QD/OLED Decision?
We have previously mentioned a potential decision process at Samsung Display (pvt) that needs to be made if the company is to expand its QD/OLED production capabilities at its Asan, Korea fab. The QD/OLED fab, the company’s first, has a capacity of 30,000 sheets/month, which limits the total available capacity that can be produced for the QD/OLED display product. SDC has two primary QD/OLED TV panel customers, parent Samsung Electronics (005930.KS), and Sony (SNE), both of whom have active retail consumer QD/OLED TV products . Sony has two currently available models, a 55” and 65” but withheld new TV model announcements at CES in order to focus attention on other products, while Samsung Electronics has the same size models (2022 series) but has announced it will add 49” and 77” TV models this year. SDC also produces 34” QD/OLED displays, which are used in an Alienware (DELL) QD/OLED monitor and a 49” QD/OLED display that will be used in Samsung’s upcoming 49” QD/OLED monitor.
Samsung Display has said little about its plans for expansion, after facing serious yield issues in the 1st half of 2022, which limited SDC’s ability to deliver displays to both parent Samsung and Sony. This led to such a small number of displays being delivered to Samsung Electronics that Samsung was unable to prominently feature the technology in its 2022 TV lineup, and the sets were under promoted for much of the year. As the year progressed, SDC was able to solve the yield issues and increased deliveries, but the TV environment remained weak, which we believe limited Samsung’s desire to increase marketing dollars and left Samsung Display with questions as to the future of the technology. Toward the end of the year, SDC’s yield improved to the point that they were able to lower the panel price to Samsung, and there was then a bit of hope that Samsung would more fully back the product in the back end of last year as it made the consumer price point more attractive and boosted sales.
While Samsung nor SDC has revealed how many QD/OLED units were produced and/or sold last year, we expect, while disappointing overall, the price points reached in 2H made the product attractive to consumers and Samsung became more interested in using QD/OLED as a part of its TV line-up going forward, but given that Samsung ships 40m to 50m sets each year, shipments of QD/OLED TVs represented roughly 1% of total shipments, leaving the product in limbo as to its place in the Samsung 2023 TV lineup. That said, there was considerably more Samsung traction for QD/OLED at CES this year and the company indicated that it would be adding 77” and 49” models to the line this year. In order to make the QD/OLED product significant enough to take a real place in the TV line, we expect Samsung must be able to bring shipments to between 4% and 5% of total TV units, or between 1.8m and 2.3m units this year.
We believe SDC was able to produce ~1m units last year, although they produced less, and while they have brought yields to over 90%, they would be limited to under 2.2m units at full capacity for the 2023 year, leaving little room for Sony, Dell, and other potential customers, along with safety stock. That has led us to expect SDC to announce that it will expand production , building out additional capacity, although no such announcement has been made. However a number of rumors have been circulating in South Korea indicating that Samsung Display will be increasing capacity at the QD/OLED Asan plant from the current 30,000 sheets/month to 45,000 sheets/month during the year, which we assume would be co-located with the existing lines. Based on our timing and capacity estimates, we believe this will enable SDC to produce ~2.5m units, enough to justify parent Samsung’s increasing product support with a path to a more significant place in the 2024 TV product line
As SDC is currently the only producer of QD/OLED technology, it is up to them to produce quantities that make it worthwhile for customers to support the technology, so SDC must balance the need for capacity against the cost of that capacity and the risk that a weak macro environment will weigh on overall TV shipments this year. A line-by-line expansion makes considerable sense given that the QD/OLED process is a bit less complex than typical RGB OLED and we assume that there is already sufficient TFT backplane capacity at the existing fab, keeping the cost of the expansion relatively low. This would imply the installation of a new 15k line, with the major tools being an open-mask deposition tool and QD ink-jet printing capacity that could be fit into the existing fab structure. While there is considerable conjecture here, the risk of such an incremental expansion is far less than a greenfield project, even if it were done in an idle fab shell. We expect SDC to say little until such a capacity increase is up and running smoothly, but both the timing and the level of risk fit the parameters necessary to keep the QD/OLED display product line active and growing for SDC.
Samsung Display has said little about its plans for expansion, after facing serious yield issues in the 1st half of 2022, which limited SDC’s ability to deliver displays to both parent Samsung and Sony. This led to such a small number of displays being delivered to Samsung Electronics that Samsung was unable to prominently feature the technology in its 2022 TV lineup, and the sets were under promoted for much of the year. As the year progressed, SDC was able to solve the yield issues and increased deliveries, but the TV environment remained weak, which we believe limited Samsung’s desire to increase marketing dollars and left Samsung Display with questions as to the future of the technology. Toward the end of the year, SDC’s yield improved to the point that they were able to lower the panel price to Samsung, and there was then a bit of hope that Samsung would more fully back the product in the back end of last year as it made the consumer price point more attractive and boosted sales.
While Samsung nor SDC has revealed how many QD/OLED units were produced and/or sold last year, we expect, while disappointing overall, the price points reached in 2H made the product attractive to consumers and Samsung became more interested in using QD/OLED as a part of its TV line-up going forward, but given that Samsung ships 40m to 50m sets each year, shipments of QD/OLED TVs represented roughly 1% of total shipments, leaving the product in limbo as to its place in the Samsung 2023 TV lineup. That said, there was considerably more Samsung traction for QD/OLED at CES this year and the company indicated that it would be adding 77” and 49” models to the line this year. In order to make the QD/OLED product significant enough to take a real place in the TV line, we expect Samsung must be able to bring shipments to between 4% and 5% of total TV units, or between 1.8m and 2.3m units this year.
We believe SDC was able to produce ~1m units last year, although they produced less, and while they have brought yields to over 90%, they would be limited to under 2.2m units at full capacity for the 2023 year, leaving little room for Sony, Dell, and other potential customers, along with safety stock. That has led us to expect SDC to announce that it will expand production , building out additional capacity, although no such announcement has been made. However a number of rumors have been circulating in South Korea indicating that Samsung Display will be increasing capacity at the QD/OLED Asan plant from the current 30,000 sheets/month to 45,000 sheets/month during the year, which we assume would be co-located with the existing lines. Based on our timing and capacity estimates, we believe this will enable SDC to produce ~2.5m units, enough to justify parent Samsung’s increasing product support with a path to a more significant place in the 2024 TV product line
As SDC is currently the only producer of QD/OLED technology, it is up to them to produce quantities that make it worthwhile for customers to support the technology, so SDC must balance the need for capacity against the cost of that capacity and the risk that a weak macro environment will weigh on overall TV shipments this year. A line-by-line expansion makes considerable sense given that the QD/OLED process is a bit less complex than typical RGB OLED and we assume that there is already sufficient TFT backplane capacity at the existing fab, keeping the cost of the expansion relatively low. This would imply the installation of a new 15k line, with the major tools being an open-mask deposition tool and QD ink-jet printing capacity that could be fit into the existing fab structure. While there is considerable conjecture here, the risk of such an incremental expansion is far less than a greenfield project, even if it were done in an idle fab shell. We expect SDC to say little until such a capacity increase is up and running smoothly, but both the timing and the level of risk fit the parameters necessary to keep the QD/OLED display product line active and growing for SDC.
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