of course, despite the photo-ops and handshaking in the press, Sharp is also being wooed by other countries, in particular India, where the government is also offering ‘encouragements’ to Sharp/Foxconn and cites lower labor costs and a rapidly growing local market, so Foxconn management has little incentive to rush toward a final decision, allowing the players to up the stakes repeatedly.  Of course it would be helpful to create jobs in the US in the display industry, but the altruistic nature of panel producers and CE brands is not one that can be counted on when making decisions that involved billions of dollars.

Chinese panel producers China Star (pvt) has indicated that it believes Chinese TV brands will reach 85% self-sufficiency this year as mainland panel manufacturers continue to add TV panel capacity.  This is up from 80% last year and 54% in 2012 according to the company, and while the timeframe to reach 100% was a bit vague at ‘sooner or later’, the idea that China will eventually reach 100% self-sufficiency in TV panels has been an objective of the Chinese government for a number of years.  The comments by China Star do not include small panel displays, where South Korean firms dominate the market, but include only those fabs that produce large format panels for TV, usually starting at 32” and topping out at 100+”.
We note that while the TV segment ranges from 43% to 49% of revenue on average for large panel producers, even 100% self-sufficiency in that segment does leave considerable room for other display manufacturers in the Chinese market, and looking at the TV market today, will likely not give a realistic picture of what the TV market will look like in 2020 or beyond, given the changes in TV panel size and display technologies.  That said, there is no doubt that Chinese display producers have made great strides in building capacity over the last few years, and on an overall capacity basis, we expect China to have the largest overall capacity share by 4Q 2019, as can be seen in Fig. 2 below.
As we have noted in the past, Chinese panel producers have an advantage over other regional suppliers in that they receive significant subsidies for fab construction and substantial state, regional, or local intervention as to a supporting infrastructure.  This has allowed Chinese panel producers to generate large display production projects that might have been far more difficult to finance if not state-sponsored. This is not to say that other panel producers do not receive some benefits from their respective governments, but the substantial subsidies and sponsorship that Chinese panel producers regularly receive has allowed them to bypass some of the financial hurdles that other panel producers face and expand despite the lack of near-term financial viability.  While this can also be looked at as a driver that pushes other panel producers to be more focused on profitability, it is responsible for much of China’s growth as a display producing country.
Further, while Chinese panel producers will eventually reach near 100% self-sufficiency in the TV panel segment, Chinese TV panel producers will not be satisfied with only providing panels to Chinese TV brands, and are already pushing out into the worldwide TV market to further justify their growth.  This is both a challenge to non-Chinese TV panel producers and a significant factor for decisions as to what direction the non-Chinese panel producers will take over the next few years.  Samsung Display (pvt) has already made some directional changes in its capacity plans, by closing some older LCD fabs and converting them to small panel OLED production lines, while buying open cell panels from other suppliers, and LG Display (LPL) is re-evaluating plans for a Gen 10.5 TV panel fab that it was considering, and refocusing away from the ultra-large TV space and more toward small panel OLED displays.  In part, these decisions reflect the concept that competing against Chinese panel producers in the large panel TV market is a low profitability generator, while enhancing the technology advantage that other panel producers have over the relative new Chinese panel producers is a much more profitable way to allocate assets.  While these decisions are not quite as cut and dried as this, and can also be influenced by a number of other factors, the handwriting has been on the wall for other non-Chinese panel producers, who must adapt or face dire circumstances over the next few years.