Photolithography is the platform on which the semiconductor industry is built.  The concept of photolithography etch is fundamental to almost all semiconductor production and is the most common way in which structures at the micron level are formed.  In the display space however, photolithography is used in the formation of the TFT (thin-film) electronics that control display pixels, but the pixels themselves, at least in OLED displays, are formed using the deposition of OLED materials through CVD (Chemical Vapor Deposition) tools that vaporize the OLED materials and deposit them through fine metal masks, essentially screens that form red, green, and blue sub-pixels that generate the millions of color combinations needed for full color displays. 
There are problems with OLED material deposition, one of which is the masks themselves.  They are made of INVAR, a nickel-iron alloy that is able to maintain shape and uniformity under the temperature conditions used in CVD (up to 500⁰C) but at the same time must be unusually thin and placed extremely close to the substrate to create precise sub-pixel placement.  The requisite thinness limits the size of these masks, as they begin to sag above Gen 6 substrate size, and the buildup of material on the mask surface requires they be cleaned and replaced regularly, pushing OLED display producers to look for alternative deposition methods.
One promising technique is ink-jet printing where multiple nozzles place OLED material droplets on the substrate as they move across its length.  This allows for precise control over the materials, resulting in a substantial reduction in the amount of OLED emitter material waste but in order for the material to pass through the nozzles, it must be put into solution which means mixing the emitter materials with a solvent which can change the characteristics of the OLED materials or require ‘soluble’ materials that are different from those used in CVD deposition.

AR/VR displays require very high resolution displays in order to keep the optic system from becoming confused about what it is seeing (similar to motion sickness) and such displays require pixel densities far above the 400 to 500 pixels/inch we see in current smartphones, but both CVD deposition and ink-jet printing fall short of these densities, pushing OLED display producers to look for other alternatives to boost their ability to  create high density pixel displays and that is where the aforementioned photolithography comes in.  Japan Display (6740.JP) has announced that it will be starting to sample displays to customers this year that are based on ‘maskless’ lithography based material patterning.
JDI’s eLEAP (environmental positive Lithography with maskless deposition Extreme long life, low power, and high luminance Any shape Patterning) is claimed to increase emission efficiency by 60%, which is more than 2 times that of the FMM method and is not limited to Gen 6 substrates.  The process is green in that it is more ‘environmentally positive’ without masks that need to be regularly cleaned and therefore uses less toxic material and produces less CO2 emissions.  JDI is combining this technology with its expertise in IGZO TFT backplanes to create what it calls a breakthrough in display technology.
While we cannot verify many of JDI’s claims, there are some points that are do make sense.  We expect that the JDI system involves the use of supercritical Carbon Dioxide, which is a form of ‘dry ice’ that is low-cost, non-flammable, and can be used as a developing solvent that does not degrade OLED materials, which are critically sensitive to water, air, and many of the solvents used in lithography, and possibly fluorinated solvents that have less onerous characteristics toward organic (OLED) materials.  Since lithographic patterning is only limited by the size and shape of the substrate, almost any shape display could be patterned in theory, and given that no metal masks are used, three of the claims are possible.

The one area that cannot be verified is, ‘Extreme long life, low power, and high luminance’.  JDI claims a lifetime improvement of greater than 3X over conventional deposition based OLED displays (see Figure 3) and a 2X improvement in Peak brightness.  We can understand the low power portion as JDI is pairing eLEAP technology with its expertise in IGZO backplanes, which have lower power demands than other backplane technologies, and the claim of higher luminance (subjectively ‘brightness’) seems to be based on the technology’s ability to increase the size of RGB sub-pixels by placing them closer together in each pixel, but neither have been verified, so these claims need to be verified.

​There have been a a number of smaller companies that have been researching using photolithography for OLED deposition, in particular IMEC (pvt) and Orthogonal (pvt), a Cornell spin-off, but JDI would be the first to commercialize the process if it is successful in creating customer demand, particularly from AR/VR display buyers who are always looking to increase resolution without excessive cost.  We expect it will take some time for JDI to develop its eLEAP technology to the point where a full scale production line could be built, but given the mature nature of photolithographic tools, and the use of same for the TFT side of the display business, it is certainly a possibility from an infrastructure POV and one that has less limitations than current processes.  Given JDI’s on and off relationship with Apple (AAPL), there has been speculation that the ‘significant customer interest’ JDI mentions in its press release is coming from Apple, but we hesitate to make such conclusions.  All in it would be a very important step for JDI if they were able to commercialize this technology, giving them an advantage in the high resolution display market, but we expect the timeline for a viable commercial product is still some time away.

​DS Neolux (213420.KS) has purchased a $20m site on which it intends to build out its OLED material production.  The purchase of the $20m site will give the company the room to expand production by 3 times current levels by 2024.  As a primary OLED material supplier to Samsung Display (pvt), Neolux is expecting to capitalize on SDC’s continued expansion in the OLED space, as it produces a number of materials in common OLED stacks and has developed a number of these materials with SDC.  NeoLux currently supplies HTL (Hole Transport Layer) to SDC, along with green prime (HIL – Hole Injection Layer) and red host material and has supplied black PDL (Pixel Defining Layer) material to SDC for the Samsung (005930.KS) Galaxy Z Fold 3.  

The display production business is a difficult one with an almost infinite number of internal and external variables working for and against production goals.  With the obvious objective of producing the greatest number of panels possible at as high an efficiency as possible, there are trade-offs that must be made in order to maintain quality while still producing profits.  OLED technology calls for a more specialized fab, which in reality are two fabs.  The first in simplified form is the one where substrates are coated with OLED materials and encapsulated, while the second is the more conventional TFT production line that generates the electronics that trigger each OLED sub-pixel.  There are cases where these processes are done on the same substrate and ones where they are separate, but the coordination between both processes is essential to avoid bottlenecks.
To complicate matters further, not only are such fabs massive and expensive, but they must operate efficiently at all times or the financials of the fab will be compromised, so we broke down the numbers for a typical[1] 30,000 sheet/month Gen 8.5 OLED TV panel fab to illustrate the volumes and dollars involved:


[1] LG Display is the only producer of OLED TV panels currently with Gen 8.5 fabs in South Korea and China.

​We note that these numbers represent a fab that has full utilization and 100% yield, which of course, is theoretical rather than practical, although that is the ultimate objective of every fab manager.  A new OLED Gen 8.5 fab would likely start production at a low yield, which could be anywhere from 30% to 50% depending on the experience of the engineers, with relatively rapid yield improvements for experienced producers such as LG Display (LPL), but the sensitivity to yield at these unit volumes is quite large.  A 1% improvement in yield amounts to a $795,000 gain over one month, so fab managers are extremely interested in yield improvement, especially in the early days of mass production at a new fab.  
Panels are examined at a number of points during OLED panel production to reduce the number of defective panels that pass further down the process line, particularly the deposition stage where expensive emitter materials are added.  Before deposition this is usually done through an optical process, but each fab is different in whether they use AOI (Automated Optical Inspection) tools that are in-line or tools that are off line.  In-line tools must have TACT times that are compatible with production lines or multiple tools would be necessary to alleviate bottlenecks, or the fab can choose to ‘spot check’ by taking random panels off the line for inspection, a lower cost alternative but one that could miss less frequent defects.
The testing process becomes the most sensitive right before and right after the deposition of OLED materials, as pulling a defective substrate off the line before deposition is a major cost savings, and, albeit less so, poor deposition results would prevent the panel from incurring further cost, but the tests following deposition are more complex and require more sophisticated and expensive tools that deal with particular defects that are specific to OLED, some of which require a panel to be tested using a process that changes the characteristics of the OLED materials, which makes them unusable.  Fab managers have to weigh the cost of pulling a set number of panels out of the line and destroying them to facing the chance that customers will be facing a defective panel that went undetected. 
A research team at the Korea Institute of Science & Technology (KIST) have come up with a way to test OLED panels at an ‘intermediate’ stage, meaning after deposition but before encapsulation, that is not destructive.  Testing OLED panels using a contact method is destructive but necessary, while testing them using a non-contact (UV irradiation) is also destructive, so the ‘cost’ of testing OLED TV panels is a yield reducer but carries significant financial risk if the defective panels reach consumers.  The researchers at KIST have found a way to test for defects in OLED material deposition that uses terahertz waves that do not affect the materials themselves, particularly blue OLED emitters which age faster than other OLED materials, and is therefore non-destructive. 
Terahertz waves, which are an order of magnitude higher than the gigahertz spectrum used for cell traffic, can penetrate the very thin layers of OLED materials, but are stopped by thick substances, and can be used to create high resolution images of the interior of thin films without their destruction.  If the research is able to translate these results (Yeongkon Jeong, 2022) into a practical product, it would go a long way toward improving OLED panel quality without reducing yield, and while we don’t usually note such basic research, its non-destructive characteristics make it viable for examining thin films or ultra-small structures like Micro-LEDs and is therefore extremely relevant to the display industry, regardless of how it evolves over the next few years.

​We have mentioned the Chinese company Royole (pvt) a number of times over the past few years, in particular relating to folding displays, where the company was the first to release a development kit for a foldable device, beating out CE giants like Samsung Electronics (005930.KS) and LG Electronics (066570.KS).  That said, the company has not done as well as early expectations might have predicted and in our 4/422 note, we described some of the problems Royole was facing, including rumors that the company had been failing to pay worker wages starting last December.  Some of the wage arrears were paid in January, with the promise the rest would be paid after the New Year festival, which did not happen, however we have now heard that after some employees were told to ‘take a long vacation’ (three months), it seems that some workers have been paid missing wages.
The company’s only comment was that ‘funds would be received in batches’, with those employees that resigned without arbitration getting the first batch and those with arbitration having to wait for the 2nd batch.  The source of the funds however was not made clear, other than the remittance itself came from Qingdou Rouyu Technology,  a company established in August of last year (wholly owned by Royole), rather than the typical Hua Xia Bank (600015,CH).  It was noted that in March of this year Royole pledged a number of patents to Qingdao Urban Investment Engineering Construction Development (Group) Co., Ltd. and Qingdao Urban Investment Industrial Investment (Group) Co., both of which are controlled by Qingdao SASAC (State-owned Asset Supervision & Administration Commission of the State Council), whose obligation is to ‘perform the responsibilities mandated by the Central Committee of the Chinese Communist Party’, so one might imply that Royole is being bailed out by the government.
What seems to be a difficult time for Royole is made worse by the late 2020 announcement by the company that it was planning to build a $2.4b flexible OLED fab in Qingdao, which remained on the “List of Key Projects” by the Qingdao Municipal Government earlier this year, which is likely a massive financial burden, if it is still under construction.  Details on the fab’s status are sparse, although the original theory was that Royole’s ULT-NSSP (Ultra-low Temperature Non-Silicon Semiconductor Process) would allow the company (and potentially other Chinese OLED producers) to produce foldable OLED panels without paying royalties to foreign entities.  This was likely the impetus for the original project, but Royole’s lack of traction relative to their earlier products (they produced only 48,600 units in 2020 at their existing Gen 6 OLED fab) has made it difficult for the company to exist independently, as the company’s failed attempts to list in the US and China seem to indicate.
How much capital the local governments are willing to fund going forward is an open question and while Royole has raised ~$1.1b in 7 rounds over the last nine years (the last was in 2018 with a $5b valuation), we expect they will have to give up considerably more IP and ownership if they are to remain in business going forward.  As a private company we expect to see little financial or ownership information forthcoming, with much of what we know about the company coming from previous IPO filings, but we suspect local government organizations will wind up being the majority owners of the company if it survives.

​We have noted the ongoing negotiations between OLED TV panel producer LG Display (LPL) and Samsung Electronics that have been the fodder for headlines citing “Signed, Sealed, & Delivered” to “Still Very Far Apart” over the last few months.  As the days pass, it gets more difficult for Samsung to gain enough momentum to establish an OLED TV presence, with a Chinese firm indicating that it believes Samsung will not offer an OLED TV line this year, other than its own QD/OLED sets produced by affiliate Samsung Display (pvt). 
Citing a number of factors the Chinese firm RUNTO has lowered its forecast for global OLED TV shipments  from 10m units this year to between 7.9m and 8.1m, reducing its growth rate expectations from 53.8% to 23.0% based on 6.5m units shipped last year and also lowered its forecast for TV shipments overall from 219m to less than 210m units.  With the negotiations still not final, and TV panel prices moving further in Samsung’s favor, it gets progressively harder for Samsung to avail itself of the ~4m total OLED sets it needs to represent 10% of its TV sales according to RUNTO.  With expectations that Samsung Display will be able to produce between 750,000 and 1.4m QD/OLED units this year (We expect between 700,000 and 725,000 units – as per our 04-18-22 note) that would leave Samsung with the need for purchasing between 3m and 3.6m WOLED panels from LG Display this year to meet RUNTO’s 10% of total TV sales target. 
With RUNTO’s 11m unit expectations for LG Display’s WOLED panel production and using the same percentages purchased by LG Electronics, Sony (SNE) and other customers last year, leaving ~1.5m units for Samsung to purchase.  When added to the QD/OLED sets purchased from Samsung Display, the total of 2.25m to 3m units falls short of the 10% of TV sales RUNTO feels is necessary for Samsung to initiate an OLED line this year.  Based on that conclusion, the war in Ukraine, the COVID outbreaks and lockdowns in China, and inflation, the company makes the assumption that Samsung will not purchase WOLED panels from LG Display this year.
Again, these are not our assumptions or numbers but we present the concept as a possible outcome (one of many) that are possible given the current circumstances surrounding the display business.  While we do not agree with some of the estimates, not would we assume that unit volume share allocations would be identical to those made last year, the above is certainly possible, although such a decision by Samsung would put the introduction of the expected QD/OLED TV product in a different light.  As part of an overall OLED TV strategy QD/OLED can be offered as the ‘top tier’ of OLED TVs, while on its own it is more of a curiosity than a full product line. 
While we value the scenario noted above, we expect there are many more variables that play into the Samsung LG negotiations and delays have been working in Samsung’s favor.  If Samsung can negotiate a long-term unit volume based contract with LGD at a lower price than late last year, it would serve them well over the next few years, and if that means postponing the full OLED line this year, we expect Samsung’s TV marketing department will find another hook to attract customers during the holiday season.  Regardless, it is interesting to hear what is in our mind a more radical view of the situation, rather than the daily “We know the answer” headlines that tend to appear after an influencer speaks with a low level supplier...

Universal Display (OLED) reported 1Q results of $150.47m, up 2.9% q/q and up 12.3% y/y (typical 1Q is down 11.3% q/q on a 5 year average), which was above consensus of $144.5m and our $123.7m base expectation.  Material sales grew 1.1% q/q and 8.6% y/y while royalty/license revenue grew 6.8% q/q and 17.5% y/y, with overall margins flat q/q at 78.0% but down from 82.6% one year ago, although consistent with the last three quarters.  EPS was $1.05, ahead of $0.98 consensus, up 7.2% q/q but down 3.6% y/y.  UDC finished the quarter with $17.67 in cash, ST and LT investments ($17.36 in 4Q 2021)..
While this was a relatively uneventful quarter for UDC, primarily reflecting continued adoption of OLED across a wide variety of CE display based products, the company indicated that while they have not seen the effects of Chinese COVID lockdowns, continuing inflation, or similar economic headwinds from their customer base, they do acknowledge that such issues are affecting the CE space and could change customer plans.  That said, they reiterated previous full-year guidance of $625m to $650m.  One point of note in recent quarters has been the decline in emitter material gross margins, which while relative stable in 1Q, have declined from 72.8% in 2019 to 67.2% last year.  Contributing to that decline has been a need to carry higher inventory levels and increasing raw material costs, a portion of which is iridium a key part of phosphorescent emitters, which saw a five-fold price increase last year.   While iridium has come off its peak in 3Q last year ($6,100+) and reached as low as $3,850 in 4Q ’21, it is now back up to ~$5,000/oz., indicating that volatility in UDC’s material margins will likely continue.  While this seems to be a concern to others, we believe the general stability of material margins (63% - 67%) is more important than returning to levels seen in pre-pandemic days until global inflation is brought under control, especially as material sales continue to grow, which will give UDC more leverage toward iridium purchases as the material returns to less lofty levels over time.

On a regional basis South Korea continues to hold the largest share of UDC’s revenue at 60%, essentially flat during 2020 and 2021, while China has grown from 32% to 35% since 2019.  Sales to South Korea were $90m and UDC’s ‘Customer A’ and ‘Customer B’ represented ~$100m in sales so we can assume that A & B were Samsung Display (pvt) and LG Display (LPL).  China represented ~$55m in UDC sales and ‘Customer C’ and ‘Customer D’ represented $33m, likely representing BOE (200725.CH) and Visionox (002387.CH).  UDC’s top four customers represented 89% of material and royalty/license sales in 1Q which is consistent with the last two years, along with the ratio of material sales to license/royalty revenue, which was 1.45, in line with last year’s average of 1.47.

Material sales are the key to UDC’s business, and since the adoption of ASC 606 material sales ‘regulate’ the recognition of license/royalty revenue, but that aside, we look closely at the long-term growth of both red and green emitter sales to gauge the growth in overall OLED device area.  While there are subtle changes in material efficiency, formulations, and quarterly buying patterns, red emitter and green emitter is used in every RGB display and yellow/green is used in most[1] OLED TV displays so they are certainly data points in understanding the growth of OLED in the display space, with both having remained above trend line for the last 5 quarters.
There are a number of potential OLED fab projects under consideration that will likely have an impact on UDC’s long-term material sales should they become actual production lines.  Samsung Display, LG Display, and BOE are also considering building Gen 8.5 OLED fabs to better serve the newest OLED application, IT products, and while these will likely not be in production until late 2023 at the earliest, even in their phase one states they will represent a significant boost to overall OLED capacity, and given UDC’s lock on phosphorescent OLED emitter materials and its existing relationships with all OLED producers, we expect there will be another leg to the OLED growth story as OLED IT product demand begins to grow over the next few years..  There will be competition from other display technologies but OLED has established itself as a viable display prpduction process and with the infrastructure already in production will likely have the same staying power as LCD has had over the last twenty+ years.


[1] Samsung’s QD/OLED display does not use yellow/green emitter.

​Much of the Q&A was related to the company’s previous statements concerning the development of a blue phosphorescent emitter and host system, which the company reiterated this quarter.  There is considerable significance to such a development, although UDC is not alone in its efforts toward such a material.  Some additional color on the project was given in that the company expects to meet technical targets[1] by the end of this year and might see some revenue from such a product at the end of 2023, although real revenue generation from a blue emitter system will be in 2024. 
As we would expect there is considerable interest in the development of a phosphorescent blue emitter as it would improve OLED stack characteristics and increase power efficiency, but more toward UDC’s interests would be the addition of a 3rd material revenue stream for RGB displays.  We note also that the license agreement and material supply contract UDC has with its first and sometimes largest customer, Samsung Display (pvt), does not include blue emitter material, which would imply an additional or supplemental agreement between the parties when blue emitter material becomes commercially available.  As UDC is working directly with its customers on the development of a blue phosphorescent emitter, since they will ultimately decide whether it is ready for commercial use, we expect early revenue would likely be in the form of ‘developmental’ emitter sales, as management noted might show in 2023, with full scale commercial product in 2024.
UDC’s Organic Vapor Jet Deposition development project is also progressing with 23 employees at the end of 1Q working toward putting together the key subsystems necessary for an alpha system that will serve to verify the technology’s ability to scale.  An actual commercial product is still a few years away (we would expect a pilot system in 2024 and a gen 6 commercial product in late 2025 or early 2026) although competition from a number of different deposition technologies continues to pressure the development of such a tool.  In the interim we would expect a cost burden between $1.2m and $1.6m per year.
All in, 1Q 2022 was a good quarter for Universal Display, both from a financial standpoint and an emotional one.  There was little to explain on the conference call, as the issues facing UDC’s customers are well known to investors.  More to the point is whether the growth in OLED display penetration can offset the weakness that is expected to continue in CE product demand.  While the LCD display business has been on the positive side of the scale during the COVID-19 pandemic, we are slowly moving back to a more normalized demand cycle in the CE space, where competition for consumer dollars will no longer be related to how fast a producer can get a product on shelves, but more does it provide enough incentive for the consumer to shell out dollars with less buying power than two years ago.  While LCD manufacturers extol the progress made in their space over the last few years, OLED displays are still considered the best technically, and while there will be issues with every display technology, OLED has become embraced by CE brands as a way to raise the quality of CE products.  Given that UDC is in the unusual position of being a ‘window’ into the OLED space, the company should be a focus for any technology investor.  Of course, valuation is absolutely up to the individual…


[1] Typically those targets are material efficiency, color point, and lifetime.  While UDC likely has a good idea what minimums are necessary for a commercial blue emitter/host system, each customer has its own targets, which makes the adoption timeline particular to each customer.

Samsung Display (pvt), the display production arm of parent Samsung Electronics (005930.KS), was part of a decision made back around 2013 not to pursue OLED technology for TVs.  SDC and Samsung Electronics were both convinced that the RGB OLED process, which patterns red, green, and blue OLED sub-pixels in each pixel, could not be adapted to the larger panel sizes necessary for TV displays.  LG Display (LPL) took a different view, and championed WOLED technology for its OLED TVs, which used layers of OLED material that were not patterned, and added a color filter to define the red, green, and blue ‘dots’ that made up each pixel.  While the WOLED process allowed for the production of large OLED panels, the color filter reduced the amount of light reaching the user, an issue that LCD technology proponents still cite today.
Samsung Display has gone on to become the preeminent RGB OLED display producer with what we believe to be a 70.5% share[1] of the small panel OLED display market, which itself has grown from ~7.5m units in 2014 to ~620m units last year, and while this represents ~50% of the overall mobile phone display market, RGB OLED displays have been primarily limited to smartphone, tablet, and watch displays.  In 2019[2] however, SDC began mass producing OLED panels for laptops which are now being used in a variety of models by popular laptop brands, and other small panel OLED producers are beginning to see this as an area where they might want to compete with SDC.  As is typical for Samsung, they are technologically the leader in the OLED laptop display space and continue to expand offerings, with 13 of the 15 OLED laptop display models that are available made by Samsung Display (2 from Everdisplay (688538.CH)) and they are also the leader in promoting the technology for laptops, which has led to its adoption by major laptop brands.
While Samsung Electronics produces both OLED and LCD based laptops, only Samsung Chromebooks use traditional LCD displays, with the entire Samsung laptop line based on OLED displays produced by SDC, and as such Samsung Display is happy to promote the concept and quality derived from using OLED rather than LCD in a laptop format.  SDC recently summarized those advantages in a series of pictures comparing images from both types of displays which have been translated and show below.  We note that the translations might be lacking occasionally, and SDC, while primarily accurate in its statements, has likely picked examples that do not reflect LCD technology in its best light, akin to the Nick Nolte arrest photo in Figure 1, but isn’t that what promotion is all about?  All in, while OLED displays for laptops are more expensive than LCD displays (the reason Samsung uses LCD for its Chromebook line), they do provide higher quality images that users will eventually demand, as they have for smartphones.  Its takes time for the industry to make the migration and we are still in the early stages where consumers have to be educated as to OLED display technology’s advantages, but it will happen in laptops, just as it did in smartphones.


[1] 2021 full year units volume

[2] Small quantities of OLED laptop displays were produced in the 3 years prior to 2019 but were not in mass production.

“estimate” – to roughly calculate or judge the value, number, quantity or extent of…  We try to maintain our own estimates whenever possible and in cases where that is not the case, we try to aggregate as many data sources into a more comprehensive model to mitigate outliers and inconsistencies.  That said, we also like to check our data against others, particularly in areas where there are relatively few data sources or the particular area is subject to excessive politicization or hype.  While small panel OLED production has become relatively commonplace in the display industry, most OLED display producers are less than open about production and sales data, leaving much open to speculation and potential enhancement.  Given that China is known for its ‘glorious’ representation of its technical prowess and its desire to dominate as many aspects in the technology space as possible, we are always a bit wary of statistics that proclaim China’s dominance (or pending dominance). 
CINNO Research (pvt), based in Shanghai, provides data on consumer electronics which is regularly picked up by Chinese technology rags.  In many cases the data is shaded (not by CINNO) to show China’s potential as a technology giant, so we decided to check our data against some of the promotional articles we see from China on a daily basis.  Here’s what we found:

​After reviewing both our data and the CINNO data, we notice that our data is actually more favorable to the idea that Chinese OLED display manufacturers are gaining ground against manufacturers from ‘other’ (meaning Samsung Display (pvt)) countries, and while our data does not go back as far as that of CINNO, we note that their earlier data (1H 2018 shows Samsung Display’s share at 93%, which would indicate that they have lost over 20% share over the last 2½ years.  That said, when the data is parsed on a quarterly basis Samsung Display’s share over time looks worse, declining from 93% in June of 2018 to 70.2% in March of this year, but even with the enormous growth rate seen by BOE (200725.CH) during the same time period (1868%), SDC still produces over 6 times the number of small panel OLED units than BOE.
While our data leans a bit more to the Chinese camp, we believe it will be quite a while before BOE and other Chinese small panel OLED producers will dominate the OLED business, despite the headlines in the Chinese tech press based on recent CINNO data, and we expect that despite the increased volumes shown for BOE, they are less profitable than SDC, given the advanced displays that SDC is able to produce, which would only be factored into sales values, not unit volume.  But the data does show that any display producer that stands still technologically might gain share during up cycles but will likely see profitability fall quickly during the down cycles, both of which are inevitable in the display space.
 

​China’s Tainma (000050.CH) has set a timeline for its new Gen 8.6 LCD fab project that it is building in  Xiamen.  This follows the recent early production runs at its T18 OLED fab also in Xiamen.  The new project is expected to cost $5.16b, of which Tianma has contributed $464m for a 15% direct stake, and will have a capacity to produce 120,000 Gen 8.6 (2250mm x 2600mm) panels/month.  The project is expected to reach the piling (basic construction) stage during the 2nd half of this year and the main building is expected to be capped a year later.  Phase 1 production is expected to start in 2H 2024, although no timeline has been set for phase 2 development, which we assume will mean that 60,000 sheets/month will be built out for phase 1.  We expect the project will develop both LTPS and IGZO backplane technology and will be oriented toward the production of IT and automotive panels, at least that is the current intention,
While Tianma is best known for its small panel production, both LCD and OLED, the company lacks the Gen 8 capaity that is needed to efficiently produce large panel displays.  That said, given the vast resources of other Chinese competitors, and the potential for over capacity across the large panel display industry, it would seem somewhat ill advised to be building out new Gen 8 LCD capacity at this point in the cycle.  That said, we expect that Tianma’s management is more concerned with their ability to provide what their customer base is asking for or what they believe they will be asking for in the future, without regard for the impact on the overall LCD display industry or China’s exposure to a potentially extended weak profitability cycle for China’s display segment.  There is little chance, in our view, that management has put such a perspective ahead of a desire to gain share against competitors and generate what it believes will be new revenue sources, but we expect the outcome of the project will be to generate incremental sales but at relatively low profitability.  It’s a long way t 2H 20224.

​LG Display (LPL) has picked up a second customer for its foldable OLED displays, said to be supplying same to Hewlett Packard’s (HPE) 17” 4K foldable device expected late this year or early next, and will begin production in 3Q.  Unit volumes are expected to be small, but represent a 2nd foldable OLED display customer for LGD.  The company previously supplied foldable panels to Lenovo (992.HK) in 2020.  LGD displayed its 17” foldable 4K panel at CES earlier this year.  Polyimide cover film is expected to be used on the display, which will be supplied by SK IE Technology (361610.KS), a local material supply firm that is part of SK Holdings (034730.KS), a major energy conglomerate in South Korea.  It is said that SK IE bid 50% lower than competitors to win the project as the last project for which it supplied such material was for China’s Royole (pvt), whose volumes never improved and is now facing financial difficulties.