Margins Rule
LG Electronics (066570.KS) released a number of updated laptops at CES 2023, as part of its Gram laptop line. What makes these laptops unusual is the Gram 15.6” “Ultraslim” and the Gram 14” and 15” “Style” models now use OLED displays. In itself, it is not surprising for LG Electronics to feature OLED displays as it is the leader in large panel OLED display production through its affiliate LG Display (LPL), who also produces small panel OLED displays for Apple and a number of other smartphone customers., but in the case of these new OLED laptops, parent LG Electronics is buying the OLED panels from rival Samsung Electronics.
Samsung Display (pvt), affiliate of parent Samsung Electronics (005930.KS), is the leading producer of RGB OLED displays, primarily for use in smartphones and tablets, while more recently building out its RGB OLED display line to include larger panels suitable for the notebook market. While smartphone OLED displays are typically produced on a flexible substrate, with the phone’s structure providing the rigidity, laptop displays tend to be produced on rigid substrates (glass), as the more structurally solid frame keeps the glass-based display from flexing. Further, the production cost of glass OLED displays is lower than that of those produced on flexible substrates, as during the production process the flexible substrate material must be attached to a glass substrate to make sure it remains flat during deposition, and them must be removed using a LLO (laser lift-off) process to return the display to a flexible state.
LG Display does not produce rigid OLED displays, producing only those with flexible substrates for smartphones, watches, and automotive displays, so in order to keep down cost, but also provide an OLED alternative to its laptop line, LGE had no choice but to buy from SDC or go to a Chinese supplier. Considering that it has had problems with the displays on earlier models in its laptop line, the choice of Samsung seems logical, albeit a bit embarrassing. We believe Samsung Display has ~ an 85% share of the rigid OLED display market, with only Everdisplay (688538.CH) and Visionox (002387.CH) competing and has considerably more experience than the others in producing these large OLED displays.
What also stands out in this unusual relationship is that Samsung Electronics and LG Display were said to be in negotiations last year for a potential purchase by Samsung of a large (>1m) number of OLED TV panels, which never occurred. Rumors that while LG Display was willing to lower the OLED panel price below the price at which it sells OLED panels to its parent, the two were still unable to reach an agreement and the deal was called off, but when it comes to CE products, margins rule.
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