Back in August we noted a few points about the development and adoption of blue phosphorescent OLED materials (“Singing the Blues”) and also indicated some hesitancy about the excitement that had gathered around the pending development of a blue phosphorescent OLED emitter material next year.  While the development of same by a number of companies, including Universal Display (OLED), Samsung Display (pvt), Sumitomo Chemical (4005.JP), Idemitsu Kosan (5019.JP), Merck (MRK), and Lumiotec (pvt), as well as a number of well-known universities, continues, the actual adoption of a blue phosphorescent material into a commercial OLED stack is a more difficult task and one that is likely not to adhere to the aggressive timelines than many hope for.
Universal Display began reporting commercial revenue from phosphorescent emitters in late 2005, primarily from its red emitter.  Previously the company’s sales came from developmental materials sold to customers and developmental contracts.  The first color OLED smartphone was the Samsung (005930.KS) X120, released in 1Q 2004, which had a 1.8” OLED display, was able to reproduce 65,000 colors, with a resolution of 128 x 128 pixels., and the following year BenQ (2352.TT) released the A520, which sported a 1.5” OLED display (128 x 128) and a smaller 96 x 96 display.  To compare that to what is available currently, the Xiaomi (1810.HK) 14 Pro released this month has a 6.73” OLED display that can reproduce 68 billion colors and has a resolution of 3200 x 1440 pixels.
We have been tracking sales of Universal Display’s OLED materials for more than 10 years and while the company announced its first commercial green phosphorescent green emitter material in the summer of 2010, Samsung Display, UDC’s biggest customer did not release a smartphone using both red and green phosphorescent emitters until the Galaxy S4 in April of 2013, almost 3 years later.  We expect Samsung Display had integrated the green emitter into the display stack for some time before the stack was stable enough to be used commercially, and while the OLED industry is far more adept at making stack material changes, we expect there will be a learning curve with blue phosphorescent emitter material when it is made available commercially.
At a seminar yesterday in South Korea, UBI research, a local consultancy, stated that Samsung Display had set a goal of applying blue phosphorescent OLED material to devices in the 2nd half of 2025, rather than in mid-2024 as previously expected.  We believe this is in reference to materials being developed by SDC, and while we assume they are working with UDC on that development, that remains unconfirmed.  UBI went on to state that they believed the current version of SDC’s blue phosphorescent emitter material is not efficient enough to be used as is, although they believe that SDC would be willing to use a more efficient version, even if the lifetime was only 55% of the fluorescent emitter materials it will replace.  Given that color point (deep blue), efficiency, and lifetime are all variables that determine the commercial success of an emitter material, it has been difficult to ‘blend’ the three major parameters to create a commercially viable blue phosphorescent emitter material.
To complicate matters further, the other components of the OLED stack, most of which are developed and produced by other material suppliers, must also work efficiently with the OLED emitter materials, and that combination must be formulated by the panel producer.  UDC and others will develop their blue phosphorescent emitter with host materials, but there are typically at least 4 layers (usually more) of additional materials that create the environment under which the emissive materials work best, so even if a panel producer decides to use a commercial blue phosphorescent emitter, all of the layers in the stack are likely to be redesigned to produce the most efficient stack combination, a time consuming task, and one that involves considerable testing. 
Why Blue?  The quest for a blue phosphorescent emitter material is not a frivolous one, as a proper phosphorescent blue emitter will improve the stack’s power efficiency.  Estimates seem to range for an improvement of between 20% and 35%, although we expect that the actual result will depend on both the blue material specs and the other stack emitters and materials.  Anything that can reduce the power consumption of a mobile device is of immense value to device designers who can add additional hardware or functionality or reduce the size of the battery, while maintaining or improving the overall display specifications. 
Why has it been so hard?  UDC and others have been on the trail of a blue phosphorescent emitter material for almost as long as commercial OLED materials have been around, but like other ‘blue’ structures, such as blue LEDs, the characteristics that create blue light are specific to what are known as ‘high bandgap’ materials.  In an OLED device, ‘holes’ (think: ‘anti-electrons’) are injected into the stack at the Highest Occupied Molecular Level (HOMO), while electrons are injected at the Lowest Unoccupied Molecular Level (LUMO), with the space between those two ‘points’ called the bandgap.  As the world of electronics always strives toward a neutral state, the two ‘migrate’ to the bandgap mid-point and when they pair, they release light energy and cancel each other.  The frequency (color) of that light energy is proportional to the size of the ’gap’ between HUMO and LUMO, with larger gaps creating higher (blue) frequencies and small gaps creating lower (red) frequencies.
Unfortunately, the larger the bandgap, the more unstable the materials tend to be, which means they have short lifetimes, just as in nature animals or insects with high metabolic rates tend to have shorter lifetimes than those with slower rates, and this has been a fundamental problem for OLED material scientists.  In theory, a lighter blue should be more stable and have a longer lifetime, but a deep blue is essential to balance the phosphorescent red and green already being used in RGB OLED displays, so the quest to find a material with a large bandgap with a stable structure continues.  Eventually a material will be found that meets the necessary criteria, but once it becomes commercialized, it will take time to find its way into OLED stack, just the way green phosphorescent emitter material did, along with the more predictable issues surrounding cost, availability, and IP that overhang current OLED emitter materials.  It’s coming and its going to create a stir when it does, but aside from the initial hoopla, blue phosphorescent OLED emitter material is just a part of the OLED stack and will be subject to the same starts and stops as other OLED materials.

The holy grail in the OLED material space is phosphorescent blue emitter material, with the reason being that in current RGB OLED displays (all OLED smartphones and IT devices but not OLED TVs) the OLED stack is comprised of a Red phosphorescent emitter, a green phosphorescent emitter, and a blue fluorescent emitter.  The nuance between phosphorescent and fluorescent is a big one in the OLED material space as broadly, fluorescent materials generate less light per unit of energy than phosphorescent ones.  By converting the blue fluorescent emitter material currently used in most OLED stacks, to a phosphorescent one, the amount of power consumed by the emitter stack could be reduced by ~25%, an important point for mobile devices, and with numerous labs and companies working toward the commercialization of a blue phosphorescent emitter, the long-term stakes are high.
It seems that the average investor believes that when blue phosphorescent emitter material is commercialized, the winner of the race, whoever that might be, is due to see a windfall in terms of OLED material sales, but while we believe that is the case over time, we are less sanguine about an immediate and significant jump in revenue from blue phosphorescent sales, as both physics and marketing must be figured into such equations. 
There are two factors that come into play when planning OLED pixels.  First is the efficiency of the materials, or their ability to convert electrical energy into light, and the 2nd is the eye’s sensitivity to each color.  If we assume the efficiency of both red and green phosphorescent emitter materials is the same (its not), for both colors to look equally bright to the huma eye, the pixel would contain two times the amount of red material to green material, but in practice that ratio is closer to 2 (red) to 3 (green), and again assuming the same efficiency for blue phosphorescent material, the theoretical ratio for blue would be only 16.3% of red, or 33% of green. So if red emitter cost $1,000 per kilogram (arbitrary price), the theoretical cost of a display that used 1 gram of red emitter would be $1.67, consisting of $1.00 of red, $0.50 of green, and $0.17 of blue, remembering that these are theoretical not practical ratios.
Back to reality, just by looking at a common pentile pixel layout, those ratios are not even close, especially as the efficiency of fluorescent blue (currently used) is considerably lower than that of (hopefully) phosphorescent blue, so ‘more’ fluorescent blue is needed currently to make up for that inefficiency, which leads to the idea that if fluorescent blue is replaced by a more efficient phosphorescent blue emitter, wouldn’t that mean that less blue is needed?  If all were of equal efficiency, yes, but that is certainly not the case with OLED materials. 
OLED material developers must find a balance between three major factors.  Color point (such as deep blue, not sky blue), efficiency, the ability to convert energy applied to light, and lifetime, or how long it takes for the material to degrade to a set point.  Finding a true deep blue phosphorescent material is not an impossible task, but finding one that has a reasonable efficiency is much harder, and finding one that is deep blue, with a high efficiency, but does not degrade in a few hours is very difficult, so material scientists continue to wrestle with materials until the right combination is found.  Even at that point however, we don’t know what the efficiency of this new blue phosphorescent material will be, and that will be a determinant in how much blue phosphorescent emitter material is needed to balance existing red and green phosphorescent emitter materials, which will also determine how much blue phosphorescent emitter material an OLED panel producer must buy when incorporating it in a new OLED display, so the variables are truly ‘variable’.
With all of those physical issues, there is another one as important, and that is the manufacturing cost of this new blue material.  Again, in theory, the amount of heavy metal, in this case iridium, needed to produce the increasingly higher energy levels of green and blue emitters, would make a phosphorescent blue emitter more expensive to produce than green or red, and under the assumption that the cost of raw materials for emitters is ~40%, this does represent a bit of an incremental cost, along with a relatively immature manufacturing process and considerable R&D that needs to be amortized, so the price/kg of a blue phosphorescent emitter is going to have to be higher than red or green.
That said, while the cost of a blue phosphorescent emitter material will be higher than that of a fluorescent blue emitter, less will be needed (in theory) unless the efficiency is low, which will make the changeover less onerous from a total OLED stack cost.  However it is important to understand that the adoption of a blue phosphorescent emitter material will not happen overnight, just as the adoption of a green phosphorescent material took time, as shown below.  While we expect the idea of being able to reduce power consumption by 25% or have an OLED display that is brighter than is currently possible, will be an attraction to OLED panel producers, but implementing new OLED materials into existing manufacturing processes takes time and considerable effort, and could affect yield for an extended period of time.  Typically such a change would be implemented on a single line, so once the new materials are proven, they would be expanded across other lines over time.
All in, while it will be exciting to see a commercial blue phosphorescent emitter material to complete the OLED stack, we hesitate to build in the high early expectations that are typical in the OLED space and take a more conservative view of how such a new material will be adopted.  With Universal Display (OLED) expected to have an all-phosphorescent stack commercially available next year, expectations will be high, but we expect adoption to the levels seen for current red and green phosphorescent emitter materials will take some time and investors should be wary of building in high expectations at the onset.

Years ago we saw a mock-up of an OLED device that looked like a large pen.  It had a tab that allowed the user to pull out a flexible OLED display that showed full color images and text, as if you were reading a magazine or newspaper., which you could wirelessly update or switch pages with the press of a button.  As one who has spent many hours on trains commuting to and from work, the idea of such a device remained a futuristic but eminently achievable industry goal in our minds, and we have followed the display space closely ever since. 
It seems that we are getting ever closer to that dream as Samsung Display (pvt) promises to show an updated version of their flexible and rollable displays at the upcoming SID show next week.  The product is called Rollable Flex, and while it is similar to other SDC display products, and those of other display manufacturers, it takes the rollable concept a bit further.  Typically rollable displays are able to expand their surface area by 3x by maintaining a wide circumference around a drum, or in some cases folding across the interior of a device, however the folks at SDC have come up with a display that is able to be more tightly ‘wound’ around a cylinder without damage, and is able to expand its surface area by 5x, with the show demo being 49mm (1.9”) long when rolled to 254.4mm (10.01”) long when unrolled by wrapping it tightly around a cylinder.
While rollable OLED displays exist currently, they do not have the physical characteristics to be tightly wound without showing stress and eventual more serious damage.  While all of the materials in an OLED stack have their own ‘modulus of elasticity’, a fancy way of saying its resistance to being deformed, much of an OLED display’s flexibility is not determined by its substrate but by the material used to create the OLED stack’s anode.  The anode must be transparent if the light from the OLED emitters is to exit the pixel, and the most common material for OLED anodes is ITO, or indium Tin Oxide, which it typically sputtered[1] onto the substrate.  ITO is unusual in that it has both high electrical conductivity and optical transparency, a rare combination, along with ability to be finely etched, however the material is also brittle, the antithesis of what is needed for rollable displays, and is also permeable enough to allow oxygen and water vapor into the OLED stack, which destroys OLED materials.
In rigid OLED displays, the ITO is deposited on glass, and with a second ‘base’ glass substrate, locks the ITO and other OLED materials away from oxygen and water, however rollable displays must be built on flexible substrates which leaves the ITO and other material open to damage.  The solution for this issue is ‘layer’ other impermeable but transparent materials over the ITO, a process called encapsulation, solving the contamination issue.  That said, ITO’s brittleness is still an issue, and we expect SDC has come up with either an ITO substitute or modified ITO mixture that allows the material to have a higher elasticity modulus that exceeds that of current materials, and the odds are that SDC will not reveal the details of the difference from ‘normal’ and less flexible OLED stack components.
While this is all technical, it does pave the way for progressively smaller rollable devices and puts into sight the one-day pocket pen that opens into a large, full color display.  Samsung has already patented a number of ‘hybrid’ devices that use a rolled OLED display and a mechanical pull-out frame that holds the display when open, but these are typically the size of smartphones when closed, still a reach from the pocket-pen newspaper.


[1] Sputtering is a process  that involves the creation of plasma that ionizes the mater5ial (source) which forces the molecules out of the source  and on to a target material as a thin film.

​Universal Display (OLED) indicated that they will be showing, for the first time, a demo of their OVJP (Organic Vapor Jet Printing Systems), which the company has had in development for a number of years.  Based on a series of patents developed by the University of Michigan, University of Southern California, and Princeton University, with whom UDC has IP sharing agreements, particularly with work done by Dr. Mark E. Thompson and Professor Stephen Forrest, early OLED researchers.   OVJP differs from more typical OLED material deposition methods which use fine metal masks, essentially screens, to pattern OLED materials. OVJP heats the materials into a vapor, mixes the material with a carrier gas, and sends it to a print head that precisely places the material. 
As opposed to ink-jet printing, which mixes the OLED materials with a solvent, OVJP uses existing vaporization technology and direct printing, but does not liquify the OLED material, nor mix it with a solvent.  OLED materials that are miscible in solvents have different characteristics than immiscible OLED materials, which means formulations must be tailored to IJP systems, while OVJP can use the same OLED material sources as current mask-based deposition systems.  While the idea of OVJP has been around for some time, it has never been commercially developed until Universal Display took up the cause officially in 2014 when it created OVJP Corp. to design and build a commercial OVJP system.
OVJP is run by Jeff Hawthorne, former CEO of Photon Dynamics, a producer of automated inspection equipment for the display space that was acquired by Orbotech for $290, who was later purchased by KLA-Tencor (KLAC).   Company is still in the early stages of OVJP development, with the development of modules that will eventually become an alpha system, but the company will show its first 200mm x 500mm OVJP demo on a glass substrate, along with a 7-layer mono-color phosphorescent OLED device that was made-up on an OVJP R&D system, which will point to ‘proof-of-concept’ for the process.  The next step in OVJP development will be assembling an alpha system of size, likely about 6x the surface area of the current demo, and eventually scaling the system to commercial production sizes.
As the OVJP concept is one that is based on two existing technologies, it is not a far-fetched concept and essentially takes the best parts of both.  However there is substantial engineering involved and considerable competition from other deposition technologies and alternative materials, which are also in development.  The risk to UDC on OVJP is that other developments obviate the need for OVJP before it is commercially viable, so time is certainly a factor in its development, but the demos being shown by UDC do indicate progress is being made which is certainly encouraging.

​eMagin (EMAN) and Samsung Display have announced a merger agreement under which SDC will purchase all of eMagin’s outstanding stock at $2.08, roughly a 10% premium to the closing price on May 16.  This values eMagin at ~$218m.  eMagin has been developing Micro-OLED displays since 1996, with considerable funding from the US military who has used their displays in military hardware, particularly night-vision goggles, and in 2004 released the first consumer-oriented OLED Micro-display that was used in an early Sony (SNE) VR headset.  eMagin, which is based in Hopewell Junction, NY at a former IBM (IBM) site,
eMagin currently produces a variety of full color Micro-OLED displays that range from VGA to 2Kx2K micro-OLED displays ranging in size from 0.47” to 1”.  Samsung’s interest likely stems from eMagin’s dPd OLED patterning technology that is part of its patent portfolio.  The technology allows for RGB side-by-side stripe patterning, rather than a white OLED Micro-display that uses a color filter to create sub-pixels.  Samsung is expected to adopt this type of Micro-OLED display technology in the future, although it will likely initially use the WOLED system until the dPd technology can be scaled to nigh volume production.  Upper management are former Eastman Kodak (KODK) executives who were involved in Kodak’s early work with OLED displays.
While major investors are Vanguard (pvt), Blackrock (BLK) and company management and directors, the largest single shareholder is the Stillwater Trust LLC, whose sole member is Mortimer D.A. Sackler, former (left in 2018) 20-year director of the notorious Purdue Pharma LLC, the developers, and marketers of oxycontin, considered a major cause of the national opioid crisis.  You don’t always get to choose who your shareholders are…
 

We have mentioned a number of times that over the last few quarters Samsung Electronics (005930.KS) and LG Display (LPL) have been negotiating over a panel supply deal for OLED displays.  Samsung, whose display affiliate Samsung Display (pvt) has exited the LCD TV panel business, has been looking to expand its premium TV offerings, and while it offers its own Quantum Dot/OLED TVs, production is limited to one 30K fab, leaving Micro-LED TVs at the top of the line, albeit far out of reach for almost all consumers, the company’s Mini-LED/Quantum Dot lines, a small QD/OLED line, and Samsung’s Quantum Dot only LCD TVs.  With the premium Tv market the only TV segment expected to show positive y/y growth this year, building out that segment is quite important currently and likely necessary for the next few years.

While the definition of ‘premium’ in the Tv market varies, we define the ‘premium’ TV market as sets that are 55” or larger and cost $1,000 or more, and the lines shown in the graphic above all fall into that category, with a few models just below the ‘premium’ cut as shown in the table below.  As the Micro-LED line is not really a consumer-friendly priced item. We would expect Samsung, if a deal were concluded, to insert the ‘New OLED’ line at the same price points as the QD/OLED line to increase the volume of OLED offerings at those price points, and consequently, those price points are roughly equal to LG’s (066570.KS) own G3 OLED TV line, so price competition between the two rivals would not create further friction.
The big question however is Samsung’s margins on the new OLED line, much of which would be determined by the agreed-on price for the panels, which was said to be the contention throughout the earlier negotiations.  As Samsung is expected to purchase ~2m units next year, increasing to 3m and 5m in the following years (unconfirmed), and perhaps up to 1m panels this year, they are looking for a substantial discount to LGD’s normal transfer price.  LG Display has been running its WOLED fabs at less than full utilization so far this year, and such a deal would give a needed boost to OLED utilization rates that have dragged down profitability in recent quarters.  However rumors that Samsung is demanding prices below those offered to LG Display’s parent, which would likely cause a bit of bad blood between parent and affiliate.  That said, LG owns almost 60% of LG Display, so it’s an odd situation for LG.
While news services have picked up the supposed ‘movement’ in the negotiations, this would not be the first time a ‘deal done’ signal was given (or assumed) from local South Korean media.  While such a deal will have benefits for both parties, there is considerable emotional skin in the game for Samsung, who decided in 2013 that producing large RGB OLED panels was not a viable process.  In fact, they were correct in that assumption, as LG Display does not use and RGB patterning process in its OLED panels, but one encompassing creating a white light with a combination of OLED emitters and using a color filter to create the necessary red, green and blue sub-pixels., which reduces the brightness of the display.  Over the years LGD has adopted a number of improvements that have offset some of that issue, but the current-day management at Samsung must bow to the fact that the 2013 decision has given LGD a distinct advantage in the OLED TV space, as both the sole OLED TV panel supplier and LG’s over 50% share of the OLED TV set market.
It will be challenging for Samsung to come up with a marketing plan that continues to sell its QD/OLED technology while extoling the virtues of LG Display’s OLED TV panel vision, and not degrading the company’s Mini-LED/QD technology, which Samsung has been championing since 2021.  Of course that is what the marketing guys get paid for, so we expect rounds of advertisements providing little empirical information about the pluses and minuses of each technology, and more on why whatever the technology is, Samsung’s is better than others.  Samsung’s smartphone and TV divisions were ‘ordered’ to find solutions to improve earnings after 1Q results led to an 18% decline in sales and the lowest operating profit the company has seen in many years.  Tv division sales were down 14.8% y/y, so there is considerable pressure to expand the premium set business and bring up margins from upper management, so likely less face saving, and more sales will be the holiday mantra this year.
 

At the end of last month we noted (4/27/23) that while there was still time for Samsung Display to decide to make its investment in a Gen 8 OLED fab a reality, time was beginning to run out.  It seems that, according to Korean sources, has created an internal organization to begin to execute plans for said Gen 8.6 OLED fab, and has begun to order equipment for same.  The new fab would be oriented toward the production of IT OLED products, with a potentially large consumer company () a likely customer over the next few years, along with parent Samsung Electronics.  When this fab is completed, it will be the first of its kind, producing RGB OLED displays on a substrate that is over double the surface area of the current Gen 6 fabs that are producing RGB OLED displays for smartphones and IT products, giving Samsung Display a volume and efficiency advantage over its competitors.
The project is expected to cost ~$3.1b US, and purchase orders are said to be released this month, starting the construction process, which has been in development for many months.  The heart of the fab will be the deposition tools, which pattern OLED materials on the substrate through fine metal masks.  These tools are typically designed for Gen 6 substrates, so tools for this larger base will have to be custom built, and as we have noted before, there has been some question as to who will be contracted to build such tools.  LG Display has aligned itself with Sunic Systems (171090.KS), but Samsung Display has yet to place an order with Sunic or the market leader Canon-Tokki (7751.JP), who developed a system that can automate a number of deposition functions, including cathode metal and organic material deposition, and encapsulation.  Samsung was said to be trying to negotiate a price that does not include development costs, which Canon wants to include.  Smaller Gen 6 systems start at ~$100m, likely putting the cost of a Gen 8 mass production system between $200m and $250m.

OLED displays are exceptional in that they have infinite contrast, the ratio between the blackest black and the whitest white.  They typically have a wide viewing angle, averaging ~140⁰, while LCD displays have a more narrow viewing angle of ~80⁰, meaning the contrast is reduced less as you move away from the center of the screen (Figure 1).  The colors tend to be ‘saturated’, meaning OLED materials have narrow color ‘peaks’ (Figure 2).  Phosphorescent OLED materials are more efficient than LCD displays that need a backlight, they are thin and flexible, and OLED materials have a very rapid response time (typ. 0.01ms for OLED vs. 1 – 16ms for LCD).

​OLED & LCD Color Filter Spectral Comparison - Source: Transmission Spectra – Journal of Display Technology

Based on the above, every display used in consumer devices should be an OLED display, providing the best possible image to customers, but there are issues, the largest of which is cost.  While in theory, OLED displays require no backlight as they are self-emitting, and for smaller OLED displays, do not require a color filter, both of which are necessary for LCD displays, the BOM should be lower for OLED display products, but that is not the case.  In a typical OLED fab, OLED materials are vaporized in a heated chamber and pass through a Fine Metal Mask, essentially a very fine screen, that ‘places’ the OLED material in precise positions to form an RGB pixel on a substrate.  Masks must be very thin and very rigid in order to avoid ‘shadows’ that will cause the materials to be misplaced, but as more holes are added to produce higher resolution displays, the masks become more expensive and subject to gravity, causing misplaced pixels, leading to low display yields and an overall higher display cost.

​Slot & Slit Type FMM detail - Source: Toppan

Over the years display equipment engineers have come up with some alternatives to mask-oriented OLED deposition, particularly ink-jet printing, and while there have been a relatively small number of IJP OLED displays made available commercially, the process, in terms of directly printing OLED materials, has its own limitations.  In order for OLED materials to be printed, they need to be dissolved in a solvent, and that can change the properties of some OLED materials, and as the materials must remain in liquid form in order not to clog the ~50,000 nozzles that are small enough to drop 6 pico-liters of material for each sub-pixel (a pico-liter is equal to 1 trillionth of a liter), with a typical 4K RGB OLED display requiring 24,883,200 droplets.   In high resolution displays, where the pixel density is high, a drop that is even a bit too large can cause the material to migrate into another pixel, which leaves IJP to some of the less precise deposition layers, such as encapsulation materials, rather than OLED material deposition itself.
There is an alternative process that is currently being developed by a number of display producers that is based on photolithography, rather than mask-based deposition.  Japan Display (6740.JP) has been developing a maskless photolithography process called eLEAP (Environment positive Lithography with Maskless Deposition, Extreme long-life, low power, & high luminance, Any shape Patterning) that promises 2x the brightness of mask-based deposition displays, 3x current display lifetimes, while reducing 150,000 tons of CO2 emissions/year.  JDI has plans to commercialize the process by 2025 in partnership with China’s HKC (248.HK), and rumors that Samsung Display (pvt) has decided to test JDI’s process. 
A typical (not that there is a typical process) OLED display being processed without a mask would go through the following steps:

1. Clean the substrate.
2. Coat the substrate with OLED material (one color)
3. Apply resist and cure.
4. Pattern vis plasma etch.
5. Strip resist
6. Repeat steps 2 – 5 for each color.

With semiconductor photolithography stepper tools, theoretical line width down to 1um could be patterned, which would lead the way to higher resolutions that would prove extremely challenging for mask-based deposition, but there are drawbacks, a number of which need to be solved before the process becomes scalable or cost effective.  As the process indicated above uses an open-mask or sputtering system, the cost/m2 should be a bit lower than a FMM system, but deposition tools are only produced by two or three manufacturers and can cost upwards of $100m, depending on size and complexity.  Add to that the cost of an i-line or DUV stepper, reticles, and photomasks, and you have added anywhere from $25m to $120m to the start-up cost of such a line, all of which goes into the panel cost.
There are other issues that need to be addressed, particularly the potential effect of the resist on what are typically very sensitive OLED materials, and the effects of UV curing radiation.  There are also questions concerning how the plasma etch process itself might compromise the integrity of the material stacks and a host of other questions that would influence the commercialization of such a process.  So it comes down to physics and chemistry, and then a hefty dose of process engineering to make this concept into a viable display that can compete with other OLED deposition methods, and other existing or potential display modalities.

​One point that will help is that display manufacturers are at least familiar with the photolithography process, as they produce the thin-film transistor backplanes that drive all displays, but those processes are well-known and mature, while photolithographic deposition is relatively new.  The good news is that this month Chinese OLED panel producer Visionox (002387.CH) announced that it is introducing ViP (short for Visionox Intelligent Pixelization), what the company says is the world’s first metal-mask free RGB self-alignment pixelation technology, and while that ‘first’ may be contested by JDI, the Visionox process claims to be able to increase the brightness of a ViP display 4 times over metal-mask OLEDs, increase the device life by 6x, increase the light-emitting area from 39% (mask) to 69%, and increase the pixel density to over 1,700 ppi, with flagship smartphone displays at between 400ppi and 500ppi.
Visionox has indicated that it has produced medium sized samples based on the technology and is ‘rapidly advancing the work related to mass production’, which, when completed will be applied to AR/VR, wearables, phones and even TVs, and has even begun to build a ViP batch production line in Hefei.  While there is still much uncertainty regarding the development and production timeline, the fact that two panel producers are seriously considering the technology is likely to expedite R&D efforts and possibly overcome some of the existing obstacles, and then it will become a direct cost issue if it is to become a practical and profitable process for high-resolution displays.  A few years to go, but the fact that it would not require building a new display infrastructure certainly gives one hope that photolithographic deposition can join the other display processes and technologies that are in operation or on the horizon over the next few years.

​It has not been lost to the press that Apple (AAPL) has been working toward moving more of its product line toward OLED displays, and all sorts of timelines for the iPad, Macbooks, and potentially other products’ OLED adoption have been bandied about.  Given that there are only a few potential OLED suppliers who are both qualified by Apple and can deliver the volumes necessary, much of the discussion around Apple’s transition has been concerning Samsung Display (pvt), LG Display, and China’s BOE (200725.CH).  With current production of OLED IT panels limited to Gen 6 OLED fabs, all three OLED producers (and some others) have indicated or hinted that they would be making investments in new capacity to support Apple’s transition, of course, without naming Apple itself as a customer.
In order to improve efficiency and volume, there has been considerable speculation that such new facilities would be Gen 8 RGB OLED fabs, which currently do not exist (LG Display has Gen 8 OLED fabs but they use a non-RGB process that is not viable for Apple’s specifications), so considerable R&D has been, and still has to be done to design the equipment necessary to make the transition to Gen 8 OLED production for Apple’s (and others’) IT products. 
Up until the beginning of this year, most predictions included Samsung Display starting construction on a Gen 8 RGB OLED fab this year, either converting an idle Gen 8 LCD fab or converting a Gen 6 line to Gen 8.  LG Display, while a bit less specific, has been expected to do the same, and BOE, has hinted that they will follow a similar path ‘as the market demands’, but the ever-shifting sands of the CE space have begun to cast askance at those plans and concomitant timelines.  The equipment needed to deposit OLED materials on the larger Gen 8 substrates takes considerable R&D to develop, and as we have noted previously, there are only a few companies with the expertise to develop such tools.  Sunic Systems (171090.KS) is working with LG Display, and at one time Samsung Display was working with ULVAC (6728.JP) on such tool development, but has since abandon that project, and is looking at the industry leader Canon-Tokki (7751.JP) as a potential Gen 8 deposition tool supplier.  However, Canon does not want to bear the cost of the tool’s development, as Gen 8 OLED adoption is still an unknown, and expects Samsung Display to pay for the development as a part of the tool price.
With the objective of reducing costs/m2, a boost to tool costs will eat away at the process BOM, and SDC has been hesitating to place the order with Canon, with a cut-off of the end of 2Q if it is to meet the goal of Gen 8 production for Apple in 2024.  But it seems not only has the cost of building out Gen 8 OLED capacity been an issue, but the trade press has taken Apple’s recent Mac sales declines as an omen that is adding additional hesitation to the Gen 8 OLED build-out for all potential participants.  We differ.
As with almost all CE products, the COVID-19 pandemic changed what was previously a relatively stable demand picture for Apple products.  Mobile devices saw some early positive momentum, but the need to communicate online became the driver for tablet, laptop, and PC sales that set volume records.  We look at the years between 2020 and 2022 as ‘aberrational’ in terms of demand and look to more normalized unit volumes as a better indicator of what we should expect going forward.  In the case of Apple, particularly the Apple Mac, a tool that is known for its use among content developers who require high quality displays, the logic holds that Apple would like to make the transition to OLED for its color purity, high contrast, and color gamut, but recent headlines from overseas are decrying the fact that Apple’s Mac sales are declining and adding to OLED panel producers’ hesitation concerning spending for Gen 8 RGB OLED fabs. 
However looking at Apple’s Mac sales going back to 2018, they average $6.35b per quarter, including the heady COVID years, which puts the last two quarters above the LTY average, despite the decline from 2022.  More specifically, Apple’s 2Q Mac sales of $7.168b, which seemed to trigger the recent press concerns, are only 1.14% lower than the average of all 2Q results since 2018, including those in the COVID years, and just looking at the pre-COVID years (2018 – 2020), 2023 2Q Mac sales are 28.7% higher than the average.
We expect SDC and LGD are most concerned about the cost of making the conversions to Gen 8 against other larger substrate transitions, rather than Apple’s near-term results, and if either company has been assuming that demand during COVID was ‘real’, we have misjudged both companies.  Spending the billions necessary to build out a Gen 8 OLED infrastructure for IT was a risky business before COVID, during COVID, and will be after COVID, but those decisions tend not to be made on near-term issues, as they are bets that will play out over many years.  SDC does have the cost issue to settle with Canon, especially as LGD has aligned with Sunic Systems, but we expect that has more to do with the timing of Samsung Display’s decision than the relative decline in Apple’s Mac sales over the last two quarters.

Universal Display (OLED) reported 1Q results of $130.467m in sales, 4% below consensus, down 22.8% q/q and down 13.3% y/y.  EPS was $0.83, slightly above consensus of $0.82, down 38.8% q/q and down 20.8% y/y.  While the numbers look poor compared to last quarter and last year, given the weak results seen from a number of consumer electronics companies who are UDC customers, there was considerable apprehension that UDC’s results and/or guidance could have been worse.  Most significant was the fact that UDC management did not change the full-year guidance that was given during the 4Q ’22 call.  We summarize that guidance below, along with how the 1Q results mesh with that guidance:

On a more general basis management reiterated their view that 2H will be better than 1H, which they believe is confirmed by conversations with major customers.  This has been the mantra for most CE companies, citing typical seasonality, new model releases, or a more generally improving economy, but we can only point to one or two realistic demand changes that will have an effect on 2H.  One would be the release of the iPhone 15 family, which will drive OLED display production starting in late July or early August, and the other a more general build toward the 4Q holiday season.  While the magnitude of the initial iPhone display orders from Apple (AAPL) will be based on their demand outlook toward consumer spending and their confidence in the feature set of the 15 series, the holiday build for most CE companies will be based more on inventory levels going into 3Q and an overall view of demand.
From the perspective of UDC, the 5-year average ratio between 2H and 1H is 1.22:1.  This includes two unusual years where the 1st half was unusually weak, resulting in a high 2H ratio.  When looking at an 8-year average, excluding those two years (2020 and 2018), the average is 1.1:1.  UDC gave no guidance for the 2nd quarter, so we would expect material sales to improve between 7.5% and 9% q/q and the royalty/license ration to also improve to 1.38.  If we put a 1.14:1 ratio on the 2nd half, it implies full-year sales of ~$572m, a bit below the mid-point of guidance.  However this leaves a considerable burden on 2H results, and that remains worrisome, especially after expectations for a ‘recovery’ across the CE space in 4Q and 1Q this year did not materialize.
That said, those with a longer-term perspective should understand that Samsung Display (pvt) has already committed to a large spending plan to upgrade a number of OLED lines to Gen 8 production for IT products, which will begin in 2024.  LG Display (LPL) and BOE (200725.CH) will also upgrade either existing small panel OLED lines or build out new Gen 8 OLED capacity in order to compete with SDC, which will drive additional OLED adoption.  That said, while the industry might be painting a rosy picture of the trend toward larger size OLED displays, adoption in IT devices will take time.  Apple’s OLED timeline for its more IT oriented products will likely set the tone for adoption, so new fabs will likely start out at low utilization rates and the industry will likely take some time before the cost is low enough that OLED in IT becomes commonplace.  UDC is certainly the beneficiary of that change, but it will not be a straight line, and as the small panel OLED display business matures macroeconomics will have an increasing effect on OLED material usage.  Calling 2023 a ‘transition year’ sounds a bit like a cop-out, but with only a few markers to go on so far this year, full-year results are highly speculative.  Additional details upon request.