Chinese LCD material company to enter OLED materials market
Zhejiang Yongtai Technology Co. (002326.CH) has completed a feasibility study concerning its entry into the OLED materials market. The company, which provides liquid crystal to the display industry, along with pharmaceutical and agricultural chemicals, will invest $13.76m US of its own funds to build out OLED material production capacity with a goal of 60 tons/year. According to recent studies, the value of organic materials in OLED products is ~8%[1] which would imply an organic materials market of $1b of which intermediate chemicals would represent ~15% or $150m US, but we note that what is included or excluded from these statistics can be quite significant as to stated market sizes.
The company has indicated that it believes China accounts for much of the worldwide OLED intermediate material market share and can become a significant refiner of intermediate OLED materials due to lower cost and process advantages. Further, they believe that domestic OLED display producers will favor local OLED material producers, as long as quality is maintained. The project is expected to take 1 year to construct, with an expected output of ~30%, with 100% reached in the following year. The company also expects to see an annual net profit of $6.68m/year with an annual ROR (after tax) of 56.8% and a 3.6 year after tax payback period.
While we are unsure of the actual OLED materials that will be produced at the new facility, the company’s goals are aggressive, particularly from the perspective of OLED materials. The production of phosphorescent OLED emitters, which would have the highest value/gram of materials in a typical OLED stack, would be limited by worldwide IP, which is held by Universal Display. That would leave lesser OLED stack materials, which have both a lower price/gram and face much greater competition from other specialty chemical companies. China does need to build out its OLED material supply chain, but the most important characteristic of OLED materials is their purity, as even miniscule impurities can cause significant problems. If Chinese companies are able to produce end-user ready OLED stack materials that meet current standards, they will become eminently successful, even if their pricing is the same as what is currently available, however thus far we have seen little indication that such is the case, with OLED panel producers in China focused on the same OLED material suppliers that are used by Samsung Display and LG Display (LPL), the share leaders in OLED display production.
[1] Displaysearch 2015
The company has indicated that it believes China accounts for much of the worldwide OLED intermediate material market share and can become a significant refiner of intermediate OLED materials due to lower cost and process advantages. Further, they believe that domestic OLED display producers will favor local OLED material producers, as long as quality is maintained. The project is expected to take 1 year to construct, with an expected output of ~30%, with 100% reached in the following year. The company also expects to see an annual net profit of $6.68m/year with an annual ROR (after tax) of 56.8% and a 3.6 year after tax payback period.
While we are unsure of the actual OLED materials that will be produced at the new facility, the company’s goals are aggressive, particularly from the perspective of OLED materials. The production of phosphorescent OLED emitters, which would have the highest value/gram of materials in a typical OLED stack, would be limited by worldwide IP, which is held by Universal Display. That would leave lesser OLED stack materials, which have both a lower price/gram and face much greater competition from other specialty chemical companies. China does need to build out its OLED material supply chain, but the most important characteristic of OLED materials is their purity, as even miniscule impurities can cause significant problems. If Chinese companies are able to produce end-user ready OLED stack materials that meet current standards, they will become eminently successful, even if their pricing is the same as what is currently available, however thus far we have seen little indication that such is the case, with OLED panel producers in China focused on the same OLED material suppliers that are used by Samsung Display and LG Display (LPL), the share leaders in OLED display production.
[1] Displaysearch 2015
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