​We have mentioned the Chinese company Royole (pvt) a number of times over the past few years, in particular relating to folding displays, where the company was the first to release a development kit for a foldable device, beating out CE giants like Samsung Electronics (005930.KS) and LG Electronics (066570.KS).  That said, the company has not done as well as early expectations might have predicted and in our 4/422 note, we described some of the problems Royole was facing, including rumors that the company had been failing to pay worker wages starting last December.  Some of the wage arrears were paid in January, with the promise the rest would be paid after the New Year festival, which did not happen, however we have now heard that after some employees were told to ‘take a long vacation’ (three months), it seems that some workers have been paid missing wages.
The company’s only comment was that ‘funds would be received in batches’, with those employees that resigned without arbitration getting the first batch and those with arbitration having to wait for the 2nd batch.  The source of the funds however was not made clear, other than the remittance itself came from Qingdou Rouyu Technology,  a company established in August of last year (wholly owned by Royole), rather than the typical Hua Xia Bank (600015,CH).  It was noted that in March of this year Royole pledged a number of patents to Qingdao Urban Investment Engineering Construction Development (Group) Co., Ltd. and Qingdao Urban Investment Industrial Investment (Group) Co., both of which are controlled by Qingdao SASAC (State-owned Asset Supervision & Administration Commission of the State Council), whose obligation is to ‘perform the responsibilities mandated by the Central Committee of the Chinese Communist Party’, so one might imply that Royole is being bailed out by the government.
What seems to be a difficult time for Royole is made worse by the late 2020 announcement by the company that it was planning to build a $2.4b flexible OLED fab in Qingdao, which remained on the “List of Key Projects” by the Qingdao Municipal Government earlier this year, which is likely a massive financial burden, if it is still under construction.  Details on the fab’s status are sparse, although the original theory was that Royole’s ULT-NSSP (Ultra-low Temperature Non-Silicon Semiconductor Process) would allow the company (and potentially other Chinese OLED producers) to produce foldable OLED panels without paying royalties to foreign entities.  This was likely the impetus for the original project, but Royole’s lack of traction relative to their earlier products (they produced only 48,600 units in 2020 at their existing Gen 6 OLED fab) has made it difficult for the company to exist independently, as the company’s failed attempts to list in the US and China seem to indicate.
How much capital the local governments are willing to fund going forward is an open question and while Royole has raised ~$1.1b in 7 rounds over the last nine years (the last was in 2018 with a $5b valuation), we expect they will have to give up considerably more IP and ownership if they are to remain in business going forward.  As a private company we expect to see little financial or ownership information forthcoming, with much of what we know about the company coming from previous IPO filings, but we suspect local government organizations will wind up being the majority owners of the company if it survives.

​LG Display (LPL) reported sales of 6.471t won ($5.1b US), down 26.5% q/q and down 6.0% y/y and operating profit of 38b won (~$30m US), considerably below the consensus of 182b won.  Gross margins were 12.6% against the previous quarter’s 14.9% and the recent peak of 20.8% in 2Q ’21, and operating margins were 0.6% against the previous quarter’s 5.4% and the recent peak of 34.0% in 2Q ’21.  Capacity remained essentially flat at 11.5m m2 while ASPs (m2 basis) declined 18.1% q/q and 10.3% y/y.  2Q guidance was generally for large and medium size panels to see price declines, more specifically down ~10% q/q on an area basis, as weak mobile continues into 2Q (‘seasonal’ in their words).  Area shipments however are expected to increase between 2% and 5%, primarily on large OLED TV shipments, which had been limited in 1Q by logistical bottlenecks.  For the same reason 1Q inventory levels were higher than normal as OLED TV panel stocks were slow to ship and the company built safety stocks.  On an overall basis LGD said they expect supply/demand uncertainty to continue through 1H but expect a better 2H on increased OLED TV panel sales and a more stable high-end IT product market.
LG Display indicated that the high-end OLED TV market grew 10% in 1Q, while the overall TV set market saw a 10% decline y/y, with OLED TV set growth of 40% y/y, although OLED TV panel shipments were lower than expected.  As noted above, LGD expects to see significant growth in OLED TV shipments in 2H and increasing profitability in the segment, although they were careful to add that the improvement would be on a ‘phase by phase basis.”  We expect that at least a part of that OLED TV panel enthusiasm is related to thepotential deal between LG Display and Samsung Electronics (005930.KS) that we have noted in the past, but also on increased consumer familiarity for OLED TV in general.  The company was a bit more vague toward expected improvements in their small panel OLED business, other than typical improving 2H seasonality, mentioning wearables, automotive, and more specifically ‘tandem OLED’ a technology that LGD is developing for Apple (AAPL).  As part of the longer-term OLED plan, the company will see increased capex this year as it continues to spend on additional small panel OLED capacity at its E3 Gen 6 OLED fab (primarily for Apple), which it says remains scheduled for 2024, although we believe they could begin mass production sooner.
Questions on whether the slower growth of OLED TV panel shipments in 1Q would affect the total for the year was answered with “looking at the trend from April (then) we see that the shipment of OLED is likely to pick up from the 2nd quarter and alongside it the profitability as well”, which we found a bit lacking.  As to the potential for changes in the company’s longer-term OLED plans, a boilerplate answer based on ‘the principles of profitability and growth’ would govern future investments.  When queried about the LCD display business, LGD admitted that they had expected Chinese competitors to be ‘more disciplined’ as to pricing, but with such a decline in the market, they have become more aggressive toward pricing.  The company is expecting to reduce the amount of generic LCD panels it produces to remain competitive, something a number of Taiwanese panel producers have done over a year ago, but the company also admitted that while it had expected B2C business to weaken as COVID was slowing, it had also expected B2B business to increase, which has been slower than expected.  While that remains the case, the company added that current levels for B2B are still higher than they were pre-COVID. 
The company was also asked about plans for its entry into the AR/VR display market but gave little information as to real plans, mostly citing the examination of the market and potential entry points and products, so nothing seems to be on the near-term horizon.  When probed a bit further on the company’s view of LCD cyclicality, they stated that the “COVID boom” pulled in considerable demand which will lead to negative growth this year and could be sustained.  They expect this to lead to a potential improving situation based on supply rather than demand, meaning more utilization cuts in the near term and the closing of older, less efficient fabs going forward.  It was not apparent whether they were speaking about LG Display's older LCD fabs or ones across the industry, but LGD does have Gen 5 fabs that were commissioned in the early 2000’s and are still operational that it could close or upgrade, although expecting Chinese panel producers to close older fabs might take a more sustained downturn.
All in, we expect LG Display’s call to be rather typical for panel producers this quarter, although they are lucky enough to have OLED as an offset to the LCD display weakness.  Once again panel producers seem to be shocked about the end of what was a partially artificial ‘boom’ in LCD display demand.  Some producers have the experience to know that building into the peak of a cycle is not the best idea, while others were moving away from LCD TV panel production before COVID-19 began.  That said, those more interested in gaining market share will now face the reality of low or no profitability as the industry faces a more normalized reality going forward.  Display is a cyclical industry so as Roseanne Roseannadanna said “It’s always something!”.

​AU Optronics (2409.TT) reported 1Q sales of NT$81.5b (~$2.77b US), down 12.4% q/q and down 1.7% y/y, Gross margins declined from 18.9% in 4Q (28.7% at peak in 2Q ’21) as did net margin, which was 6.3%, down from 12.7% in the December quarter and down from 14.3% in 1Q ’21.  None of this is surprising given the state of the display space, as we have noted previously.  2nd quarter guidance for AU Optronics  reflects some of the impact of the Russian invasion of Ukraine and Chinese COVID-19 lockdowns, but the company cautioned that the impact may not be fully reflected in the forecasts, which are for area shipments to be down by low single digits q/q after a 7% decline in 1Q.  Blended ASP (m2 basis) is expected to be down by mid to high single digits, after declining 6.3% ((m2 basis) in 1Q.
AUO management indicated that aside from the continuing shortages that most panel producers have been facing, transportation issues for both raw materials and finished product continue to make predicting 2Q more difficult than usual.  Chinese COVID-19 lockdowns have also affected the company’s production fabs in Suzhou and Kunshan, where some operations have been limited or suspended due to the lockdowns, although overall inventory levels have been increasing to higher than normal levels as demand weakened during the quarter and brands lowered panel purchase targets.
We believe while AUO’s quarter is indicative of the difficulties facing panel producers currently, they have been able to mitigate some of the impact by having shifted production goals to more premium products and away from generic panel production, where competition from Chinese panel producers is fierce.  These niche products have helped stabilize AUO’s results for the last quarters but as with all panel producers overall demand will drive both pricing and profitability, so AUO’s results this year and next will be slightly less driven by the global macro environment than some, but will need an improving environment to achieve y/y sales and income growth.

March is typically a recovery month for large panel sales as February is a short production month and reduced production during the Chinese New Year holiday lowers factory utilization rates.  With potential restocking and resumed production, March large panel sales are typically up 18.8% m/m (5 year average), however this year large panel sales grew only 1.6% m/m in March (see Figure 1), even with large panel shipments (see Figure 2) increasing by 8.1% for the month, indicating continued large panel pricing weakness, which was down 3.4% in March.  April large panel pricing is expected to have declined by 4.1% (see table below) and we expect May will see roughly the same decline. 
As we noted in our 04/06/22 note, TV brands had set very aggressive goals for the 2022 year under the assumption that lower TV panel prices would stimulate TV set sales, however a number of TV set brands cut back orders in 1Q and are likely to do the same in 2Q, although not all brands are have reacted the same way.  TV set shipments declined by ~20% in 1Q, despite TV panel shipments being up 2.9% y/y, which has prompted expectations for TV set shipments for the 2022 year to be reduced to flat to up 1%.  Reasons cited have been the Russian/Ukraine war, China’s zero-tolerance COVID-19 lockdowns, FIFA World Cup postponement, and component shortages, much of which had already been part of higher estimates. 
Samsung Electronics (005930.KS) reduced TV panel purchase plans in 1Q by ~7.5% and is expected to do the same in 2Q, while LG Electronics (066570.KS), has lowered its TV panel purchase plans for 2022 by ~20%.  Some Chinese TV brands have also made TV panel purchase order adjustments, but others are waiting to see how the 618 shopping holiday plays out before making adjustments to their TV panel purchase plans, which has allowed some Chinese panel producers to continue to see high utilization rates.  Other than that there has been little for panel producers to be excited about as we head into 2Q, and few of the negatives seem to be changing quickly to the positive.  Large panel pricing is expected to decline again in May (~4.0%), broken out as shown in the table below.

​Taiwan based AU Optronics (2409.TT) has announced the purchase of Rise Vision (pvt) based in Wichita, Kansas for $29.25m US.  The company provides software that helps users design cloud based content for digital signage for schools and commercial applications.  The software is based on the number of displays used (10 displays cost $1155/year, while schools get unlimited displays for $1,000/year).  The software is hardware and OS agnostic so it will run on almost any OS and media player, and is used by a number of large organizations including Marriot (MAR), The Philadelphia Eagles (pvt), and the Chicago Public School System.
AU Optronics has a public display division that provides a broad lineup of displays that include small touch based displays to large video walls.  This software will help to provide a simple and popular solution for content creation as part of a PID sale and goes toward AUO’s push toward providing non-generic displays that carry higher margins and are less subject to competition from Chinese panel producers.   For those not familiar with the public display market here are a few examples:

​China’s Tainma (000050.CH) has set a timeline for its new Gen 8.6 LCD fab project that it is building in  Xiamen.  This follows the recent early production runs at its T18 OLED fab also in Xiamen.  The new project is expected to cost $5.16b, of which Tianma has contributed $464m for a 15% direct stake, and will have a capacity to produce 120,000 Gen 8.6 (2250mm x 2600mm) panels/month.  The project is expected to reach the piling (basic construction) stage during the 2nd half of this year and the main building is expected to be capped a year later.  Phase 1 production is expected to start in 2H 2024, although no timeline has been set for phase 2 development, which we assume will mean that 60,000 sheets/month will be built out for phase 1.  We expect the project will develop both LTPS and IGZO backplane technology and will be oriented toward the production of IT and automotive panels, at least that is the current intention,
While Tianma is best known for its small panel production, both LCD and OLED, the company lacks the Gen 8 capaity that is needed to efficiently produce large panel displays.  That said, given the vast resources of other Chinese competitors, and the potential for over capacity across the large panel display industry, it would seem somewhat ill advised to be building out new Gen 8 LCD capacity at this point in the cycle.  That said, we expect that Tianma’s management is more concerned with their ability to provide what their customer base is asking for or what they believe they will be asking for in the future, without regard for the impact on the overall LCD display industry or China’s exposure to a potentially extended weak profitability cycle for China’s display segment.  There is little chance, in our view, that management has put such a perspective ahead of a desire to gain share against competitors and generate what it believes will be new revenue sources, but we expect the outcome of the project will be to generate incremental sales but at relatively low profitability.  It’s a long way t 2H 20224.

​As we have noted, Samsung Display (pvt), LG Display (LPL) and most recently China’s BOE (200725.CH) have been working toward developing the technology necessary to produce IT OLED panels on larger substrates, moving from Gen 6 sheets, which are 2.78 m2 to Gen 8.5 sheets, which are 5.5 m2 to increase the efficiency of the process.  Recently is seems that other OLED producers are also looking to make such a change, although we believe the motivation and potential for success are different from those producers mentioned above.  Visionox (002387.CH) has been the name most often mentioned as a potential developer of such technology, although we have our doubts as to whether such stories are anything more than self-promotion.
As OLED display technology migrates to larger devices, OLED deposition technology comes up against some roadblocks, the largest of which is the use of fine metal masks that force gaseous OLED materials to form the pattern on substrates that become pixels on a display.  These masks are made of a nickel/iron alloy that is able to remain stable under the heat and high and low pressures found in OLED deposition equipment, as it is absolutely necessary that the FMM ‘screens’ keep the OLED materials in perfect order and spacing during production.  While the FMM are designed to handle heat and pressure they must also react to gravity, which can cause them to sag and misplace pixels, causing a panel to fail.  While this is not a problem for small OLED displays, such as those used in watches and smartphones, as the displays and masks get larger, such as might be the case for notebook or monitor panels, the effects of gravity get worse and yield management becomes more difficult.
Currently the number of OLED displays produced for IT products is relatively small when compared to smartphone production, but that is expected to change over the next few years with OLED adoption increasing for such products, which makes solving the production issues with larger OLED panels all the more important.  It is especially important to SDC, LGD, and BOE, all of whom are OLED display suppliers to Apple (AAPL), who is expected to continue to migrate more display based products to OLED.  Each of the three has been working toward find solutions that will improve OLED IT panel yields, each with their own ‘slant’ to the problems, but with each knowing that they have the ‘ear’ of Apple as they progress.  Visionox however is not a supplier of flexible OLED panels to Apple, with Chinese brand Honor (pvt) their biggest OLED display customer, along with Xiaomi (1810.HK) for whom they produce OLED watch displays.
To give some perspective in 2021, Honor purchased ~24m OLED panels, and while that might sound like a large quantity, it represents ~3.9% of the OLED display market (unit volume), and while Xiaomi has a larger share (~13.9%) given the size of OLED watch displays relative to smartphones or OLED IT panels, it represents only a small amount of small panel OLED industry capacity.  Apple however purchased ~184m OLED displays last year, most of which went toward iPhone production, giving them a ~29.6% share of the overall small panel OLED market, which is why the three mentioned above are working so hard to solve OLED IT production issues, especially under the assumption that Apple will continue to expand OLED penetration among its IT products.  While all three OLED producers are taking R&D risk and potentially large capital risk, the goal of becoming a primary supplier of small panel IT OLED products to Apple is in their headlights.
That said, it is not the same for Visionox, who would have to get qualified as a primary small panel OLED supplier at Apple before they would even have a shot at competing with SDC, LGD, or BOE for Apple’s incremental OLED IT business, so why would they circulate such stories?  Industry folk, and we certainly can see their point, infer that it is to garner support from the Chinese government in the form of subsidies.  Much of the early construction costs and operating expenses for panel producers in China are paid for through provincial or city-based subsidies that can defray construction costs that might normally be prohibitive, allowing Chinese producers to grow more quickly than non-subsidized producers, and during the early years of operation, those subsidies can offset low yields and low utilization rates for Chinese fabs.  As China has already become the capacity leader in LCD panel production, government organizations are want to give subsidies for such capacity, but a challenge to incumbent OLED leaders like SDC and LGD can still garner local government financial support, giving Visionox the hope that by dangling the idea of building out capacity to challenge others for Apple’s OLED IT business, they might set the wheels in motion for potential government help.
Visionox is said to be testing the OLED IT waters at its V3 Gen 6 fab in Hefei to work through production issues, and then would build a new Gen 8.5 OLED line in another location.  The V3 fab is being built in two phases with “the 2nd phase promoted in a timely manner” according to the company late last year.  Perhaps additional financial support is being hinted at for the phase 2 construction and equipment, which we had expected to be completed later this year, although not oriented to IT panel production.  If Visionox is able to solve the necessary IT OLED production issues on the V3 phase 1 line, it would encourage funding sources to push forward with phase 2 and potentially add a new Gen 8.5 fab designed specifically for IT OLED panels.  By indicating that there was potential for a new Gen 8.5 OLED fab to be built, the company can begin selling the idea to city leaders in other locations to see if funding is available and hopefully create a bidding war, similar to what occurred when Samsung was looking for a new silicon fab location in the US.
There is a lot of speculation here, but certainly not any that has not been seen by us over the years in the display space, so while we don’t like to speculate, the Visionox story has many similarities to others we have heard over the years, and feels as if we have been to this rodeo before.  We could be wrong, with Visionox much further along with Apple or the technology needed for IT OLED production, but we are less sanguine about the idea knowing that Visionox only grew their share of the small panel OLED market from 4.7% in 2020 to 4.9% in 2021, while Samsung Display and LG Display’s real competitor BOE grew its share from 7.3% in 2020 to 10.0% last year, which amounted to a 66.9% increase in unit volume y/y.  Without a very dedicated customer base already established, we expect it will be necessary for Visionox to win a few more games before they build ‘it’, especially knowing who ‘they’ are.

As we have noted in the past, while Taiwan represents ~27.4% (Fe. ‘22) of large panel display industry revenue, the three Taiwanese panel producers are required to report monthly sales figures while panel producers in other regions and countries typically report those figures quarterly.  This gives a bit of granularity to shorter-term trends in the display space and justifies tracking those results.  As February is an unusual month for the display space given that it is a short month and also contains the Chinese New Year holiday, March tends to even the quarter out, making it a bit more comparable to other years.  Such is the case this year, although the total quarterly result is a bit less positive than last year.
AU Optronics (2409.TT) reported March sales of NT$28043 ($829m US), up 9.3% m/m but down 8.7% y/y, while Innolux (3481.TT) posted sales of NT$23.92b ($825.74m US), up 9.0% m/m but down 22.8% y/y, while Hannstar (61116.TT) generated sales of  NT$1.74b ($59.57m US), up17.4% m/m but down 42.6% y/y.  While the m/m performance looks strong, as we noted, March tends to be a recovery month for panel producers after a slow January and February, however, in the table below, we also show the 5 year averages for March m/m and y/y, which indicate that the gains seen this March are below the averages, particularly when comparing y/y metrics.
Preliminary quarterly sales results, as shown in Table 2, paint a similar picture, although not quite as negative, with the 1Q results being a bit closer to 5 year q/q averages, while 1Q y/y results are a bit further from the averages.  The charts below show that 2022 is starting out more similar to 2018 – 2019, which makes sense given 2020 was certainly not a typical year, nor was 2021, but based on the sales data thus far for the three Taiwan based panel producers, it looks like 2022 will be a more typical year than the last two, but at a higher sales level than 2018 – 2019.  This would be a good indicator of full year panel producer results, however we expect TV panel pricing to remain relatively flat for 2Q and IT panel prices to decline further, which would pull down full year sales and make the 2022 full year chart look a bit less typical than it does thus far.
All in, the best case in our view would be a typically seasonal 2022 for panel sales, at a higher level than 2018 – 2019, but a lower one than the ‘COVID-19 years’ of 2020 and 2021.  The worst case would be a rapid decline in IT panel prices with no increase in TV (large) panel prices, which would set up potential q/q declines during what should be sequentially better quarters.  Y/y results will likely be down in 2Q and possibly 3Q as last year’s large panel price decline began late in the year.  While not a disastrous year for panel producers 2022 is shaping up to be far more difficult than last year and we expect valuations to continue to remain constrained for most generic panel producers.

BOE (200725.CH) is China’s largest panel producer and the largest single display panel revenue generator in the display space, so we took some time to read through the company’s recently released 10K to clarify some points that have been in the trade press over the last few months, and a few that we felt important to clarify.  While most US investors are not familiar with Chinese display companies, during a portion of 2021 and in January of this year Chinese panel producers represented over 50% of the industry’s large panel LCD revenue and will likely continue to see that share expand over the next few years.  We do note that the above data only represents the large panel LCD business in China, and as we have noted, Samsung Display (pvt) and LG Display (LPL) have been reducing their capacity exposure to that segment since late 2020 so there is some give and take as to share, but the bottom line is that China is the dominant player in the large panel LCD display space currently.
BOE has been diversifying in order to maintain profitability through the cycles that are part of the display space, and we have broken out the company’s revenue segments below (Sales are in billions).  While product diversity is certainly a goal for BOE, with a 92.2% share of revenue, the display business was certainly the key to the company’s sales and the panel price increases seen in 2020 and 1H 2021 were instrumental in generating the 64.3% display segment growth and substantial increase in gross margins.  That said, we were a bit surprised at the size of BOE’s Mini-LED business, which generated $71m last year, which was a bit larger than we had expected.  BOE’s top 5 major customers represented 37.8% of sales last year, with the largest of the top 5 representing 9.05% of total sales, with 42.8% of total sales being made in China and 43.8% in other Asian regions, while the company’s top 5 suppliers represented only 17.9% of purchases in 2021.

While much of the 10K equivalent was typical boilerplate, there was mention of a number of capacity development projects particular to the display segment, which were and are at various stages of construction and development, however the most significant project that we see BOE embarking on this year is one that was not mentioned in the 10K.  BOE is expected to begin construction of a new Gen 8.5 OLED fab it will use to produce OLED IT products with the goal of mass production late in 2024.  This would put BOE in direct competition with Samsung Display and LG Display who are both working toward building Gen 8.5 OLED capacity in order to supply Apple (AAPL) with tablet and laptop OLED displays.  While the substrate efficiency of such Gen 8.5 OLED lines is similar to that of a Gen 6 line for tablets and laptops, the size of the substrate increases by 2x which means 2x more units per run, making a Gen 8.5 able to produce more units/operating time than a typical Gen 6 line.
The problem with running Gen 8.5 lines for RGB OLED displays has been the fine metal masks used to pattern OLED materials on the substrate, and while these masks are made of a strong alloy that is resistant to heat, even the smallest sag in what looks like a thin screen will create a defective display.  As the masks must be larger for Gen 8.5 lines, they run the risk of sagging and OLED panel producers have been wary of making the move from Gen 6 to Gen 8.5 fabs for RGB OLED displays.  In the case of the three producers mentioned, SDC has taken a new approach, devising a vertical OLED deposition unit, taking out the potential for much of the sagging, while LGD and BOE are working with conventional horizontal deposition tools to try to conquer the problem.

​All three OLED producers are working toward this new IT OLED capacity in 2024 and will likely be supplying test and qualification panels to potential customers as soon as the fabs are able to produce even limited quantities, but we would not expect to see any real product next year.  2024 is more of a realistic timeframe for these new fabs and while they face some difficult challenges, would represent the next step in OLED display production.  As we have mentioned in the past, one of the challenges facing OLED producers is improving brightness, which can be done in a number of ways, by creating new more efficient OLED materials, by stacking OLED emitting layers, and by improving light extraction, so the technology can play a role in who wins this rivalry.  What makes the game a bit more interesting now is that SDC and LGD now have some new competition to deal with and while BOE does not have the OLED expertise that South Korean producers have, they are quite aggressive and already have an established relationship with Apple for OLED smartphone displays, making the field a bit more crowded this time around.

​As far back as 6/24/20 we noted that strained relations between Japan and South Korea has pushed the South Korean Ministry of Trade to sponsor a Fine Metal Mask ‘bakeoff’ pitting a number of South Korean companies against each other to find the best production methodology to develop an in-country supply chain, allowing South Korea to become less dependent on Japan for this critical part of OLED production technology.  The South Korean Ministry of Trade chose APS (054620.KS) (laser patterning) and Poongwon Precision (pvt) (etch) as the winners in the project, leaving Philoptics (161580.KS) and Olum Materials (pvt) to work on their own. 
Much of the momentum behind the South Korean government’s interest in Fine Metal Masks is due to the fact that the world’s largest producer of OLED displays, Samsung Display (pvt) buys almost all of its masks from Japanese suppliers Dai Nippon Printing (7912.JP) and Toppan Printing (7911.JP) who dominate this market.  The masks, which must meet extremely fine tolerances in order to correctly pattern OLED materials, must be cleaned and replaced regularly, and any disruption in mask supply could slow or halt OLED display production, regardless of whether the reason is political or production related. As the material used to produce such masks is made from Invar, an iron/nickel alloy (36% - 42% nickel) and the price of nickel has increased from $20,912/ton at the end of last year to $35,500/ton now (with a peak of $48,196 in the interim), as Russia is a top 5 producer, the sensitivity toward ensuring mask supply and proper pricing has returned.
To make things even more difficult, there are a number of ways in which the masks can be made, with Dai Nippon and Toppan using an etch method while APS uses laser patterning and Philoptics uses electro-forming, a method that deposits the metal on a mandrel.  When the South Korean government created the ‘bake-off’, much was to see which technologies would be most practical, with laser patterning and the more standard etch winning out.  That said, Philoptics has continued to refine it electro-forming process, despite its bakeoff loss, and has been supplying evaluation product to a Chinese OLED panel producer.  The company expects that the evaluation process, which began late last year will take roughly a year and will begin to generate sales (if accepted) in 2023.  The Chinese OLED producer is looking to add a mask supplier as it depends entirely on Japanese mask producers and Philoptics also hopes to sell to Samsung Display as well, although a similar qualification process would have to be completed.