Samsung keeps expanding OLED and reducing LCD
Back on 2/27/17 we noted that Samsung Electronics (005930.KS) had verified that it would release a new Galaxy Tab S3 at Mobile World Congress, returning its tablet business to OLED displays. Samsung had used an OLED display in its Tab s (7/2014) and Tab S2 (9/2015), but returned to LCD technology for the Tab A (3/2016) and Tab E (1/2016). We believe Samsung Display (pvt) will be sticking with OLED displays for new tablet models and is considering using OLED for some laptop production this year.
We believe Samsung Display will be converting at least a portion of its L6 LCD production line from a-Si[1] to Oxide[2] backplane production and OLED display lines. The L6 fab had a raw capacity of 268,125 m2 as of November 2016, which represented 7.5% of Samsung Display’s overall capacity, and 1.3% of worldwide capacity, and we believe had begun to reduce production on at least one of the three L6 lines at the end of last year. We expect that line to be closed by May and the conversion to Oxide and OLED to begin. We expect phase 1 of the oxide conversion to be fully ramped by April/May 2018, with lower output levels beginning this summer, and the ramp down of L6 phase 2 starting in July of this year, completed by year-end, and the conversion of L6 phase 2 to be completed by July/August 2018. The L6 phase 3 ramp down will begin at the end of this year, with the conversion completed by 1Q 2019.
Samsung Display has yet to signal whether the L6 conversion will change the substrate size from Gen 5, so we build the changes into our model using a Gen 5 format. As the upgraded fab will be supplying both IGZO backplanes and OLED displays, we expect the actual OLED capacity to be considerably lower than what the fab had been producing for LCDs. We believe that Samsung will shift its LCD tablet and notebook production to its L8 Gen 5.5 lines, albeit at a reduced rate, as it continues to supply Apple (AAPL) with panels for the iPad, along with Sharp (6753.JP) and LG Display (LPL).
While expectations are that Samsung will release the previously mentioned Galaxy Tab S3 this month, there have been rumors that they will also release a Win 10 tablet line this year, although that remains unconfirmed, and we believe has supplied OLED displays to HP (HPE) and Lenovo (992.HK) for their Spectre and Yoga Thinkpad laptops. But the laptop market is far different than the smartphone market, and the necessity for OLED displays is less urgent than for smartphones, where the device is on for a large portion of the day. That said, there was little OLED capacity for laptop display sizes, and yields were lower than those for smartphones, so Samsung Display had less of an incentive to expand that segment. So what makes Samsung Display willing to step up its ‘non-smartphone’ OLED production capacity? Most likely it is interest from Apple for its iPad line, and while an immediate move to OLED would be somewhat premature, Samsung Display could be responding to both its parent company’s demand and the potential for Apple to move to at least an OLED iPad variant sometime in the future. Apple will be announcing new iPads at a press event in April.
All in, Samsung Display and parent Samsung Electronics, continue to push OLED displays further into their mobile lines, and reduce their exposure to LCD in small panel devices. If we are correct in our assumptions about the L6 conversion, Samsung Display should be able to produce the equivalent of 2.6m 13.5” OLED laptop screens/quarter at the completely converted facility[3]. Apple has been averaging about 11.5m iPad units/quarter for the last two years, so we have to assume that only a portion of the iPad line could be converted to OLED over the next few years, as Samsung Display will also use the new capacity for its captive customer, but even the possibility that Apple might use OLED for its iPad line keeps a fire burning under the OLED space, and will continue to drive Samsung Display and others to add capacity.
[1] A-Si – amorphous silicon – commonly used as an LCD backplane
[2] Indium Gallium Zinc Oxide – aka ‘Oxide’ – another type of backplane
[3] 100% yield – Actual rates will be lower
We believe Samsung Display will be converting at least a portion of its L6 LCD production line from a-Si[1] to Oxide[2] backplane production and OLED display lines. The L6 fab had a raw capacity of 268,125 m2 as of November 2016, which represented 7.5% of Samsung Display’s overall capacity, and 1.3% of worldwide capacity, and we believe had begun to reduce production on at least one of the three L6 lines at the end of last year. We expect that line to be closed by May and the conversion to Oxide and OLED to begin. We expect phase 1 of the oxide conversion to be fully ramped by April/May 2018, with lower output levels beginning this summer, and the ramp down of L6 phase 2 starting in July of this year, completed by year-end, and the conversion of L6 phase 2 to be completed by July/August 2018. The L6 phase 3 ramp down will begin at the end of this year, with the conversion completed by 1Q 2019.
Samsung Display has yet to signal whether the L6 conversion will change the substrate size from Gen 5, so we build the changes into our model using a Gen 5 format. As the upgraded fab will be supplying both IGZO backplanes and OLED displays, we expect the actual OLED capacity to be considerably lower than what the fab had been producing for LCDs. We believe that Samsung will shift its LCD tablet and notebook production to its L8 Gen 5.5 lines, albeit at a reduced rate, as it continues to supply Apple (AAPL) with panels for the iPad, along with Sharp (6753.JP) and LG Display (LPL).
While expectations are that Samsung will release the previously mentioned Galaxy Tab S3 this month, there have been rumors that they will also release a Win 10 tablet line this year, although that remains unconfirmed, and we believe has supplied OLED displays to HP (HPE) and Lenovo (992.HK) for their Spectre and Yoga Thinkpad laptops. But the laptop market is far different than the smartphone market, and the necessity for OLED displays is less urgent than for smartphones, where the device is on for a large portion of the day. That said, there was little OLED capacity for laptop display sizes, and yields were lower than those for smartphones, so Samsung Display had less of an incentive to expand that segment. So what makes Samsung Display willing to step up its ‘non-smartphone’ OLED production capacity? Most likely it is interest from Apple for its iPad line, and while an immediate move to OLED would be somewhat premature, Samsung Display could be responding to both its parent company’s demand and the potential for Apple to move to at least an OLED iPad variant sometime in the future. Apple will be announcing new iPads at a press event in April.
All in, Samsung Display and parent Samsung Electronics, continue to push OLED displays further into their mobile lines, and reduce their exposure to LCD in small panel devices. If we are correct in our assumptions about the L6 conversion, Samsung Display should be able to produce the equivalent of 2.6m 13.5” OLED laptop screens/quarter at the completely converted facility[3]. Apple has been averaging about 11.5m iPad units/quarter for the last two years, so we have to assume that only a portion of the iPad line could be converted to OLED over the next few years, as Samsung Display will also use the new capacity for its captive customer, but even the possibility that Apple might use OLED for its iPad line keeps a fire burning under the OLED space, and will continue to drive Samsung Display and others to add capacity.
[1] A-Si – amorphous silicon – commonly used as an LCD backplane
[2] Indium Gallium Zinc Oxide – aka ‘Oxide’ – another type of backplane
[3] 100% yield – Actual rates will be lower
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