​As we have noted, Samsung Display (pvt), LG Display (LPL) and most recently China’s BOE (200725.CH) have been working toward developing the technology necessary to produce IT OLED panels on larger substrates, moving from Gen 6 sheets, which are 2.78 m2 to Gen 8.5 sheets, which are 5.5 m2 to increase the efficiency of the process.  Recently is seems that other OLED producers are also looking to make such a change, although we believe the motivation and potential for success are different from those producers mentioned above.  Visionox (002387.CH) has been the name most often mentioned as a potential developer of such technology, although we have our doubts as to whether such stories are anything more than self-promotion.
As OLED display technology migrates to larger devices, OLED deposition technology comes up against some roadblocks, the largest of which is the use of fine metal masks that force gaseous OLED materials to form the pattern on substrates that become pixels on a display.  These masks are made of a nickel/iron alloy that is able to remain stable under the heat and high and low pressures found in OLED deposition equipment, as it is absolutely necessary that the FMM ‘screens’ keep the OLED materials in perfect order and spacing during production.  While the FMM are designed to handle heat and pressure they must also react to gravity, which can cause them to sag and misplace pixels, causing a panel to fail.  While this is not a problem for small OLED displays, such as those used in watches and smartphones, as the displays and masks get larger, such as might be the case for notebook or monitor panels, the effects of gravity get worse and yield management becomes more difficult.
Currently the number of OLED displays produced for IT products is relatively small when compared to smartphone production, but that is expected to change over the next few years with OLED adoption increasing for such products, which makes solving the production issues with larger OLED panels all the more important.  It is especially important to SDC, LGD, and BOE, all of whom are OLED display suppliers to Apple (AAPL), who is expected to continue to migrate more display based products to OLED.  Each of the three has been working toward find solutions that will improve OLED IT panel yields, each with their own ‘slant’ to the problems, but with each knowing that they have the ‘ear’ of Apple as they progress.  Visionox however is not a supplier of flexible OLED panels to Apple, with Chinese brand Honor (pvt) their biggest OLED display customer, along with Xiaomi (1810.HK) for whom they produce OLED watch displays.
To give some perspective in 2021, Honor purchased ~24m OLED panels, and while that might sound like a large quantity, it represents ~3.9% of the OLED display market (unit volume), and while Xiaomi has a larger share (~13.9%) given the size of OLED watch displays relative to smartphones or OLED IT panels, it represents only a small amount of small panel OLED industry capacity.  Apple however purchased ~184m OLED displays last year, most of which went toward iPhone production, giving them a ~29.6% share of the overall small panel OLED market, which is why the three mentioned above are working so hard to solve OLED IT production issues, especially under the assumption that Apple will continue to expand OLED penetration among its IT products.  While all three OLED producers are taking R&D risk and potentially large capital risk, the goal of becoming a primary supplier of small panel IT OLED products to Apple is in their headlights.
That said, it is not the same for Visionox, who would have to get qualified as a primary small panel OLED supplier at Apple before they would even have a shot at competing with SDC, LGD, or BOE for Apple’s incremental OLED IT business, so why would they circulate such stories?  Industry folk, and we certainly can see their point, infer that it is to garner support from the Chinese government in the form of subsidies.  Much of the early construction costs and operating expenses for panel producers in China are paid for through provincial or city-based subsidies that can defray construction costs that might normally be prohibitive, allowing Chinese producers to grow more quickly than non-subsidized producers, and during the early years of operation, those subsidies can offset low yields and low utilization rates for Chinese fabs.  As China has already become the capacity leader in LCD panel production, government organizations are want to give subsidies for such capacity, but a challenge to incumbent OLED leaders like SDC and LGD can still garner local government financial support, giving Visionox the hope that by dangling the idea of building out capacity to challenge others for Apple’s OLED IT business, they might set the wheels in motion for potential government help.
Visionox is said to be testing the OLED IT waters at its V3 Gen 6 fab in Hefei to work through production issues, and then would build a new Gen 8.5 OLED line in another location.  The V3 fab is being built in two phases with “the 2nd phase promoted in a timely manner” according to the company late last year.  Perhaps additional financial support is being hinted at for the phase 2 construction and equipment, which we had expected to be completed later this year, although not oriented to IT panel production.  If Visionox is able to solve the necessary IT OLED production issues on the V3 phase 1 line, it would encourage funding sources to push forward with phase 2 and potentially add a new Gen 8.5 fab designed specifically for IT OLED panels.  By indicating that there was potential for a new Gen 8.5 OLED fab to be built, the company can begin selling the idea to city leaders in other locations to see if funding is available and hopefully create a bidding war, similar to what occurred when Samsung was looking for a new silicon fab location in the US.
There is a lot of speculation here, but certainly not any that has not been seen by us over the years in the display space, so while we don’t like to speculate, the Visionox story has many similarities to others we have heard over the years, and feels as if we have been to this rodeo before.  We could be wrong, with Visionox much further along with Apple or the technology needed for IT OLED production, but we are less sanguine about the idea knowing that Visionox only grew their share of the small panel OLED market from 4.7% in 2020 to 4.9% in 2021, while Samsung Display and LG Display’s real competitor BOE grew its share from 7.3% in 2020 to 10.0% last year, which amounted to a 66.9% increase in unit volume y/y.  Without a very dedicated customer base already established, we expect it will be necessary for Visionox to win a few more games before they build ‘it’, especially knowing who ‘they’ are.

Samsung Large Panel LCD Phase Out
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Samsung Display (pvt) has been working toward ending its production of large panel LCD displays for a number of years and is now likely to close its last remaining large panel LCD production fab this year, likely by the end of 2Q.  Samsung Display’s decision to shut down large panel LCD pricing began a number of years ago as a result of the competition from Chinese LCD panel producers, who were both extremely aggressive in building out large panel capacity and had the backing of the Chinese government, who saw the necessity to change the balance of power in the display business from South Korea and Taiwan, who had long dominated the large panel LCD display business.  At the same time Samsung Display found itself the dominant player in the small panel OLED display business, with its parent Samsung Electronics a very strong supporter of OLED technology for small panel devices, and from the standpoint of profitability, SDC could make a higher return on small panel displays on a m2 basis than it could on large panel LCD displays.
In 2016 SDC began converting some of its older Gen 7 LCD capacity to OLED and in 2017 shut down additional older fabs in South Korea, sold equipment to Chinese panel producers, and leased the facilities to affiliates.  As SDC added small panel OLED capacity it found interest continued to build for small panel OLED displays with Apple (AAPL) releasing its first OLED iPhone, the iPhone X in late 2018.  Firmly convinced that Chinese large panel LCD producers would continue to build capacity regardless of short or mid-term demand, SDC continued to push forward with its large panel reduction plans, culminating in 2020 when it sold its remaining large panel LCD plant in Suzhou, China to Chinastar (pvt) for over $1b US.
SDC has been converting its larger (Gen 8.5) LCD fabs in South Korea to OLED over the last two to three years to small panel OLED and one for its new QD/OLED large panel production line, and has additional idle capacity for QD/OLED expansion should the technology become in demand.  What remains is SDC’s last large panel line in Asan, South Korea, and that was kept open at the request of parent Samsung Electronics when large panel prices increased as the COVID-19 pandemic began to spread.  While the operation of the fab was likely profitable for Samsung Display during the large panel price increases that began in July 2020, those prices peaked a year later and have fallen quickly to pre-pandemic levels.
This puts SDC back in the same position it was in in 2020, that of competing against the Chinese in the large panel market, and likely making only a small profit or no profit while doing so.  As the aggregate price of TV panels is only 7.5% above the lowest point during the last 5 years, SDC sees little need to continue to compete in that business and will likely end that last production fab this year.  Samsung Electronics buys all (other than what it still gets from SDC) of its TV panels from other suppliers and while faced a difficult times during the pandemic related price increases, is now taking advantage of the price declines, without the burden of the losses at SDC that such declines caused in the past. 
While there will always be large panel LCD price cycles, Samsung Electronics can use its buying power to exert price pressure on outside panel producers, who clamor for Samsung’s business to fill their capacity, while SDC operates in the OLED world that has completely different demand characteristics.  While it has been a bumpy road over the last year for both Samsung and Samsung Display, the logic behind SDC’s original decision to exit the large panel LCD space seems to be proving out, leaving them little need to remain in the large panel business.
 

We have noted recently that Samsung Display (pvt) has had differing opinions about an OLED technology called ‘tandem’ or ‘dual stack’ structure.  In typical smartphone OLED displays the OLED materials, particularly the emissive OLED materials are arranged in layers between an anode and a cathode, with three (Red, Green, Blue) sub-pixels making up a single pixel that can display millions of colors by varying the mix of the three.  The key process for producing OLED displays is deposition where the materials are heated in a vacuum until they vaporize and then settle on a substrate after passing through a mask that patterns them into sub-pixel ‘dots’.  In an OLED display a backplane of thin-film transistors (TFT) control each subpixel by providing a ‘push’ that causes the materials to produce light and create a full color image.
OLED materials are relatively complex and are continually being developed to increase their efficiency and light output, but said materials have some limitations such as a point at which applying more ‘push’ does not generate more light and can degrade the materials more quickly.  This limits OLED display ‘brightness’ relative to non-emissive displays that use a backlight to generate brightness, which has led some to criticize OLED display technology as ‘not bright enough’.  While new OLED materials continue to push those limitations, a number of OLED panel producers have been developing a new OLED structure that places two OLED stacks on top of each other, creating a brighter display, but there has been some controversy among suppliers as to whether this approach is a viable one for OLED displays.
LG Display (LPL) is the only OLED display supplier to have the production capabilities to produce such tandem OLED displays and uses them for automotive displays that must meet strict brightness specifications, however Apple is looking to incorporate such an OLED solution in products in order to quell potential brightness issues in a number of its products, particularly tablets and laptops.  As Apple’s largest OLED display supplier is Samsung Display, SDC was charged with developing a dual-stack OLED 11.9” display for a potential iPad product but said project was cancelled in 3Q last year, reportedly as SDC could not find a way to produce such a display economically given the additional process steps and process modifications needed for the new structure.  However, as we recently noted, SDC decided to get back into ‘Dual Stack’ development, likely as China’s BOE (200725.CH) has indicated that it is modifying some of its OLED capacity to produce dual-stack displays.
But all is not rosy even for BOE, who has recently become a 3rd supplier of OLED displays to Apple after an arduous qualification process., as there is another aspect to Apple’s desire to implement a tandem stack OLED structure in future products, and that is the backplane that controls the OLED pixels.  There are two competing control structures that are used in OLED displays, LTPS (Low Temperature Polysilicon) and LTPO (Low Temperature Poly-Oxide), with the former the most common.  LTPO however is Apple’s choice for its premium iPhones and will likely push to expand LTPO’s use across more products as it requires less power, improving battery life in mobile devices.  Samsung Display has been Apple’s primary LTPO OLED display supplier, with LGD beginning to compete in that arena, but BOE does not have sufficient LTPO capacity to provide a dual stack device using LTPO in the quantities needed by Apple. 
According to South Korean trade press, BOE was in talks to supply a tandem OLED display to Chinese smartphone brand Honor (pvt) but rejected the brand’s request for that device to also incorporate LTPO under the theory that while the dual-stack structure could reduce the power consumption of the device by 30%, the application of an LTPO backplane would not add enough additional power savings to make it worthwhile to produce.    On the surface that seems plausible however given BOE’s lesser experience with LTPO production we expect the allocation of resources to building out their LTPO production and their dual stack initiative might have proved to be a bit more than BOE was willing to take on, particularly as the dual stack structure requires two deposition lines instead of one or a 50% reduction in capacity if the same deposition line is used for both stacks.
Apple is certainly a demanding partner to display producers but with unit volumes at or near the top of the industry and a willingness to pay a premium for cutting edge technology, the company represents a massive source of revenue over time, albeit not without risk and/or cost.  If Samsung Display was willing to change their mind about a dual stack structure, likely at Apple’s behest, than we expect BOE might also decide that the opportunity is too lucrative to miss sometime in the near future, especially as Samsung Display is not the leader in tandem OLED structure production, as they are in most other OLED display production modalities.  We are still in the early stages of this horserace.

As we noted in our 9/29/21 note (“Walking the Tightrope”), Samsung Display and its largest ‘unrelated’ customer Apple (AAPL) do not always agree.  In that note we detailed a conflict between the two over how a potential Apple OLED product would be structured, with Apple wanting what is called a ‘dual stack’ or ‘tandem stack’ configuration developed, while Samsung Display thought a single stack OLED display would suffice.  At the time it was indicated that SDC had walked away from the development of a 10.86” dual stack OLED display reportedly for a new iPad, leaving Apple to find other suppliers who were willing to follow Apple’s guidelines.  It seems that SDC has changed its mind about the idea of a tandem stack structure and is now working toward the development of such a design to woo Apple back to the fold.
SDC’s reluctance comes from the fact that developing a dual stack OLED structure is not as easy as placing two stacks on top of each other, but has some inherent issues that make it more complex and more costly to produce, including a number of changes that would have to be made to existing production lines.  What might have spurred SDC into returning to such development is the fact that local competitor LG Display (LPL) has production capabilities for a dual stack OLED architecture and that China’s BOE (200725.CH), newly qualified as an OLED supplier to Apple, has been making modifications to its B12 – P3 line that would allow it to produce such tandem OLED displays.
Without taking a deep dive into the details, the problem facing tandem stack OLED structures is that the material connecting the two OLED stacks, called a charge generation layer, which allows both ‘stacks’ to be triggered at the same time, must be of a very precise thickness and material composition.  A thin CGL will cause the two stacks to be out of sync, which could cause a cancellation effect, while a CGL that is too thick causes an electrical field that can spread the light from the structure in the wrong direction.  As the whole purpose of the tandem stack structure is to create a brighter display (or a normal display that has a longer lifetime), either alternative works against the process.  While it was SDC’s original contention that the development of such a display would not be feasible at a reasonable cost, it seems that business over science is the winner here, and that SDC’s scientists and engineers have been told to make it work.
SDC is expected to be using a new material stack (‘T’) for this project, different from the updated material set (M12) as described in our 2/25/22 note, with that material set going into production next year and an updated (‘T2’) set in 2024, but such development timelines are certainly subject to change and Apple’s acceptance of the new materials could extend that timeframe, although we expect SDC to pitch the T1 or T2 stack to parent Samsung Electronics (005930.KS) for use in its tablet line in the hope that such a deal would justify the cost of modifications and give SDC additional production experience before any Apple product release.  All in, while it was surprising to hear that SDC had cancelled the development project earlier, the fact that there are two potential competitors who are willing to go the distance for Apple, makes it far less surprising that SDC has changed its mind.

​Apple is a fan of LTPO (Low-temperature Poly-Oxide) backplane technology, a process that uses materials from both LTPS (Low-temperature poly-silicon), a common backplane technology, and LTPO.  By combining these materials and processes, panel producers can change the characteristics of OLED displays, allowing them to function at a 120Hz refresh rate.  With the screen be ‘repainted’ twice as often as usual, the chance that an image might blur as it moves across the screen is lessened, however at the same time the double refresh rate creates addition power consumption.  In order to compensate for this, LTPO can provide a lower overall power drain, and helps to keep the higher refresh rate displays from draining the battery.
That said, there are few panel producers who have the ability to produce displays with LTPO backplanes, and that limits those who wish to take advantage of 120Hz refresh rates to a small number of display producers, primarily Samsung Display (pvt), who is the leader in the space.  LG Display (LPL) also produces LTPO displays but in a more limited capacity, leaving Apple little choice but to use South Korean suppliers for its LTPO needs, with both the iPhone 13 Pro and the iPhone 13 Pro Max using the technology.  As we have noted previously, China’s BOE (200725.CH) has passed muster as a primary display producer for the iPhone, but is limited to producing LTPS displays (iPhone 13 currently) until it is able to get qualified for LTPO display production by Apple, which has yet to happen.
In the interim, China’s Visionox (002387.CH) has announced that they have launched China’s first LTPO OLED display and expects to see the display in new phones ‘soon’, putting them both in competition to garner attention from Apple and to compete with BOE, SDC, and LPL.  As BOE discovered, it can take quite a while to get through Apple’s intense qualification process, which not only considers the quality of the technology but also the ability to produce a stuffiest quantity for inclusion as a full supplier, and that means a yield that can be difficult to reach.  Visionox, while they will certainly push to develop customers on the Mainland, will have to begin the qualification process with Apple now that they have a commercial product, which can be both difficult and could require at least some capacity to be dedicated to such a project.  With that goal in mind we expect Visionox will make such an attempt although they have relatively small OLED production capacity (line in Hebei, Hefei & Kunshan) when compared to BOE and South Korean producers, so it could be some time before they would have the dedicated capacity needed to be a primary LTPO supplier to Apple.  As BOE faced a number of qualification disappointments that were regaled in the trade press, it might be best for Visionox to work with Chinese smartphone brands for a time rather than take the big step toward Apple.

​The layers of materials used in an OLED display are quite thin, with key layers as thin as 10nm, but when those materials are used in hundreds of millions of devices, those thin layers add up.  Suppliers of materials for OLED stacks are constantly vying for a place with key OLED display producers, Samsung Display (pvt) being the largest.  SDC changes it stack materials when it can see an appreciable change in stack performance, as such changes can spark considerable design and process changes and require requalification with customers, a time-consuming task that can have a number of iterations.  That said, a win can lead to considerable revenue and a (hopefully) long-term relationship with producers.
While there are a few stack materials where there is only one supplier, usually a material ‘helper’ that increases the effectiveness of a key stack material, a number of OLED materials see considerable competition, particularly those that are not in the emitting layer, as both red and green phosphorescent OLED emitters are licensed and produced only by Universal Display (OLED), while emitter ‘host’ material in which the emitter is ‘doped’ are produced by a number of suppliers.  As new stacks are developed by OLED producers material suppliers submit their latest materials for evaluation, with the intention of becoming or remaining a supplier of as many materials as possible in each new stack.
As we noted recently, Samsung Display will be updating its OLED stack later this year (M12) and there are already a few changes or additions to stack material suppliers.  While we cannot confirm all material suppliers yet, there are a few that we believe are confirmed, and a number that we believe will be confirmed eventually.  In the diagram below we show the typical OLED stack layers for Samsung’s most recent RGB OLED stacks (M10, M11) and M12 which will be adopted this year.  Those suppliers that we can confirm in M12 are in black.  Those that we believe will be chosen but have not confirmed are in red, and we note also that where multiple suppliers are listed, there is the possibility that a supplier for one SDC customer might be different from a supplier for another customer.  We thank UBI, The Elec, and a number of suppliers for their contributions to the graphic.

​OLED stack materials are likely a bit too esoteric for most investors and rightly so, with names like Tris[2-phenylpyridinato-C2,N]iridium(III) or Bis[2-(1-isoquinolinyl-N)phenyl-C](2,4-pentanedionato-O2,O4)iridium(III), such materials likely remind most of High School Chemistry and the embarrassment of not being able to define a co-valent bond when asked, but in some cases those materials can be quite important.  Not only do the materials in an OLED stack make a difference to the display, but they are key to a number of companies that produce and license those materials, such as Universal Display (OLED), NEolux (213420.KS), Hodogaya Chemical (4112.JP) or Idemitsu Kosan (5019.JP).   
OLED stack composition differs with each producer and there are a considerable number of subtleties that go into stack structure and the materials used for each category, but the most important is the emitters, those materials that produce the light that illuminates the display.  There are a number of types of emitters, but the broad categories are fluorescent and phosphorescent, with all but blue emitter material being phosphorescent.  Phosphorescent OLED emitters produce 3 times the number of ‘excitons’[1] as fluorescent OLED emitters and are therefore able to generate significantly more light, but are not available in blue, which makes the RGB (Red, green, blue) OLED stack one with red and green phosphorescent OLED materials and a blue fluorescent material.  Universal Display holds the IP for the use of phosphorescent OLED emitters based on a  number of heavy metals, and all commercial OLED producers use UDC’s phosphorescent OLED emitter materials and licenses same.
This gives UDC a considerable amount of leverage in OLED emitter pricing, but at the same time must maintain long-term supply relationships with its customers, particularly Samsung Display, LG Display (LPL), and BOE (200725.CH).  As part of those relationships, UDC develops new phosphorescent OLED emitter materials that it presents to its customers for evaluation, with the hope that these new phosphorescent emitter materials will be incorporated in the customer’s next OLED display stack iteration to improve the display.  But there is a bit more to the process, and that is phosphorescent OLED emitter pricing.
When a customer agrees to be supplied  by UDC the specific materials under the agreement are priced at an initial rate/kilogram and a schedule is derived that sets volume based points at which the price of the material declines until it reaches a ‘terminal’ value at which point it remains, so profitability for UDC, and likely other stack material suppliers can be dependent on the ratio of ‘new’ Phosphorescent OLED emitters the company sells relative to how much ‘old’ material the company sells, as each new material purchased sets that material’s price point back to the higher level and starts the price declination process again.
Given that in most quarters Samsung is UDC’s biggest customer, we pay attention to any information concerning Samsung Display’s plans for changes to its OLED stack as they correlate, at least to a degree, to a portion of UDC’s emitter material sales, and while it is difficult to decouple the various OLED stacks that SDC uses for each of its smartphone displays, we note that those changes can be part of the cause and effect that push UDC material sales in a particular direction.  A successful Galaxy smartphone using a new stack can generate incremental material sales for UDC, while the long-term use of an older stack material set could generate less. 
There is of course, a balance between a low volume product like the Samsung Galaxy Fold series that will likely update stack materials each year and lower price tier Samsung OLED displays that use older OLED emitter sets but generate higher volumes, so changes to SDC’s OLED stack materials can influence material suppliers and this year it seems that SDC has decided to upgrade stack materials in some models and not in others.  The Galaxy S21 used the M10 stack set and it looks like the Galaxy S22 will use the same, while the Galaxy S22+ will be updated from last year’s M10 stack to the newer M11, resetting the price, although surprisingly the Galaxy S22 Ultra, which has become a replacement for the Galaxy Note series which Samsung has discontinued, will not be upgraded from the M11 stack to a new emitter material set.
As this is the top of the Galaxy S Series, SDC is likely trying to contain costs against the rising cost of silicon and components to maintain the price of the S22 Ultra at last year’s level while maintaining margins.  In theory this could have some impact on UDC’ material sales this year, but would likely be a relatively small influence against and upgraded stack for Samsung’s foldables and the next iPhone iteration, which is also expected to see a new material stack.  We also take into consideration the expansion of LG Display’s OLED TV unit volume and BOE’s increased OLED display unit volume with Apple (AAPL) this year, so we expect any SDC material sales imbalances will be short-lived or barely perceptible, but we will know more tonight when UDC reports 4Q results and (hopefully) give guidance for 2022.


[1] Quasi-particles that releases light energy (photon)  for a short period before returning to a normal electrical state.

​As we noted on 11/15/21, Samsung has some aggressive targets for its smartphone line next year, and as part of that plan, it targets 13m foldable phones to be shipped, up from the 7m expected this year.  While Samsung Display (pvt) has the capacity to produce the required units for its parent, it also expects to ship an additional 5m units to other customers, a target of 18m units, however the panels produced by SDC need to be assembled into modules before being shipped to customers, which takes place at the company’s module plant in Vietnam. 
With the Vietnam module plant capacity at between 17m and 18m foldable modules/year, even running at full capacity the foldable module assembly process would be the bottleneck facing SDC’s foldable display shipment plans.  To that end, SDC has begun to order equipment to expand module capacity at the Vietnam facility with the goal of increasing module output capacity to 24m units, a ~33% increase, by adding 3 new lines to the existing 7.  As the tools needed for assembly are not akin to those used for actual display production, the timing of tool delivery should not be a limiting factor for SDC.  That said, the COVID-19 travel restrictions mentioned earlier in our daily note, could lengthen the time for the tools to be installed and tested, which is why SDC is ordering enough new module capacity to more than meet foldable module expectations for 2022.

​On October 29, BOE (200725.CH), China’s largest panel producer, held a quiet ceremony marking the final certification needed to become a full scale OLED supplier to Apple for the iPhone 13 line.  As we have noted on numerous occasions, this has not been an easy path for BOE, as the company was unable to qualify for full production at least twice that we know of, and was most recently put on a limited production schedule until final certification could be affirmed.  While BOE has been producing small panel OLED for Apple, an estimated 5.5m units in 1H, the final certification proves out the company’s ability to reach both quality and production goals set by Apple, with an additional 6.5m units produced between July and the end of October, and a current run rate of between 1.5m and 1.9m units/month.  According to Chinese press, by the end of the year this run rate would represent ~10% of Apple’s iPhone shipment target of 160m units, with BOE showing a total of ~50m OLED units (all customers) this year.
In 2022 BOE should be increasing capacity at its Gen 6 Chongqing OLED fab as phase 2 capacity begins production.  While the local press says that production will start in January, and BOE will increase shipments to 80m units next year, we expect mass production, based on a more conservative ramp to see an incremental 27m units from Chongqing in 2022, but we note that is at 100% yield, which we expect is far different than what is seen currently and what will be the case as the new Chongqing lines ramp up.  While we expect BOE will certainly be a bigger contributor to Apple’s OLED supply chain in 2022, we hesitate to make predictions as to absolute share as much will depend on BOE’s ability to ramp production to a viable yield, and BOE’s ability to produce the particular OLED display variations that Apple will request in 2022. 
As we expect most, if not all of the LTPO OLED displays for the top iPhone models will be produced by Samsung Display (pvt), and LG Display (LPL) will produce much of the intermediate model, BOE’s share will be limited somewhat, depending on Apple’s application of LTPO across the iPhone line.  This is certainly a big win for BOE, after a long and difficult path to success, but we expect the Chinese press will take the win to mean that BOE’s ‘glorious success’ will ‘mark the end of South Korean OLED domination’, a bit of a stretch in 2022.  It does mean more competition for both SDC and LGD, but we assume they have been expecting that for some time

​As we have noted in a number of recent notes the display industry, particularly the LCD segment, has been leveraging itself toward the production of IT products (notebooks, monitors, and tablets) and away from LCD TV panel production.  Samsung Display (pvt) has sold or shuttered much of its TV panel business, keeping its only large panel production lines open at the request of parent Samsung Electronics (005930.KS), a much more long-term decision made back in 2019, while Chinese brands continue to build out large panel capacity, with a near-term push toward using that and existing capacity to produce more IT panels.  On a m2 basis, smaller panels get a higher ASP so some of the decision to allocate production resources comes from such motivation, but more from relatively mundane global TV demand growth, especially as compared to the increased demand for IT products stimulated by COVID-19.
The recent price decreases seen for TV panels has begun to justify Samsung Display’s original large panel capacity reduction thesis and also helps to justify other panel producers’ decisions to increase capacity exposure to IT products, but along with that decision comes the higher risk toward IT panel pricing.  Until recently that has not been an issue as IT panel prices continued to rise as TV panel prices declined, with continuing demand from brans, but two factors seem to be changing, both of which increase that risk further.  Display driver shortages have been pushing brands to build IT panel inventory.  Fear of a lack of product during the holiday season put brands in the position of paying up to get display module units, with targets based on the strong demand seen over the last year, but over the last two months demand seems to have weakened, first showing up as a slowdown in Chromebook shipments, and then as a broader slowdown in notebook demand. 
There are some technical reasons for this slowdown as students begin to return to classrooms and remote schooling programs wind down, and display drivers have become more available, yet notebook panel shipments have continued to be strong, at least through 3Q.  We expect that some of that 3Q IT order strength came from panel producers filling customer orders that had been delayed due to component shortages or had been under allocation, but hints from panel producers on 3Q calls that indicated a shift toward customers that supply IT products to corporate customers and away from those supplying retail, lead us to see a bit more concern about IT order patterns and there sustainability.
Typically (5 year average) the 4th quarter sees notebook panel shipments decline ~0.3% q/q but we have seen expectations for 4Q notebook panel shipments as low as -1.5%, and while we expect that might represent the extreme, anything significantly above the average would be troubling and would indicate potential notebook panel price weakness.  At just under 34% of large panel quarterly unit volume, weaker notebook panel prices could jeopardize 4Q panel producer sales, especially if TV panel prices continue to decline.  Notebook panel production plans are expected to be up between 15% and 19% in 2022, while recent expectations for notebook demand next year is for less than 1% unit volume growth.  Panel producers always have the option of shifting production to monitors or back to TV panels if prices dictate, but it is beginning to look like a game of musical chairs.