Flexible OLED to be bigger the Rigid OLED by 3Q 2017?
IHS has predicted that the value of the flexible OLED market will be larger than that of the rigid OLED market by the 3rd quarter of this year on a revenue basis. Their expectations are for the flexible market to reach $3.2b, edging slightly ahead of the rigid market at $3b, with the flexible market growing over 150% in 2017. Citing flexible phones from LG Electronics (066570.KS) and Samsung Electronics (005930.KS) on the demand side, and increasing flexible capacity across the industry, IHS expects costs for flexible OLED displays to drop below those of rigid displays as yields improve over time, but sees the higher current cost of flexible displays limiting presenting a challenge to some smartphone brands.
We have a slightly different view, based on our evaluation of OLED capacity through 2020. We do see continued expansion of flexible OLED capacity, and we are speaking about capacity, not revenue in this case, but we make a distinction between what would be raw OLED capacity, either rigid or flexible, and ‘utilized’ or ‘available’ OLED capacity. When fabs are designed, they are set to produce a maximum number of sheets of substrate/month. This is the theoretical maximum a fab can produce, with not regard to actual production ability. When including fab initial ramp up, equipment down time, bottlenecks, and a variety of other actual commonplace manufacturing issues, display fabs do not instantly churn out the maximum number of substrates as stated in their plans. The ‘available’ capacity, and product yield make the actual determination as to the number of units produced at any given time by the fab, and are most important in determining the actual ‘capacity’ of a fab and the industry on a monthly, quarterly, or yearly basis.
As can be seen in Fig. 3, raw OLED capacity, or the number that is commonly used in most research and press items, is considerably greater than the ‘available’ capacity that can actually produce product. Therefore we would have to assume that any pricing information that is over-laid on our capacity data (‘available’) would likely be lower than the IHS data. IHS could be completely accurate as to their assumed pricing data, but their baseline capacity assumptions would be higher than ours. When looking at both raw and available OLED capacity by substrate, as seen in Figs 4 & 5, we still do not see flexible capacity overtaking rigid until after 2020, and while higher pricing on flexible products could offset some of that difference, we see the crossover being further out.
We note also that current OLED devices deemed ‘flexible’ are not what would traditionally be called ‘flexible’. Thus far almost all ‘flexible’ smartphones are ‘conformed’, that is the shape of the display is formed at the factory, and does not have the ability to change. LG has produced a smartphone that flexes to a limited degree, with the caveat, “The flexibility of this product is limited. This phone may be bent up to 180⁰ for a limited period of time. Do not bend inward or twist”, but truly flexible devices are not yet available to consumers, although demos have been around for a number of years.
All in, we are getting closer to the commercialization of a truly flexible mobile device, and despite our longer time frame to the crossover point when the flexible OLED market exceeds the rigid one, we do see the industry headed in that direction. The next question is however, does the consumer want such a device, and is he/she willing to pay a premium for the ability to bend, fold, or twist their phone? While smartphone brands are going to use flexibility to differentiate their mobile devices, as Samsung has with the more recent Galaxy iterations, they still must create a compelling reason for consumers to want a flexible device enough to pay more than a rigid one, otherwise flexible device sales will be limited to the very top of the consumer purchasing triangle.
We have a slightly different view, based on our evaluation of OLED capacity through 2020. We do see continued expansion of flexible OLED capacity, and we are speaking about capacity, not revenue in this case, but we make a distinction between what would be raw OLED capacity, either rigid or flexible, and ‘utilized’ or ‘available’ OLED capacity. When fabs are designed, they are set to produce a maximum number of sheets of substrate/month. This is the theoretical maximum a fab can produce, with not regard to actual production ability. When including fab initial ramp up, equipment down time, bottlenecks, and a variety of other actual commonplace manufacturing issues, display fabs do not instantly churn out the maximum number of substrates as stated in their plans. The ‘available’ capacity, and product yield make the actual determination as to the number of units produced at any given time by the fab, and are most important in determining the actual ‘capacity’ of a fab and the industry on a monthly, quarterly, or yearly basis.
As can be seen in Fig. 3, raw OLED capacity, or the number that is commonly used in most research and press items, is considerably greater than the ‘available’ capacity that can actually produce product. Therefore we would have to assume that any pricing information that is over-laid on our capacity data (‘available’) would likely be lower than the IHS data. IHS could be completely accurate as to their assumed pricing data, but their baseline capacity assumptions would be higher than ours. When looking at both raw and available OLED capacity by substrate, as seen in Figs 4 & 5, we still do not see flexible capacity overtaking rigid until after 2020, and while higher pricing on flexible products could offset some of that difference, we see the crossover being further out.
We note also that current OLED devices deemed ‘flexible’ are not what would traditionally be called ‘flexible’. Thus far almost all ‘flexible’ smartphones are ‘conformed’, that is the shape of the display is formed at the factory, and does not have the ability to change. LG has produced a smartphone that flexes to a limited degree, with the caveat, “The flexibility of this product is limited. This phone may be bent up to 180⁰ for a limited period of time. Do not bend inward or twist”, but truly flexible devices are not yet available to consumers, although demos have been around for a number of years.
All in, we are getting closer to the commercialization of a truly flexible mobile device, and despite our longer time frame to the crossover point when the flexible OLED market exceeds the rigid one, we do see the industry headed in that direction. The next question is however, does the consumer want such a device, and is he/she willing to pay a premium for the ability to bend, fold, or twist their phone? While smartphone brands are going to use flexibility to differentiate their mobile devices, as Samsung has with the more recent Galaxy iterations, they still must create a compelling reason for consumers to want a flexible device enough to pay more than a rigid one, otherwise flexible device sales will be limited to the very top of the consumer purchasing triangle.
Raw vs. Utilized OLED Capacity - Source: SCMR LLC, OLED-A, Company Data
Raw Rigid & Flexible OLED Capacity - Source: SCMR LLC, OLED-A, Company Data
Available Rigid & Flexible OLED Capacity - Source: SCMR LLC, OLED-A, Company Data
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