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.

Foldable are not new anymore.  Having been technically available since 10/31/2018[1] and in real production in September 2019[2], there have been at least 30 foldable smartphone models and a number of other ‘foldable’ display devices.  That said, there have been a vast number of prototypes, demos, and ‘concept’ foldables shown at a never ending parade of conferences and expositions, only a few of which have ever seen retail shelves.  That said, consumers have become used to the idea of foldable displays, and with the improvements that have been made in both the displays themselves and the hinge and other mechanisms needed to make them operate correctly, that fear of spending all that money on a device that is going to fall apart quickly seems to have dissipated.
As smartphone component manufacturers became more adept at creating those intricate mechanisms that help foldables to open an close without scoring a line across the screen, they began to understand that as flexible OLED screen technology continued to develop, they could think about rolling a display on a spool inside a device and unrolling it when a larger screen was desired.  Many smartphone brands have shown demos of such devices, including smartphones, tablets, and laptops, and with the start of Mobile World Congress this week, there have been a few more that have made the tech press rounds.
Lenovo (992.HK) showed a particularly interesting device, a 12” laptop (diagonal) that could be expanded to 15.3”, and while that might not seem a big change in size, it is a ~65% increase in display surface area.   As seen below, the device looks a bit strange when expanded as the screen expands vertically, but Lenovo said the idea comes from users as the expanded screen can fit two 9:16 aspect ration images, the format for most videos.  The screen expands mechanically through a motor as the user presses a button and the system adjusts the screen resolution as the size changes. 
There is no timetable for the commercialization of such a device from Lenovo and earlier prototypes have been around for a while, but one has to give credit for Lenovo coming up with an idea that has practical value in the real world, as opposed to the many demos we have seen that are essential there to prove that engineers can prove a point.  The most successful CE products are those that make life easier for consumers, and we can see how such a device, especially in a cramped location such as a plane, might be useful.  Perhaps we won’t buy the first iteration, letting the mechanics settle in for a generation, but it certainly is a thoughtful use of rollable technology.


[1] Royole (pvt) Flexpai developers model

[2] Samsung Galaxy Fold

Back in Grade school science, or maybe High School biology, there was a chapter in the textbook about the eye, with the gist of the chapter focused (!) on rods and cones, the two light sensitive receptors in the human eye.  There was the inevitable question from those sitting in the back row, “Which is better, teach, rods or cones?”, exasperating the teacher, but as rods are useful in situation where light levels are low, cones are active in normal or bright lit settings, so the answer is both, as we live in a world of changing light levels.  Color is generated by cones, so you might notice that there is little color content in what you can see in the dark, as the images are generated primarily by rods.  Cones have three types of pigments (red, green, and blue) that are stimulated when illuminated, with the brain comparing the response levels of the three to create a representation that we call ‘color’.
But the characteristics of rods and cones, and a third type of receptor that was discovered almost 40 years ago, but was not included in textbooks, have another function aside from the creation of color, and that has to do with time.  Rods are slow to respond to stimulus, while cones are more rapid, and by comparing those responses the brain is able to create a ‘temporal framework’ that adds to the brain’s ‘time sense’.  The 3rd type of receptor cell found in the eye, known as ipRGC (Intrinsically photosensitive retinal ganglion cells, which is why they were not in the textbook…), contains a light sensitive protein but does not help the brain to form images.  As that protein responds to light slowly over a longer period of time, it tells the brain about the presence of ambient light, helps the pupils to widen and narrow, and is a key resource in the formation of circadian rhythm, the body’s internal 24-hour clock, much of which is formed in the brain’s suprachiasmatic nucleus.
The display industry, in recent years, has championed the concept that blue light is dangerous, and while it is an integral component of full-color displays, it is promoted as something that should be avoided by consumers, with many brands promoting “low blue light” displays or similar seemingly ‘woke’ slogans.  But whether blue light is good or bad for humans is a more complex question and one that the Circadian Light Research Center has been studying since 1983, in order to help improve the performance of 24/7 workforces for international companies.  
Studies performed in the early 2000’s placed the blue onus on blue light at 460nm, known as royal blue, but while there was no question that exposure to blue light has been linked to dozens of serious health disorders, such as sleep issues, depression, obesity, diabetes, cardiovascular disease, and hormone-related cancers,  as it upsets the body’s circadian rhythm, the studies were done with very short exposure periods (<90 min.), which had little to do with the realities of blue light exposure in everyday life.  The Center’s research studies in recent years have indicated that under normal office working conditions the ‘blue’ that needed to be controlled to reduce health risks is at 477nm, known as sky blue.  While this might seem a small difference, sky blue is almost at the peak sensitivity point of the circadian photopigment (melanopsin) in the human eye, while royal blue sensitivity is most prominent when the eye has adapted to a dark lighting situation.  Further studies at Harvard confirmed the concept that while royal blue is more heavily triggered as cones become adapted to initial light sources, such as upon waking, that reaction fades over time, transitioning to sky blue sensitivity as the day progresses.  The brain uses these chemical transitions to keep track of 24-hour circadian cycles.
In an ideal working environment, office lighting and displays should have plenty of blue light, across the entire blue light spectrum, but after sunset that light should have as little blue light as possible in order that the body’s circadian rhythm is maintained as it was before humans were removed from natural light environments.  That said we live in a display-oriented society, with most days ending by holding a smartphone screen inches away from our eyes, which can confuse our circadian clocks by triggering ‘daylight’ responses if the blue is not eliminated.  One can see how this artificial daylight causes those cycles to be interrupted, and while many believe that late-night social media is responsible for sleep disorders and the like, disrupting the body’s circadian rhythm on a regular basis has longer-term and likely longer-lasting consequences.
The most practical response to the problem would be to limit display use to daylight hours when blue-enriched displays mimic daylight, but that is not a practical one, or one that works in an office environment where hours are not dictated by sunrise and sunset.  There are LED lighting systems that are designed to be ‘circadian modulated’ and shift blue light content over a 24 hour period, which are ideal for facilities that operate on a 24 hour schedule, such as hospitals or police stations, but for the average consumer the best solution is to make sure your phone has a blue light filter or download an app that provides same, many of which will allow the user to set the time when the filter Is automatically turned on.  While this won’t reduce the tension associated with no one appreciating your latest Tweet, it will keep your circadian cycles intact which will have much longer-term health benefits.
If you don’t have a blue filter on your phone, here are a few free apps that can do the trick (we don’t get compensation for directing anyone to these links):
https://play.google.com/store/apps/details?id=com.urbandroid.lux&cjevent=b936ad6da24511ed83d82ea30a82b839
https://play.google.com/store/apps/details?id=com.palmerin.easyeyesfree&cjevent=06dcb0baa24611ed80ba6bb40a82b821
https://play.google.com/store/apps/details?id=com.eyefilter.nightmode.bluelightfilter&cjevent=2527ab03a24611ed81b9015a0a82b820
https://play.google.com/store/apps/details?id=jp.ne.hardyinfinity.bluelightfilter.free&cjevent=3176ecc5a24611ed83d82ea40a82b839
https://play.google.com/store/apps/details?id=com.ascendik.eyeshield&cjevent=3dea197ba24611ed817df7780a82b82c
​

​​LG Electronics (066570.KS) released a number of updated laptops at CES 2023, as part of its Gram laptop line.  What makes these laptops unusual is the Gram 15.6” “Ultraslim” and the Gram 14” and 15” “Style” models now use OLED displays.  In itself, it is not surprising for LG Electronics to feature OLED displays as it is the leader in large panel OLED display production through its affiliate LG Display (LPL), who also produces small panel OLED displays for Apple and a number of other smartphone customers., but in the case of these new OLED laptops, parent LG Electronics is buying the OLED panels from rival Samsung Electronics. 
Samsung Display (pvt), affiliate of parent Samsung Electronics (005930.KS), is the leading producer of RGB OLED displays, primarily for use in smartphones and tablets, while more recently building out its RGB OLED display line to include larger panels suitable for the notebook market.  While smartphone OLED displays are typically produced on a flexible substrate, with the phone’s structure providing the rigidity, laptop displays tend to be produced on rigid substrates (glass), as the more structurally solid frame keeps the glass-based display from flexing.  Further, the production cost of glass OLED displays is lower than that of those produced on flexible substrates, as during the production process the flexible substrate material must be attached to a glass substrate to make sure it remains flat during deposition, and them must be removed using a LLO (laser lift-off) process to return the display to a flexible state.
LG Display does not produce rigid OLED displays, producing only those with flexible substrates for smartphones, watches, and automotive displays, so in order to keep down cost, but also provide an OLED alternative to its laptop line, LGE had no choice but to buy from SDC or go to a Chinese supplier.  Considering that it has had problems with the displays on earlier models in its laptop line, the choice of Samsung seems logical, albeit a bit embarrassing.  We believe Samsung Display has ~ an 85% share of the rigid OLED display market, with only Everdisplay (688538.CH) and Visionox (002387.CH) competing and has considerably more experience than the others in producing these large OLED displays.
What also stands out in this unusual relationship is that Samsung Electronics and LG Display were said to be in negotiations last year for a potential purchase by Samsung of a large (>1m) number of OLED TV panels, which never occurred.  Rumors that while LG Display was willing to lower the OLED panel price below the price at which it sells OLED panels to its parent, the two were still unable to reach an agreement and the deal was called off, but when it comes to CE products, margins rule. 

​There are many TV brands represented in the US, with Best Buy (BBY) and Walmart (WMT) listing over 20 and Amazon (AMZN) listing over 25 TV brands offered.  But while US TV consumers have choices when it comes to LCD TVs, they have far less choice when it comes to OLED TVs.  OLED TV brands are plentiful on a global basis, with over 20 brands having at least a single model (albeit some a bit dated), and while this was not a good year for the TV market in general, ~7m OLED TV sets were shipped globally, for a ~3.5% share of the overall TV market.  In the US however, a quick look at the OLED TV market shows that it is dominated by three or four brands, and few, if any other OLED TV brands are sold in the US market.  Until last year, LG (066570.KS) and Sony (SNE) were the dominant OLED TV brands sold in the US, with Vizio (VZIO) entering the US OLED TV market in 2020, and Samsung Electronics (005930.KS) entering the OLED TV market last year with its QD/OLED TVs.
One brand that has been conspicuously absent from the US market has been the Japanese TV brand Sharp (6753.JP), who built a reputation on calculators and later microwave ovens, built the world’s first Gen 10 LCD plant in 2004, years ahead of other panel manufacturers, and was the leader in large-size LCD TVs.  By 2010 however, the company faced mounting losses and instituted staff reductions in 2012, but was unable to recover sustainable profitability, being forced to sell a 50% stake in its Sakai LCD plant to then Hon Hai (2317.TT) chairman Terry Gou and 10% stake in the overall company to Hon Hai (aka Foxconn (2354.TT)) for a bit over $800m US.  
While the Foxconn stake kept the company afloat for a while, in 2015 Sharp sold its Mexico assembly plant to China’s Hisense (000921.CH) for $23.7m US, along with the rights to the Sharp brand name in North and South America, where it had a ~4.5% share of the US TV market.  In 2016 Foxconn announced it would raise its Sharp stake up to 66% for an additional $6.24b US, but after additional financial issues were revealed, the payout was reduced to $3.5b US.  In 2017, after a restructuring by Foxconn, Sharp began legal proceedings against Hisense, who they said was producing low quality TV sets using the Sharp name and a protracted legal battle ensued, ending with Sharp buying back the brand name rights in the US in 2019 for an undisclosed sum and was expected to return to the US TV market that year.  While Sharp’s TVs are sold on Amazon to US customers, the brand remains under-represented in the US although it is still a major brand in Japan.
With all of that said, we expect Sharp to enter the US OLED TV market this year, likely with assembly being done at the Mexico plant, which is now owned by Foxconn, and will likely be Roku (ROKU) based, as their LCD TVs have been, which would be the first 4K Roku OLED TV sold in the US (it sells OLED TVs in Japan and other regions).  We believe Sharp will offer at least a 55” and 65” OLED model, but pricing and other specifications are still unknown, although we expect sets will be priced toward the middle of the range relative to LG’s pricing, which would be ~$1,100 to $1,200 for a 55” set and between $1,400 and $1,800 for a 65” set.  While we expect Sharp will enter the US OLED TV market with a limited number of models, Sharp does represent a recognizable TV brand name to US consumers, as opposed to many Chinese TV brands and could have the potential to compete with Samsung, LG and Sony, however unless Sharp is able to strike a deal with major retailers, we expect most consumers will stick with those brands featured by Best Buy and Amazon, unless Sharp can prove its TVs are of higher value, a difficult task when competing with the two sole producers of OLED TV displays.

​by issing new shares and using the cash to buy a controlling interest in Hefei Visionox Technology Company (pvt) a company in which it currently owns an 18.18% stake.  While this sounds a bit like the company buying itself, it does have some nuance that does not seem obvios on the surface.  Visionox, the listed company, owns two Gen 5.5 OLED lines in Kunsham and two Gen 6 OLED lines in Guan, and while we included two additional Gen 6 lines in Hebei, they are not technically under the ownership of the listed company.
In fact, the 18.18% share that Visionox owns in the Hefei fab makes them the smallest owner, with Hefei Xingrong Investment Co,, Hefei Core Screen Investment Fund, and Hefei Heping Investment Co, each owning 27.27% of the Hefei fab.  It turns out that two of the three holders mentioned are state controlled, likely the original investors that provided the capital for the fab, given their location, and the third is a private investment fund that seems to be aligned with state interests. So why would it become important to Visionox to become the majority shareholder of the Hefei Gen 6 OLED fab?
It seems that the Hefei fab is the most technically sophisticated of the Visionox fabs, and the one suplying most, if not all of Visionox’s LTPO OLED display products, which we suspect is why Visionox wants actual control of the Hefei fab.  With Apple (AAPL) the biggest prponent of LTPO OLED displays, Visionox seems to be positioning itself to have more visible control as it develops its LTPO product line, and likely less control by state -owned entities.  This would make Visionox less likely to face anti-China rhetoric that might occur if it were able to become a visible LTPO supplier to Apple (or others). 
We expect that Samsung Display (pvt) and LG Display (LPL), both of whom are providing LTPO OLED displays to Apple would somehow bring in the ‘;state’ issue, should Apple qualify Visionox in the future, with even China’s own BOE (200725.CH) facing considerable anti-China sentiment as it develops it LTPO capabilities to meet Apple’s requirements.  \While we cannot be sure about the motivation behind Visionox’s acquisition of control in the Hefei fab, it seems logial that if they are going to fund and develop LTPO capabilities, they would like to be the beneficiary of the potential profits, while presenting a more ‘global’ face should such issues come up in the future.