​The debate over whether Samsung Electronics (005930.KS) will buy OLED TV panels from rival LG Display (LPL) continues with the most recent ‘information’ coming from The Elec, a South Korean Tech rag that reports that the two companies have agreed on price and volumes, although the sets using the WOLED displays will not be released until June at the earliest, later than originally planned.  While the story goes that Samsung’s Business Support Group, the top of the decision tree at Samsung, approved the purchase late last year, the company is now looking at the contract “with a working-level perspective” (whatever that means) and that is causing the delay in product release, which was why Samsung did not inform its global distributors of its plans and discuss marketing for the OLED TV product at CES, which it had originally intended.
Where this gets even more opaque is that Samsung is said to have agreed to buy the panels at a price that is the same as that offered to LG Electronics (066570.KS), LG Display’s parent, despite the fact that a recent story in the same paper indicated that the delay was due to Samsung’s unwillingness to accept LG Display’s panel pricing, which was said to be at a discount to that of LG Electronics.  It is hard to imagine that Samsung would have agreed to the higher price without some other incentive, as the number of units (2m) seems to have remained the same, which is why we put little credence in such stories, especially as they seem to change weekly.  All in, if such a deal were to be had, Samsung Electronics is expected to ship ~1.5m of the 2m units in 2022, along with .5m QD/OLED TVs, and ~3m Mini-LED/QD sets, as much of its premium TV line. 

LG Display (LPL) has announced a new, brighter OLED display, called OLED-EX, which it expects to put into production at its plants in Paju, South Korea during the 2nd quarter of 2022.  The company is said to have been using the new material at its plant in Guangzhou, China as part of its OLED TV panel supply to parent LG Electronics (066570.KS) for its EVO OLED TV line. The changes to the new panel are said (by the company) to be two-fold, with the first part a change in material composition, and the second a change in the way the sub-pixels are used.  LGD did not give much information on either change but we derive at least somewhat of an idea about the possible change to LGD’s OLED material composition.
Organic compounds are based on carbon, where the carbon atom is bonded to a hydrogen or other atoms or radical structures.  The bonds between these two elements comes from the fact that carbon, which has 4 electrons in its outer shell can share those electrons with 4 hydrogen atoms that have 1 electron in their outer shell.  In OLED displays, the application of an electrical current pushes the electrons out of the shell and as they fall back they give off that extra energy as light, hence the name light-emitting diodes; essentially what goes in as electrical energy comes out as light.  Sounds simple but it’s not.  If the reaction happens too quickly some of the excitons (let’s say ‘excited electron’) ‘quench’ the reaction of other excitons, reducing the light generated, and too little ‘push’ from applied current produces no reaction, so the organic materials and the electrical charge have to be carefully balanced.
Over time the bonds that hold such organic materials deteriorate, with higher energy organic materials (blue) deteriorating more quickly than lower energy materials (red and green), creating both lifetime discrepancies and persistence problems, also known as burn-in.  Chemical engineers have found that by substituting an isotope of hydrogen called deuterium, which still has the same one electron to bond to carbon but is a bit heavier (aka ‘heavy hydrogen’), they can slow down the reaction and reduce the ‘quenching’, increasing the brightness of the material without the normal decrease in lifetime that comes with more typical methods of driving materials to higher brightness by increasing the current.  While deuterium occurs naturally in water, the ratio is one atom for every 6,420 ‘regular’ hydrogen atoms and the process to separate those atoms is energy intensive, so LGD is buying the blue material from supplier DuPont (DOW), rather than its usual supplier of fluorescent blue emitter material, idemitsu Koasan (5019.JP).
While we don’t know precisely what LG Display has done to its OLED materials, based on IP filings by Samsung Display (pvt), Universal Display (OLED), LG Chem (051910.KS), Rohm & Haas (DOW) and others[1], the idea of substituting heavy hydrogen for elemental hydrogen in OLED materials is one of interest to many of those developing such materials, especially blue emitters and hosts, so we speculate a bit on what LG Display has done on the material side to generate a new OLED brand name.  As to the results, which are said to boost brightness between 25% and 30%, we expect both the material change and a new AI pixel processor contribute to the increase.


[1] Jeong, Eunjae, et al. ORGANIC ELECTROLUMINESCENCE DEVICE AND AMINE COMPOUND FOR ORGANIC ELECTROLUMINESCENCE DEVICE.
Chen, Hsiao-Fan, and Jason Brooks. ORGANIC ELECTROLUMINESCENT MATERIALS AND DEVICES.
Kim, Chi-Sik, et al. ORGANIC ELECTROLUMINESCENT COMPOUND AND ORGANIC ELECTROLUMINESCENT DEVICE COMPRISING THE SAME.
Kim, Seong-So, et al. ORGANIC LIGHT EMITTING DEVICE.
DOH, Yoo-Jin, et al. ORGANIC ELECTROLUMINESCENT DEVICE.
 
 

​The South Korean trade press is reporting that LG Display has won an order from Apple to supply LTPO OLED small panel displays for the iPhone 14.  LTPO allows for the display to support a variable refresh rate system that reaches a maximum of 120 Hz, allowing for both a longer battery life and less blur during image playback.  Samsung Display (pvt) has been the sole vendor of LTPO displays to Apple and was expected to hold the same exclusive position in 2022, but it seems LGD has been qualified by Apple and will now supply at least a portion of the LTPO displays for the iPhone 14 Pro Max model, while SDC will remain the sole supplier for the iPhone 14 Pro.
Both LG Display and BOE (200725.CH) have been vying for a place in Apple’s LTPO display supply chain, and while both have been supplying LTPS OLED displays for the current iPhone line, neither was expected to be ready for volume LTPO display production in 2022.  LG Display has been part of Apple’s LTPO development project but had yet to prove it was able to produce such displays with a high enough yield that Apple would qualify them as a supplier.  BOE is working toward the same goal but has yet to commercialize its LTPO process for volume production, although it has entered Apple’s LTPS OLED supply chain this year and will expand its volumes in 2022.
On an overall basis, LG Display might not see an increase in the number of small panel overall displays it supplies to Apple in 2022 as the conversion of production lines from LTPS to LTPO will reduce the available capacity for LTPS displays, but the higher value LTPO displays will likely improve average small panel OLED ASP, and more importantly prove to Apple that LGD can become a major supplier of LTPO displays in the following years.  Of course, Apple will use the fact that it now has a 2nd LTPO display supplier to work down price with SDC, but the real competition will occur when BOE is able to be qualified for Apple’s LTPO displays, as Apple will squeeze SDC further as long as there are no display problems in 2022.

​LG Electronics (066570.KS) is expected to introduce a 97” OLED TV at CES in January.  This will be LG’s largest OLED TV size, with the maximum currently an 88” 8K model (OLED88ZXPUA) priced at $30,000, although availability is quite limited and delivery times are between 6 and 8 weeks for most retailers.  Such large OLED TVs are not produced in large quantities, with less than 2% of LG Display’s (LPL) production being for such large panel sizes, however two 98” OLED TV panels can be cut from a Gen 8.5 substrate with substrate efficiency close to 100%, which makes them viable for OLED lines that are not producing MMG product that mixes both large and smaller OLED panels on the same substrate., a slower process.  The price for the 98” TV model remains unknown, but based on the price of smaller sets, it will likely be in the $35,000 to $45,000 range.
LG is not only competing with Samsung’s (005930.KS) Micro-LED TVs, as we noted yesterday, but also with its own micro-LED TV brand, so despite the high price, it is necessary for LG to offer such large size OLED models, which, while certainly expensive compared to smaller OLED TV models, are less expensive than the micro-LED offerings by both vendors.  While few consumers can afford the high price tag, such large OLED TVs can be used in commercial settings where the high contrast and color quality are essential to product presentation.  Save those pennies.

We have noted China’s push toward expanding OLED capacity, particularly that of China’s largest panel producer BOE (200725.CH), who has now entered Apple’s (AAPL) flexible OLED supply chain.  Chinese small panel OLED producers added considerable capacity in 2020, up 23.4% y/y based on our fab survey database, but only added an additional 13.2% capacity this year.  While this seems a rather large reduction, it should be taken in context with expected small panel capacity expansion in 2022, as a number of this year’s expansion projects will not be completed this year.  This leads us to forecast a 23.4% increase in small panel OLED capacity in 2022 as these projects actually reach their targets. 
One issue that remains however, is the need for such capacity, and while each small panel OLED producer is focused on existing and potential customers and their ability to meet customer demands, the net increase in capacity is of a more direct concern to us as an observer of the industry, and the utilization rate of that capacity is key.  While ‘adding 16,000 sheets/month’ is what might be noted by a panel producer, 16,000 sheets do not usually come on line all at once.  OLED lines are based on both the TFT component, where circuitry that sits under each pixel is constructed, and the deposition of the OLED structures themselves, accomplished within a multi-chamber evaporative deposition tool (see Fig. 1), followed by an encapsulation process that is either part of the same tool or a separate process step. 
The Canon tool shown in Fig. 1 can process a substrate sheet (usually ½ sheet) in ~5 mins., which is over 90 6.5” smartphones.  Such a tool should be able to operate continuously for ~6 days, producing roughly 600,000 units/month including down time, particularly chamber cleaning and mask replacement and alignment.  Since each deposition tool processes ½ substrate, two such tools are needed to match the processing capabilities of the TFT structures in order for there to be no bottlenecks.  Equipment supplier backlog and build times for such tools are a consideration for OLED panel producers, so a line with 15,000 sheet stated capacity, might begin operation at half that rate until both deposition tools are operating at their target rate.  The equipment utilization rate, or the percent of a line’s equipment that is in operation, is different from the line’s yield, which is a bigger determinant as to actual production, and the above numbers assume 100% product yield, which is a theoretical number.
Product yield varies with each product and is initially low, especially with products that differ from previously produced displays.  Much fab equipment is dedicated to examining displays coming off the line, both optically and electrically, with the objective to trace back yield issues to the source, but such iterations can take time and are not always easy to correct given the complexity of the tools involved.  Product yield issues can keep an OLED fab from profitability for an extended period of time depending on the experience of the producers, and while the stated capacity of the fab might be 30,000 sheets/month, the yielded capacity can be far less.
The last contributor to fab output is customers.  The cost of producing OLED displays is high enough (the deposition tool mentioned above cost between $100m and $150m each) that small panel OLED producers tend to produce against customer orders and do not want to build unallocated inventory unless they see demand from distributors, or significant demand from parent or internal subsidiaries, but even the latter can leave the fab with excess inventory if parent demand changes, so again, while a fab might be able to produce 30,000 sheets/month, there are many reasons why that number tends to be more theoretical than actual.  More mature small panel OLED fabs, during periods of strong demand, can and do see high utilization and high product yield, but we have and continue to caution investors that stated capacity does not mean yielded capacity, and yielded capacity is what makes such fabs profitable. 
Based on our data, we believe the small panel OLED industry saw a utilization range between 29.6% and 49.5% over the last 8 quarters, and while that would be considered low in comparison to LCD production fabs, with the continuation of small panel OLED capacity expansion, relatively easy capital sourcing in China, and seasonal demand patterns, it is not surprising, but it does beg the question, “Does the industry need all of that new capacity?” 
There are a few other factors that play into such calculations, individual or otherwise, such as conversions of existing small panel OLED fabs from LTPS (Low Temperature Poly-Silicon) to LTPO (Low Temperature Poly-Crystalline Oxide), which affects the TFT portion of fab throughput, and LG Display’s (LPL) loss of its parent’s smartphone business, but even with expanding demand from OLED notebooks and similar new applications, the desire of some small panel OLED producers to gain share continues to push capacity expansion at a rate considerably higher than actual production, as noted in Fig. 2, leaving some suppliers facing losses in what has been a positive environment for small panel OLED displays. 
As we have seen in the LCD space, there is no way that individual small panel OLED producers will be convinced that continued expansion is not the best objective and the concept that growth will continue forever will remain the driving force for such expansion, that is until demand plateaus are reached or questions concerning the profitability of smaller producers become foremost in the minds of funding sources.  There is still demand expansion in the small panel OLED space with OLED displays now represent over 50% of all smartphone displays (see our note 11/22/21) but new markets develop slowly and any slowdown in small panel OLED area growth could puncture the expansion balloon, which, if rational behavior is not possible, could be a solution to the problem, albeit a less desirable one.

Small panel OLED demand increased display shipments in 3Q by 26.6% (16.5% y/y), with flexible OLED displays driving almost all of the q/q shipment growth.  The biggest increase from the demand side came from Apple (AAPL), who more than doubled its small panel flexible OLED panel purchases in 3Q in preparation for the iPhone 13 rollout, and Samsung Electronics (005930.KS) whose purchases were up 50% q/q.  Chinese brand small panel flexible OLED purchases were mixed, with Huawei (pvt) and Oppo (pvt) declining, and Xiaomi (1810.HK), Vivo (pvt), and Honor (pvt) increasing, albeit at much lower volumes, as shown in Fig. 1 – 3[1].
On the supply side Samsung Display (pvt) saw a 101% q/q increase (+15.7% y/y)  in flexible panels shipped in 3Q while LG Display (LPL) saw a 43.0% increase q/q (+68.5% y/y) as they fed the Apple iPhone supply chain, while BOE (200725.CH) saw an 8.1% q/q increase (+58.4% y/y).  BOE has recently celebrated its official entry into Apple’s iPhone OLED display supply chain, which will likely lead to improving shipments in 4Q.  Samsung Display’s share of the small panel flexible OLED market returned to 62.2%, a more normalized level, after a weak 2Q (47.6% share), although down from last year’s 3Q share of 70.0%, and the combined South Korean suppliers garnered 74.8% of the small panel flexible OLED panel production market, with the remaining 25.2% belonging to combined Chinese small panel flexible OLED suppliers.  When looking at both the rigid and flexible small panel composite, Samsung Display holds a 71.5% share with Chinese suppliers at 21.0% vs. 17.0% in 3Q last year.
On an overall basis, small panel OLED production continues to grow despite weak overall smartphone sales as the overall share of small panel OLED continues to grow across the smartphone market, reaching over 50% in 3Q based on our composite small panel OLED shipment data and our composite smartphone shipment data.  This year the number of mobile devices other than smartphones that are using OLED displays continues to grow, particularly notebooks, and while this will not have a significant impact on unit volume, it will continue to increment area shipments, which set the tone for capacity expansion plans.  There are few OLED suppliers that are not expanding capacity, and while much of these plans are for IT based OLED products, we expect the small panel and large panel OLED markets to become more converged as Gen 6 OLED fabs, usually used for small panel OLED production, are still efficient up to 32” panel sizes, making them viable for many IT products which might be considered ‘large panel’.  All in, OLED growth continues based on share growth in more mature applications and to early stage penetration in new mobile device markets.


[1] Note:  Figs. 1 -3 are all drawn to the same scale to show the lower proportion of rigid OLED displays compared to flexible OLED displays.

​As a ‘pure’ display supplier and the de facto supplier of large panel OLED displays, LG Display (LPL) gives a good picture into the broad display space, albeit with a bias toward OLED over LCD.  While OLED displays have price characteristics that are different from LCD panels, especially large panel OLED, LG still has over 80% of its total capacity producing LCD displays, which means to a large degree it is affected by the same characteristics that affect LCD only panel producers.  This is reflected in such metrics as area shipped, which declined 5.6% q/q as TV panel demand waned in 3Q and to a smaller degree by component shortages, which began to affect shipments later in 3Q.  ASP/m2 increased by 6.7%, although the smaller shipment base likely accounted for much of that increase, along with less exposure to LCD TV panel production, which saw the biggest price drop in the quarter.  While hard to quantify absolutely, OLED TV panels likely saw less price pressure than LCD panels.
4Q Guidance was for area shipments to increase ~15%, based on a recovery in supply chain component issues.  Roughly one month into the quarter we have seen display driver shortages abate, likely a function of lower LCD TV panel orders and that will help to alleviate some of the supply issues that LGD has said limited shipments in 3Q.  There is some credibility to their 4Q area shipment confidence, although some of the improvement coming from IT product shipments that were deferred in 3Q and the growth in OLED TV based on the increased production at the Guangzhou fab and the generally stronger OLED TV shipments that occur in 2H.  4Q guidance for ASP/m2 is for growth of 2% to 3%, despite continuing LCD large panel price decreases.  This is more of a function of orders for OLED mobile devices, which we expect will increase for LGD in 4Q, as such have a higher ASP/m2 than large panel products.  We note that this metric is not absolute unit ASP but is based on area.
OLED TV saw 90% y/y growth as the company’s Guangzhou fab ramped additional capacity, which helped to improve the OLED segment’s profitability and is now expected to become profitable for the 2021 year.  OLED TV shipments are expected to increase in 4Q and to reach 8m units by year end, and with the additional Guangzhou capacity the company target for 2022 remains at 10m units.  We expect a more varied OLED display product line next year with specialized products for gaming and IT and profitability for OLED TV, but the risk for LGD’s OLED business is more in the small panel OLED space as success with Apple (AAPL) becomes more important as  parent LG Electronics (066570.KS) ends this year.  One of the two small panel OLED fabs that LG Display has in production is running profitably while the 2nd is facing some utilization issues and is generating losses, however management is expecting the combined operation to reach profitability next year, based on “customer and product structure”, which means Apple and their ability to produce LTPO small panel displays for same.
In the LCD space LGD is doing what other LCD manufacturers are doing, pushing LCD production away from TV and more toward IT products, where pricing has been more stable.  With little alternative other than to shutter low utilization LCD fabs, potentially converting them to OLED as Samsung Display (pvt) has done, demand for IT products, meaning notebooks, monitors, and tablets, must stay robust to offset the increased production focus.  There have been a few hints that some demand weakness in the IT space has been seen this month, with a few display producers citing a renewed focus on commercial customers rather than retail customers, but such monthly ‘bumps’ do happen.  If there is a more visible trend toward slower demand in the IT space, LG and others will have little choice but to reduce utilization.  The company has depreciated most of their current producing assets and believes that gives them a 5% to 10% cost advantage over their competition and has moved away from most generic production, giving them a higher ASP than others, but those are all concepts that need a positive or at least stable pricing environment, for which the industry is not known. 
The company was questioned about the overall plans for large panel LCD production, particularly at the company’s Gen 7 fab (P7) in Paju, which is one of the few (AU Optronics (AUOTY) also has one) Gen 7 fabs globally.  Such fabs are efficient at producing smaller panels for monitors and TV up to 47” but become less efficient for larger TV panel, other than ultra-large 85” displays.  LGD has been using that fab for such ultra-large panels (80”+) but is considering how to operate that fab over the long-term.  Samsung Display has converted its Gen 7 LCD fabs into small panel OLED production lines, which might become an alternative for LGD in the future if it decides to transition further away from the LCD TV production space.
The company did admit that it expects demand for IT products to decline in 2022 as COVID-19 restrictions are lifted, but expects that B2B demand will increase to offset the decline and goes further to predict a decline in monitor panel prices in 1Q and for notebooks in 2Q.  However they added the “…it’s going to be different this time…”clause, suggesting that premium IT product pricing will not be closely linked to commodity IT pricing and will not depend on supply and demand dynamics but more on customer TAM.  Since display price is based on demand, if commodity panel prices are falling, one would expect that overall demand was also falling, and while customers requesting premium display specifications would be willing to pay more for such panels, their overall demand would likely also be declining, so hoping that laws of supply and demand will not be in effect next year seems a bit of a stretch.  Such a scenario might keep things a bit better for those that cater to premium oriented customers, but the overall industry supply/demand undercurrents always win out.
All in it was a reasonable quarter for LG Display’s LCD business considering the pricing and component supply environment and a strong quarter for their OLED business.  With some of the shortages easing, the company should be able to grow, at least in area shipments in 4Q, with lower LCD TV revenue being offset by higher IT, OLED TV and OLED mobile sales.  While we are not expecting a record 4Q, with a bit of positive order flow LGD could generate another good quarter, but our fear is that 2022 will be a more difficult year, with the company facing decisions on how much LCD capacity it needs to meet customer demand and whether to increment large panel OLED capacity going into the 2023 production year.  Much will depend on IT product demand, basically the same issue that other display producers face, although LGD does have an improving small panel OLED business (as long as they are able to attract new customers) and a growing OLED TV business to offset some of the potential downside, a better place to be if things deteriorate.
Basics:
3Q Sales               +3.7% q/q
                              +7.2% y/y
Op Inc.                 -25.1% q/q
                              +220.1% y/y
Op Margin           7.3%                     Prev. Q  10.1%    3Q 20    2.4%                    
Capacity              +2.6%
Area Shipped      -5.6%    
ASP/m2                 +6.7%
Sales Share          TV          32%       Prev. Q  38%       3Q ’20   28%
                              IT            45%       Prev. Q  39%       3Q ’20   43%
                              Mobile  23%       Prev. Q  23%       3Q ’20   29%
Dividend              Under review

We have seen estimates for OLED TV shipments increase this year, increasing from just under 6m units (est. in 2020) to over 6.1m and more recently to 6.5m units, with shipments in 1H more than double last year’s 1H.  There are two reasons for the increase in OLED TV sales this year, the first being LG Display’s (LPL) increased capacity, along with the increased availability of smaller sized (48”) models, which carry a lower price and therefore can increase the overall unit volume.  The second, and most important is the price of OLED TVs, which both in absolute terms and against rival LCD TVs have worked toward increasing overall unit volume.
LG Display continues to increase its OLED TV production efficiency using MMG (Multi-mode glass), a process that allows for the production of multiple size panels on a single sheet of substrate, which can improve substrate usage efficiency by very substantial amounts (see table below). This allows LG Display to reduce OLED panel prices while maintaining margins and allows OLED TV set brands to lower OLED set prices during a period when LCD TV set prices have been rising.  In order to quantify just how much OLED TV prices have moved this year, we looked at all 12 OLED TV models released by LG Electronics (066570.KS) this year and tracked pricing from its initial price through current selling price.  We note that all prices shown are from Amazon (AMZN) and not 3rd party sellers, and excludes a number of LG’s more esoteric OLED products such as its rollable TV.
Of the 12 OLED models, all were at their lowest price points for the year and only one model saw a peak higher than its initial price.  The entire line has seen an average price drop of 27.1% from initial pricing, and a 28.5% from peak pricing.  48” sets saw the biggest decrease, averaging 36.3% from peak, while 83” saw the least, dropping an average of 22.3% from peak, while 55”, 65”, and 77” saw price drops of 26.9%, 30.0%, and 25.7% respectively.  While OLED TVs are still generally more expensive than LCD or quantum dot enhanced LCD TVs, and still fall into the ‘premium TV’ category, they have become far more affordable this year than in the past, especially relative to their biggest competitor, LCD TVs.  We do note that as LCD TV panel prices decline, as they have been doing for the last two months, some of the relative price difference will be eaten away, but given that a considerable amount of high-priced TV panel inventory still exists in production or transport, we expect lower TV prices will take some time to appear in full stead.  In the interim OLED TV will have a good year.

​The Chinese trade press has been extolling the virtues of BOE’s (200725.CH) tacit acceptance into the Apple supply chain and the company’s dominance of the LCD panel space, as it has in the past, and while BOE does get closer to becoming a major supplier to Apple, the gist of some of the ‘glorious’ press is that BOE has also broken into the Samsung Electronics supply chain and is poised to ‘dominate the industry’ as it seeks to replace South Korean (and other) OLED panel producers that have been suppliers to Samsung in the past, particularly affiliate Samsung Display (pvt).
Various statements as to BOE supplying displays for the Samsung Galaxy M series, a low-end smartphone sold in the Mid-east and Asia carries some truth as far as our checks go, but as to whether they are the exclusive supplier (not likely), eliminating  Samsung Display as a supplier from this line, we cannot confirm.  Stories about BOE becoming a potential supplier to Samsung’s “A series” line, among the most popular of Samsung’s phones in terms of units, are also unconfirmed, but we expect much of the talk about BOE’s potential for supplanting Samsung’s typical OLED display suppliers, Samsung Display and LG Display (LPL), is likely coming from the potential approval of BOE into Apple’s iPhone supplier list, which is expected to receive final approval next month.
BOE has been supplying some displays to the iPhone supply chain, but has yet to become a primary supplier, although we do expect that to happen in 2022.  That said, the question remains as to what percentage of the display demand from the iPhone 13 and future series BOE will garner, something we have spoken about a number of times in the past.  Apple not only has display specs that are demanding, both from a technical standpoint and a capacity standpoint, but is very wary of jumping into new technology unless they are fully satisfied that suppliers can meet consistent quality standards.  This tends to categorize suppliers, even existing ones, as to what model’s displays they will produce, sometimes limiting a model to only one supplier if the capacity or quality is still a question.  BOE will have to prove to Apple that it can meet the same specs and volumes that both Samsung Display and LG Display produce in order to become a volume supplier in the same vein as the others, a task that will likely take a number of years.
As to BOE supplying OLED displays to Samsung Electronics, we see that as a somewhat different animal, given that Samsung Electronics has a vested interest in Samsung Display.  That does not mean, at least over the last few years, that Samsung would not use other display producers, and certainly has in the LCD space where a number of LCD suppliers, including BOE, have replaced Samsung Display in the large panel space, where SDC has reduced its production to almost nil.  Where the questions arise however is in the OLED space, where SDC is the leading supplier of flexible and rigid OLED displays for smartphones, and Samsung is their primary customer. 
Samsung Electronics does have to compete with other smartphone brands, especially Chinese brands, well known for producing smartphones that rival feature sets on flagship phones from Samsung.  This competition continues to push Samsung Electronics to find ways to cut costs, especially on low and mid-priced phones, where they face the most competition from Chinese brands.  Given that the display is the most costly single component of most smartphones, logic holds that reducing the cost of OLED displays is the focus of Samsung’s attention and while they are the parent of SDC, SDC is not usually the lowest cost producer.
This is both a function of production costs in Korea vs. those in China, and the fact that most Chinese panel producers are supported financially by the Chinese government through capital project and operating subsidies.  SDC also has the burden of maintaining profitability, especially in the OLED space given it waning LCD capacity, which is not the case for Chinese OLED producers, who have yet to turn profitable in the OLED display space on a yearly basis.  This leaves parent Samsung Electronics to push SDC for lower OLED panel prices, and what better incentive than to give some of its business to Chinese competitors, to make sure SDC understands that it must remain competitive with other OLED panel suppliers.
 We don’t doubt that Samsung Electronics will continue to use Chinese OLED display producers as leverage, encouraging them to continue to develop new products, and would increase usage of same if SDC does not respond in terms of price.  But in the long run, if Samsung Electronics is still going to maintain a smartphone business that is based on premium products, be they the traditional Galaxy S line or new foldables, they will be using SDC in as many instances as possible, and while Chinese OLED producers will make inroads, they will have a far more difficult time replacing SDC with Samsung than they might with Apple, where the brand has no vested interest.  JOHO.

​On 9/29 we noted that Samsung Display seemed to have cancelled an on-going project it had been working on for Apple (AAPL).  The project was to develop a 10.86” OLED iPad display for release in 2022 but a conflict over specifications for the panel were cited by the media as the cause for the cancellation.  Samsung’s typical OLED structure is a single RGB stack, however Apple is convinced that such an arrangement would not produce a bright enough display.  They proposed a double stack structure that is essentially two sets of OLED materials on top of each other, with Apple’s contention that the single stack structure would not be bright enough, a relatively common complaint about OLED displays, and that it would extend the display’s lifetime given the use profile for tablets.
SDC seems to have been convinced that such a product, and the changes it would have to make to its production line, would not be profitable for SDC based on its cost estimates and the expectations for potential panel sales to Apple.  We also noted that 2nd OLED supplier LG Display), would now have the opportunity to explore such development without the pressure that SDC would typically bring, particularly as LG Display has already developed a simplified dual stack structure that would be the basis for the Apple panel development.  It seems that such a project is underway at LG Display, with a target of developing a 12.9” dual stack OLED display using LTPO (Low-temperature polycrystalline oxide), but the likelihood of a 2022 product seems remote considering the early development stage, the complexity of the display, and the capacity available to LG Display. 
Perhaps if LGD is able to meet Apple’s exacting specifications, and calculates that they can profitably produce such a display for Apple for an extended period of time, we might see such a device in 2023 or 2024, but at the same time Apple is also exploring Mini-LED technology, which would likely be a bright and less expensive solution, albeit one that might not meet all of Apple’s criteria for color quality without quantum dots, so in reality the pressure never goes away.  Get cookin’.