China Wants In
The OLED production equipment space is one that is dominated by a number of companies that produce a number of tolls that are the core of the OLED display production process. The key tools are those that deposit OLED materials onto various substrate types. With Chinese panel producers pushing hard to gain traction in the OLED space, they are willing to spend as much as is needed to challenge South Korea’s OLED dominance, but when it comes to deposition equipment, money is a secondary consideration. The leader in the space is Canon-Tokki (7751.JP), who produces such deposition tools for Samsung Display, LG Display and a number of other OLED producers. The problem is that these tools are extremely complex and take a considerable time to build, which means orders have to be placed far in advance of delivery schedules, and orders from principal customers, meaning Samsung Display, usually get both priority and considerable attention given SDC’s substantial OLED capacity.
Aside from the delivery times, which can range from 6 months to over a year, the cost of such machines for volume panel production runs between $100m and $150m each, so such commitments are not made lightly. Even LG Display, the only supplier of OLED TV displays and a producer of small panel RGB OLED displays, has found itself unable to work its way into the queue for such tools at times, and has had to buy deposition systems from less popular suppliers. Note also that most fab managers will try to keep tools common across a fab in order to keep maintenance costs low, so if a fab has already installed a Canon tool on a line, it will want to remain with the same supplier as it expands capacity.
Chinese OLED producers have access to considerable capital, particularly at the current stage of OLED development, but are just beginning to develop the volumes needed to compete with South Korean producers. Government subsidies have allowed them to develop OLED fabs at a rapid rate, but even with the easy access to capital, they still have to deal with the production schedules for deposition tool producers, and given the well-known Chinese gift for bringing in construction ahead of schedule, this can lead to bottlenecks in OLED fab start-ups.
The obvious solution, and one that China has been working toward in a number of related fields is that of deposition tool self-development, a task that is formidable even for those that currently produce other tools for the OLED production process. South Korean equipment companies have had some success in the deposition space, with Sunic Systems (171090.KS) having placed a number of tools over the last few years. That said, most of the deposition tools developed by equipment manufacturers are for R&D or pilot line systems, and are not able to scale to the multi-chamber deposition systems that are necessary for cost efficient OLED display production. Chinese tool vendors have produced some of these smaller systems but until recently have been unable to overcome the challenges of developing a multi-chamber deposition tool that can handle high volume production.
We say recently because a Chinese tool vendor, Hefei Xinihua (603656.CH) has developed what it says is the first Mainland developed OLED Evaporation tool for mass production. The company itself has divisions that produce OLED and LCD materials, other display production equipment, and a recently released a high speed “Large Panel Mini-LED Transfer Tool” (Die Bonder) that it has provided to a number of BLU developers on the Mainland, but information is scarce, other than a few pictures shown below, most of which are R&D systems
If a Chinese company were able to enter the mass production OLED deposition tool, it would give Chinese OLED panel producers an alternative to the Korean dominated deposition tool queue, and given China’s desire to develop its own supply chain, would provide easier access to scarce production tools. That said, a few pictures and a press release are a far cry from creating a product that can compete with established production tools on a realistic basis. We would expect that the tools are being tested by OLED panel producers, although we have heard little other than a shipment to a Chinese OLD lighting manufacturer. While we don’t have high hopes that such a tool will gain real traction, one can always be surprised.
Aside from the delivery times, which can range from 6 months to over a year, the cost of such machines for volume panel production runs between $100m and $150m each, so such commitments are not made lightly. Even LG Display, the only supplier of OLED TV displays and a producer of small panel RGB OLED displays, has found itself unable to work its way into the queue for such tools at times, and has had to buy deposition systems from less popular suppliers. Note also that most fab managers will try to keep tools common across a fab in order to keep maintenance costs low, so if a fab has already installed a Canon tool on a line, it will want to remain with the same supplier as it expands capacity.
Chinese OLED producers have access to considerable capital, particularly at the current stage of OLED development, but are just beginning to develop the volumes needed to compete with South Korean producers. Government subsidies have allowed them to develop OLED fabs at a rapid rate, but even with the easy access to capital, they still have to deal with the production schedules for deposition tool producers, and given the well-known Chinese gift for bringing in construction ahead of schedule, this can lead to bottlenecks in OLED fab start-ups.
The obvious solution, and one that China has been working toward in a number of related fields is that of deposition tool self-development, a task that is formidable even for those that currently produce other tools for the OLED production process. South Korean equipment companies have had some success in the deposition space, with Sunic Systems (171090.KS) having placed a number of tools over the last few years. That said, most of the deposition tools developed by equipment manufacturers are for R&D or pilot line systems, and are not able to scale to the multi-chamber deposition systems that are necessary for cost efficient OLED display production. Chinese tool vendors have produced some of these smaller systems but until recently have been unable to overcome the challenges of developing a multi-chamber deposition tool that can handle high volume production.
We say recently because a Chinese tool vendor, Hefei Xinihua (603656.CH) has developed what it says is the first Mainland developed OLED Evaporation tool for mass production. The company itself has divisions that produce OLED and LCD materials, other display production equipment, and a recently released a high speed “Large Panel Mini-LED Transfer Tool” (Die Bonder) that it has provided to a number of BLU developers on the Mainland, but information is scarce, other than a few pictures shown below, most of which are R&D systems
If a Chinese company were able to enter the mass production OLED deposition tool, it would give Chinese OLED panel producers an alternative to the Korean dominated deposition tool queue, and given China’s desire to develop its own supply chain, would provide easier access to scarce production tools. That said, a few pictures and a press release are a far cry from creating a product that can compete with established production tools on a realistic basis. We would expect that the tools are being tested by OLED panel producers, although we have heard little other than a shipment to a Chinese OLD lighting manufacturer. While we don’t have high hopes that such a tool will gain real traction, one can always be surprised.
Xinyihua Evaporator System - Source: Xinyihua
High-End Deposition Tool Production Floor - Source: Sineva
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