​According to Korea’s ETNews, Apple has confirmed that the rumored OLED iPad will be released in 2024.  Apple and suppliers have been producing prototype of the device to make sure that the OLED displays can scale to while still meeting Apple’s specifications as the OLED iPad, should it be similar in size to the current model, would have a screen with almost 3x the size of an iPhone.  With sales in the 50m to 60m range, a mistake on the company’s first OLED base iPad would be quite expensive and damaging to the company’s reputation and the extra time the company is taking to make sure things are right is similar to how the company worked through the iPad OLED conversion years ago, which was slower than most major smartphone brands and started with one model, eventually expanding to the entire iPhone line.
There is still considerable speculation as to who will be supplying the displays for the OLED iPad with Samsung Display and LG Display in primary contention, with both indicating potential capacity expansion plans geared toward producing larger OLED panels on Gen 8 substrates rather than the more typical Gen 6, which would lead to more efficient processing.  China’s BOE is also angling to make its way further into Apple’s display supply chain, although the company is still behind SDC and LGD in terms of producing acceptable yields on LTPO displays, which have been the backplane technology of choice for Apple’s high-end iPhone models.  With the iPad typically being released in September, BOE and potentially others, will have a bit over a year to supply Apple with additional prototypes and gear up production, but it will be difficult for new fabs to be built and tested in that time, so we expect the first round of OLED iPads will still be produced o Gen 6 lines with the possibility that there will be more than one supplier, even if there is only one OLED iPad model in the 2024 year.
 
 

​Way back in February 2020 we noted that Samsung Display (pvt) had been evaluating ink-jet printing equipment from a number of suppliers for use as part of the development of the company’s QD/OLED process, which has recently become available for TV and monitor panels.  The ink-jet process was expected to be used for depositing quantum dots that convert the blue/green OLED materials to a full RGB pixels, and, as is the case in other OLED manufacturing, to encapsulate the OLED materials to protect them from exposure to damaging air and water vapor.  As the encapsulation process is one where a large swath of raea is covered with organic and inorganic materials, the IJP technology used is less advanced than what is necessary for the more precise placement of quantum dots, which must be precisely registered with the emitting OLED materials and the TFT below.
SDC was evaluating IJP tools from Kateeva (pvt) the leader in encapsulation IJP but chose tools made by SEMES (pvt), a Samsung affiliate, despite what we believe was data that indicated that the Kateeva product was the superior choice.  While we speculated that SDC was helping to bail out SEMES, which was seeing its LCD tool business decline as SDC wound down its large panel LCD production business, at the time we could only cite 2nd hand data.  SDC’s choice caused significant disruptions to Kateeva, who had produced working tools with the hope of recovering pre-order costs from SDC, and the company had to reduce its staff by over 50%, and refocus its attention on potential Chinese customers for its encapsulation IJPs.
It seems that HB Solutions (297890.KS) invested $13.5m in Kateeva earlier this year after it was thought that Samsung Display will be using Kateeva’s ink-jet printers for the potential expansion of its QD/OLED production line, after experiencing problems with the SEMES tools, with Kateeva collateralizing a number of its South Korean patents to secure the loan.    HB Solutions is also said to have purchased rights to additional Kateeva patents in the US, although those might be subject to the preferential rights of another purchaser.  HB Solutions would be the end supplier of the IJP tools to SDC, with Kateeva the actual source of the IJP tools.
As there have been a number of delays in the development of the QD/OLED process by SDC, with questions still remaining about how well the product is being accepted by consumers and parent Samsung Electronics’ (005930.KS) commitment to the QD/OLED product line, the pressure is on Kateeva to secure the hard orders for the equipment to maintain it ownership of its IP.  As we have noted yesterday, Samsun expanded its QD/OLED marketing footprint, and while we are want to take this as a positive sign toward the QD/OLED product line, the macro environment is such that a delay in stepping up production capacity at a 2nd QD/OLED fab could push what we originally though would be an end-of-2Q decision further down the road, putting even more pressure on Kateeva.  Hopefully the long-term picture for QD/OLED at Samsung Display will take precedence and a decision (including Kateeva’s IJP) will be forthcoming, but the heat is on once again at Kateeva. 

​In our 8/16/21 note we indicated that Samsung Display (pvt) had been developing an alternative method for the deposition of OLED materials for RGB displays.  The process involves both shifting from Gen 6 substrates (which are typically used for small panel and IT OLED production, to Gen 8.5 substrates, which are typically used for larger TV size panels.  The reason for the research is that as current deposition systems are horizontal, the masks are affected by gravity causing them to sag as they get larger which has limited their size to Gen 6 when producing RGB OLED displays.  SDC is working with tool vender Ulvac (6728.JP) to develop a deposition tool that is vertical rather than horizontal, eliminating the potential gravitational mask sag issue, allowing the tool to process larger Gen 8.5 substrates.  If successful, it will give SDC a cost advantage over other OLED producers when producing IT RGB OLED displays, such as those for laptops and monitors. 
We would expect SDC to convert existing Gen 8 LCD capacity to this new process, as the TFT portion of the display process would be quite similar to what had already been in the LCD fab, which would save considerable time and cost, but at the time of our note, much depended on whether the technology was viable and cost effective.  We expect that SDC has decided that the technology is viable but has yet to decide whether the process is cost effective, with a large portion of that cost being the Gen 8.5 vertical deposition tool designed by Ulvac.  Typical Gen 6 OLED deposition tools range from $350m to $400m with Ulvac asking for $540m to $617m for the new tool, which is far above SDC’s $309m offer.  SDC is saying that they are currently the only buyer of the tool and that Ulvac has yet to complete the final version, while we expect Ulvac is building in a premium to cover sunk development costs, the larger format, and the fact that no other manufacturer has made such a tool.
We expect SDC is not betting the ranch on the Ulvac tool and is likely looking to Canon-Tokki (CAJ), the company with the largest OLED deposition tool base, for an alternative, although we expect the tool development process is further along at Ulvac, but SDC is likely looking to get the new fab in place in time for Apple’s (AAPL) OLED iPads, which are expected in 2024.  SDC could produce such OLED displays on existing Gen 6 production lines, but would have little cost advantage over LG Display, who will be competing for the Apple business, which is why we expect a decision to be made within the next 30 to 60 days.

Over the last few years we have mentioned the development of TADFs (Thermally Activated Delayed Fluorescents) as complementary to or as an alternative to fluorescent and phosphorescent OLED emitter materials.  Given that TADFs are based on fluorescent materials, which are relatively inexpensive but exhibit a number of the more desirable properties of more costly phosphorescent OLED materials, they have been the subject of considerable research in the OLED material space since the early 2000’s, particularly at the university level, with the objective of designing less expensive alternatives to the red and green phosphorescent OLED emitter materials that are used in OLED displays currently.
In order to produce the light necessary for an OLED display, electrons in the emitter material absorb electrical energy which pushes them from what is called a ground state (it is easiest to think of it as an orbit around a planet) to an excited state (a higher orbit).  These excited electrons quickly fall back to their ground state but give off the electrical energy they absorbed in the form of light, essentially converting the electrical energy that you supply when you turn the display on, into the light you see on the screen, with the composition of the emitter material determining the color of the light.

​Here’s where it gets a bit more complex…  When the electrical energy is applied to that electron and it moves to an excited state that change can happen two ways, as a singlet or a triplet, with the technical difference between the two not germane here, but phosphorescent OLED materials produce triplets which have considerable higher efficiency when converting electrical energy to visible energy (light).  This makes phosphorescent OLED materials the preferred choice for display manufacturers.  However there are some drawbacks, the first of which is such phosphorescent emitters are only available in certain colors, with blue the exception, so in order to create an RGB (Red, green, blue) display, a less efficient fluorescent blue emitter must be included, which means a less efficient combination of materials and the potential for the materials to age at different rates.
Without going into the details of why creating a phosphorescent blue emitter has proven difficult, we leave it to say that material scientists have been working toward improving the efficiency of blue fluorescent materials for many years, which is where TADFs and Cynora (pvt) come in.  One technical detail of the difference between fluorescent and phosphorescent emitters is that the jump up to an excited state and the subsequent return to ground state in fluorescent emitters is rapid, while in phosphorescent emitters (triplets) it is relatively slow, which makes phosphorescents more efficient in converting electrical energy into light energy.  TADFs take the rapid fluorescent singlet reaction and slow it down (hence the ‘delayed’ in the name) to make them more efficient, giving the potential for TADFs to be used as a more efficient blue emitter when paired with phosphorescent red and green emitters.
This has been the objective of Cynora and a Japanese company Kyulux (pvt), who have been working toward the development of a blue TADF for a number of years, along with a vast group of universities and R&D arms of companies in the display materials business.  Unfortunately such development has proven more difficult than might have been originally thought and while there have been blue TADF materials released commercially, they have not been able to meet all of the characteristics needed by OLED display manufacturers.
Heretofore we have only mentioned OLED material efficiency, but commercial OLED emitter materials must meet a number of other characteristics, all of which are a sort of balancing act between efficiency, material lifetime, and color point, as each fluorescent, phosphorescent, or TADF material is trade-off of the three.  We have seen highly efficient blue phosphorescent OLED emitters that would certainly meet commercial requirements in that category, but had lifetimes that were not commercially viable, and we have seen efficient blue phosphorescent emitters that had longer lifetimes, but were not the deep blue necessary for commercial displays, so Cynora and other TADF developers have been competing with phosphorescent blue developers to hit that magic combination of all three characteristics that would push a new material into true commercial production.
If Cynora has not been able to produce the perfect blue TADF iteration, why would Samsung Display (pvt) , an affiliate of Samsung Electronics (005930.KS), and investor in Cynora, want to pay an estimated $300m (no confirmation on price has been noted) for the company, especially as it seems the company had been reducing its staff over the last few months?    We believe there are a number of reasons, the first of which is IP.  Cynora has filed or been granted over 600 patents, much of which relates to the development and application of TADFs, with an emphasis on blue.  Even if Cynora was unable to meet its goal of developing a commercial blue TADF OLED emitter material that offered better characteristics than existing fluorescent emitters, they have done very extensive work toward that end, which makes that IP valuable, particularly to Samsung Display, the leader in the RGB OLED space.  LG Display (LPL) was also an investor in Cynora, which means that SDC’s purchase would also force other OLED producers, including LG Display, to license any TADF IP that was developed by Cynora if it predates new material TADF discoveries and would give SDC a cost advantage if such materials became commercially viable.
We expect that while Cynora has sold relatively small amounts of various materials, their last funding round was in May of 2019 and were likely facing the prospects of a need for further financing, given a staff of ~120.  At the time of the 2019 financing the company’s CEO was replaced, likely to refocus the company toward a more financially viable commercial timeline.  Our history with the company has consisted of a number of meetings over the last seven or eight years where timeline estimates tended to be pushed forward, so we would expect that initial and early investors (2010 and earlier), might be looking for a way out of what has become a longer-term investment than originally thought.  While we have looked at a number of Cynora’s patents, we expect SDC has done a deep dive into the value behind the company’s IP in order to value the only part of Cynora that SDC seems to want.  If SDC is able to monetize that IP then the transaction will make sense, otherwise it seems to be a protective move to keep any hidden potential out of the hands of competitors and to bail out the company’s venture investment.

Smartphone shipments have been weak and estimates for full year mobile shipments have been slowly declining as expectations for 2Q smartphone shipments, particularly in China, are not expected to see much of a recovery, other than modest seasonal improvement from the low in February.  As can be seen in Figure 1, in years prior to COVID-19, there was a steady build toward the 4th quarter shipment peak, which was interrupted in 2020 with the onset of the virus, and boosted in 1Q ’21 as some COVID restrictions were lifted as vaccination programs began to take hold.  This year however, there has been no return to a more normalized pattern, assuming 2Q estimates are correct, as the COVID lockdowns in China and the war in Ukraine, coupled with global inflation pressure consumer spending power. 
While Chinese smartphone shipments seem to be settling into a new, lower level, 5G has resumed its growth path and reached 85.1% of smartphone shipments in May, the highest level ever recorded, and 5G unit volume has returned to more normalized levels after a weak February, even as the number of new 5G models released in May declined.  We expect 5G share in China to remain above 80% for the remainder of the year.
In the past OLED displays were reserved for high-end or flagship smartphone models, given their high contrast, response time, and color stability, but as RGB OLED process technology became more adapted to mass production, OLED displays have been made available to a wider variety of smartphone models, with 43.8% of smartphone models released this year (YTD) with OLED displays, ahead of 2021’s 40.1%, and 2020’s 34.1%.  The premium status garnered by OLED displays in smartphones has made shipments less vulnerable to the ups and downs of shipments in the broad smartphone market, but as that share increases OLED displays are beginning to exhibit the same supply/demand characteristics as the mobile LCD display market.
A portion of that increased volatility comes from the inclusion of Chinese small panel OLED producers, with much being said, particularly in the Chinese trade press, about how Chinese small panel OLED producers are challenging South Korea’s dominance in the small panel OLED space.  Of course, Chinese small panel OLED producers have made inroads, particularly as smartphone brands look to find ways to gain leverage over Samsung Display (pvt), who is the absolute leader, and local Chinese smartphone brands look to local suppliers whenever possible, but as seen in Figure 4, South Korea’s regional share in the small panel OLED display market remains above 75% and defined further in Figure 5.  We are certainly not saying that Chinese small panel OLED producers are not making headway, but while on a percentage basis y/y shipment growth by Chinese small panel OLED producers has been impressive, the overall shipments are still small relative to Samsung, and if the last few quarters are any indication of what is to come, Chinese small panel OLED producers face the same seasonality and customer issues that South Korean producers face.
China’s BOE (200725.CH) has been expanding its small panel OLED capacity over the last two years and has become part of the Apple (AAPL) OLED display supply chain, which has been exclusive to Samsung Display and LG Display (LPL) in the past.  The path has not been an easy one for BOE, as we have outlined in a number of notes, but they have made it to the Apple iPhone platform, which is an accomplishment in itself, while other Chinese small panel OLED producers remain closely tied to local smartphone brands.  We expect Apple to utilize BOE as a tertiary supplier through 2023 as BOE must prove itself to be both reliable in terms of volume and in terms of panel consistency, issues that both SDC and LGD have faced at times.
All in, we expect growth to continue at Chinese OLED suppliers, and with BOE’s potential feed into the iPhone 14 build, the overall Chinese share will increase, but both South Korean small panel OLED suppliers, particularly SDC, have continued to invest in technology over capacity in the OLED space and that has been the one factor that keeps them from the rapid share loss that some predicted.  As the small, panel OLED display space matures further, we believe that Chinese small panel OLED producers will need to spend more on technology development in order to compete on the same level as SDC and LGD, while still increasing capacity, which will push the need for financial support higher, without the ‘automatic’ growth OLED has seen in the past.  The strong customer base that South Korean OLED producers have developed over the years, while certainly not immune to seasonality and macro factors, will allow them to hold onto premium product oriented customers, while we expect Chinese OLED producers will take the same path as they did in the LCD business, that of more generic suppliers, and while that will likely lead to more share gains over time, we expect it will prove hard for Chinese small panel  OLED producers to unseat the incumbents.

On a general basis, displays tend to be a palette for images, video, text, and live action but a subset of displays does something different, they allow you to not only see the image on the display but also to see what is behind the display.  These transparent displays have been around for over a dozen years, based on a number of technologies, primarily LCD and OLED, and have a number of uses, primarily in the retail genre as digital signage that allows the user to see through the display to the products behind it.  While the transparency of the display is a function of how the pixel structure is arranged, transparent displays tend to be a trade off against display quality, which makes them less than perfect for applications where image quality is of the essence.
Applications for transparent displays outside of retail are few, and while HUD (Heads Up Displays) are often mentioned, projectors are often used as an alternative to physically transparent displays.  As OLED displays are made of extremely thin layers of materials, some of which are transparent, much has been said as to their ability to be used to produce transparent displays, particularly large transparent displays, and LG Display , the only commercial producer of large panel OLED displays, has been promoting the idea of transparent OLED displays for a number of years and recently they have tried to exemplify the concept by installing 38 55” transparent OLED displays at what is called a ‘futuristic’ new bakery in South Korea.
With displays at the entrance to the store, on the walls, and between the baking areas, the installation is said to be the largest use of transparent OLED displays to date and creates a ‘futuristic’ look while allowing customers a view of new products.  We are not sure how necessary it is to customers to see videos and messages about the products being produced while looking directly at the bakers producing them, or why it is necessary to use a transparent display when it is mounted against a wall, but we understand that the promotional value of the store is more likely the goal, rather than the practicality of the system.
There are a number of uses for transparent displays, such as AR, where a small transparent display could act as the ‘glasses’ in a headset while images are added to the user’s visual field, but we see the sacrifice in quality from the transparency a stumbling block to such a use, especially when micro-projectors are able to put a video image directly on the eye of the user.  However the ideal application for transparency would be for lighting, where not only would a large transparent window panel would allow light to enter a room during daylight hours but could become a source of light during the night.  In such an application cost would be the mitigating factor, but such an application strikes us as far more practical as the transparent TV screens we have seen demoed, which seem to be a technology looking for an application.
All in, the idea of transparent displays certainly has technical merit, but we see little value in such splashy displays to promote the concept.  There are certainly public display applications where a transparent display would be less obtrusive than a non-transparent one, but installations such as the one in the images below, or those we have seen as a replacement for subway car windows seem to be a major stretch and just overkill in a world where overkill in advertising is a way of life. 

​Despite the reductions in forecasts for OLED unit volume this year, in the wake of rising inflation and China’s strict COVID p[policies, it seems that if you want to build out your OLED display business, you still have access to capital, and in this case it is not coming from the Chinese government.  LG Display (LPL) has announced that it has received $1b in funding for the expansion of its small panel OLED assembly manufacturing facilities in Vietnam, a part of its expansion plans that will facilitate a greater product flow to Apple (AAPL) and includes the expansion of small panel production lines at its plant in Paju, South Korea, a $2.5b project overall.  Funding, by way of long-term loans, was provided by Australia & New Zealand Banking Group (ANZ.AU), HSBC (HSBC), Citibank (C), and Caixa Bank (CABA.SM), with guarantees by the Korea Eximbank (state), Korea Export Insurance Corp. (state). 
 LG Display currently provides both LTPS and LTPO OLED panels to Apple for the iPhone 14 series, but faces competition from leader Samsung Display (pvt) and more recently from China’s BOE (200725.CH), who entered the iPhone supply chain last year after a number of failed attempts.  Since then BOE has been said to have been awarded a share of the iPhone 14 LTPS display production but more recently has been said to have been put on hiatus from Apple’s OLED supplier list after the company allegedly made changes to a display design without consulting Apple.  LGD is also looking to secure a place as a supplier of larger OLED displays to Apple and is developing production capabilities to that end as Apple is expected to continue to move its display procurement from LCD to OLED over the next few years.

We have noted a number of times the on again, off again negotiations between Samsung Electronics and LG Display (LPL) concerning the former’s purchase of OLED panels to begin producing an OLED TV brand.  This would be separate from the QD/OLED TV line that is based on such displays produced by affiliate Samsung Display (pvt) and would have been tiered above the company’s extensive quantum dot LCD TV line and their Mini-LED/QD TV line.  The negotiations have been ongoing for months and our assessment in recent notes indicated that if a deal were not made relatively soon it would become difficult for Samsung to assemble and market such a line before the holidays.
While negotiations seemingly were bogged down on price, with OLED supplier LG Display allegedly offering prices lower that what it receives from parent LG Electronics (066570.KS), Samsung has been said to be driving a very hard price position and with the rapidly falling price of LCD TV panels, it seems the negotiations have broken down again.  A spokesman from Samsung was quoted as saying “If we are to use LG OLED panels in our products this year, the discussion would have to be concluded by now. So chances are slim that we will release TV sets with LG OLEDs.   Still the possibilities remain open for future orders, although nothing is decided.”
As we have noted, with Samsung Display’s decision to end its production of large panel LCD displays, parent Samsung Electronics purchases its LCD displays from a number of panel producers, some of whom it has a financial connection with, such as Chinastar (pvt), owned by TCL (000100.CH), who purchased Samsung Display’s Suzhou LCD fab in August of 2020, with Samsung taking a 12.3% stake in TCL at the time.  Samsung also purchases LCD panels from China’s BOE (200725.CH) and Taiwan-based AU Optronics (2409.TT), among others. 
While the decision to terminate the large panel LCD display production business at Samsung Display was made by the board, we believe, based on the composition of the board, that Samsung Electronics was fully represented and was part of that decision, and while there was certainly some difficulty involved in establishing volume relationships with other suppliers, Samsung Electronics as a whole saw weaker TV set sales but higher profits from Samsung display during panel price increases  and saw the opposite during LCD panel price declines.  As the industry began to transition toward OLED, especially small panel OLED, we believe Samsung management was looking to capitalize on that growth and the long-term decline in LCD panel prices, which stimulate TV sales, without the offset of LCD TV panel losses at Samsung Display. 
The strategy suffered during the COVID-19 LCD TV panel price hike, but has since moved in Samsung’s favor, as in theory, TV set sales should increase as set prices decline, without the offset of large panel LCD losses at Samsung Display.  We note that of the 120 data points in Figure 1, 41.7% have been over the trend line, leaving 58.3% of months below trend, leading to a downward trend.  During the COVID-19 pandemic and the rise in LCD TV panel prices, the spread between LCD TV panel pricing and OLED TV panel pricing shrank, making Samsung more focused on offering OLED TVs to its customer base, but as that spread increased beginning last July, that necessity lessened and Samsung had less pressure to offer OLED TVs and more leverage with its QD/Mini-LED and pure quantum dot TVs, which are both based on LCD panels.  It would seem Samsung believes that scenario will continue through the end of this year and therefore has a greater incentive to lowball LGD for OLED displays and less pressure to come to a deal before the holidays.  We expect that Samsung will be highly promotional in regard to its quantum dot and QD/Mini-LED TVs this holiday season and will have less inclination to negotiate with LG Display until next year.

Considerable talk was generated when China’ largest panel producer BOE exhibited a 95” 8K OLED panel at the SID show last month, giving rise to speculation that BOE intends to both produce that panel commercially and also to produce a line of 4 additional large panel OLED panel sizes starting at 55”.  The panel shown was produced on a pilot line at BOE’s B5 fab, using a WOLED (White OLED) process similar to that used by LG Display and an IGZO backplane.  The pilot line and the remaining B5 fab is set up as a Gen 8.5 line using a half cut process, which means the system can deposit OLED materials on half of the Gen 8.5 sheet and must process the other half separately.  Given that 2 95” panels can be cut from a Gen 8.5 substrate at an efficiency of 90%, the half cut process is ideal for this panel size, but half cut processing is more difficult than the ¼ cut processing used for smaller IT panels and making that transition can bring down yield.  It would seem that BOE has mastered that change, at least on it pilot line, allowing it to produce large OLED panels on a Gen 8 line.
The ability to process ½ cut OLED panels on a full 15,000 sheet/month line, such as exists at the company’s B16 fab in Chengdu, BOE must be able equip the line with ½ cut deposition equipment, which is typically produced by Canon-Tokki (CAJ).   Those tools are both expensive and have an extended lead times, which means ordering the equipment to get into the queue is essential for timely production and the cut status of BOE’s Gen 8.5 lines at either B5 or B16 is unknown.  We estimate that based on a 15,000 sheet line at 100% yield, BOE could produce ~60,000 OLED panels each month, which when using a more realistic yield of 75% becomes ~45,000 units monthly, and we believe that a 75% yield for a new producer and a new process is generous, and while we have already seen headlines predicting the rapid share loss of South Korean OLED producers, we expect the impact of BOE’s push toward large panel OLED commercialization will take some time to materialize.
The good news for BOE is that relatively few OLED TV panels are produced each year, with an expected 10m panels this year, and therefore a relatively small production line will have an impact on share of the market.  That said, we believe the biggest issue facing BOE in this situation is yield, which, at times, has been a limiting factor for LG Display, who has had more experience producing large panel WOLED displays than any other producer, especially when opening a new line or fab.  Producing a few ultra-large panels on a pilot line is one thing but producing high volumes is another and much of BOE’s OLED experience in in small panel OLED production.  As a public company in China, BOE does have to work within certain financial norms, and is expanding its OLED production to meet Apple’s (APPL) needs for small panel OLED displays, while developing production infrastructure for IT OLED products to try to capture Apple’s iPad business in the future.  Running what would likely be a money losing fab for many months puts additional pressure on the company’s profitability, especially during a period when LCD panel prices are declining.  We would expect BOE to sample large panel OLED displays to all of LGD’s customers, and would likely be the lower cost alternative, but both the ability to meet volume targets and reliability of product will take time to become established, so our expectations are that BOE’s impact on the large panel OLED space will be modest this year and will take time to build in 2023.
Based on our calculations, we would expect BOE to be able to produce 473,400 units during the 1st 12 months of production on a 15,000 sheet line, against LGD’s estimated 10m units this year.  Impact yes, ‘glorious revolution’ maybe less so.

​Over the last year or two we have noted that the government of India has been trying to attract display producers to build LCD or OLED production fabs in the country by offering various financial and infrastructure incentives.  While there are a considerable number of companies with high capacity assembly plants in the country, it has been harder to attract actual production fabs as they need a complex infrastructure of suppliers that feed the fab or the cost of transporting raw materials and components offsets much of the value of the incentives.  On 06-25-21 and again on 12/16/21 we noted that the cost of building an assembly line in India was ~60% of that in China, which has gone a long way toward bringing in companies like Foxconn (2354.TT), Wistron (3231.TT), who assemble for Apple (AAPL), and Samsung (005930.KS), whose smartphone assembly plants in India have a capability to produce over 100m smartphones each year.
The chicken and egg issue of a supporting supplier infrastructure is a difficult one for India and one that takes time and money to build, and India is also trying to attract semiconductor companies to the country, so capital has to be carefully allocated, but in our 05/23/22 note we indicated that a subsidiary ((Elest (pvt)) of Rajesh Exports (RJEX.IN), a Bangalore based company that is, according to the company, the largest processor of gold globally and the world’s lowest cost gold jewelers producer, was shopping for a deal under which the company could get funding for the construction of a Gen 6 OLED fab.  It seems that the company and the government of the State of Telangana in Southeast India have signed an MOU for what is expected to be a ~$3b OLED project, along with additional projects to produce lithium ion batteries and electric vehicles.
Our skepticism about the project was based on the lack of any expertise by the company in the display space, particularly relating to OLED, but the company has stated that the technology “…will come from some of the most advanced research centers around the world…” but did not give any specifics on who might be associated with the project, although one positive is the fact that Vendanta (VEDL), an Indian mining company owned by billionaire Anil Agarwal, purchase a controlling stake in display glass producer Avanstrate (pvt) from Carlyle Group (CG) last year with the intent to use the substrate producer as a platform to develop an LCD module factory  in Nagpur. 
We don’t doubt that India wants to become a player in the display production business and is willing to offer capital that would help to attract interested parties, but it is a difficult proposition that requires not only a supply chain, but a considerable amount of experienced display engineers, who would have to come from sources outside of the country.  Attracting that kind of talent is expensive and has proven difficult in the past, but much will depend on what foreign resources Elest is able to tap into.  It would likely be difficult to attract talent from South Korea or Taiwan, but China’s OLED display industry, while still young in itself, would likely be the place where Indian companies might find display companies willing to supply construction and operating management for a price.  Whether this project ever gets off the ground remains to be seen, especially as the agreement is an MOU, but we give it time to see if it can develop into an actual production facility in the future.