Samsung to Decide On Gen 8 OLED Fab Next Month
In our 8/16/21 note we indicated that Samsung Display (pvt) had been developing an alternative method for the deposition of OLED materials for RGB displays. The process involves both shifting from Gen 6 substrates (which are typically used for small panel and IT OLED production, to Gen 8.5 substrates, which are typically used for larger TV size panels. The reason for the research is that as current deposition systems are horizontal, the masks are affected by gravity causing them to sag as they get larger which has limited their size to Gen 6 when producing RGB OLED displays. SDC is working with tool vender Ulvac (6728.JP) to develop a deposition tool that is vertical rather than horizontal, eliminating the potential gravitational mask sag issue, allowing the tool to process larger Gen 8.5 substrates. If successful, it will give SDC a cost advantage over other OLED producers when producing IT RGB OLED displays, such as those for laptops and monitors.
We would expect SDC to convert existing Gen 8 LCD capacity to this new process, as the TFT portion of the display process would be quite similar to what had already been in the LCD fab, which would save considerable time and cost, but at the time of our note, much depended on whether the technology was viable and cost effective. We expect that SDC has decided that the technology is viable but has yet to decide whether the process is cost effective, with a large portion of that cost being the Gen 8.5 vertical deposition tool designed by Ulvac. Typical Gen 6 OLED deposition tools range from $350m to $400m with Ulvac asking for $540m to $617m for the new tool, which is far above SDC’s $309m offer. SDC is saying that they are currently the only buyer of the tool and that Ulvac has yet to complete the final version, while we expect Ulvac is building in a premium to cover sunk development costs, the larger format, and the fact that no other manufacturer has made such a tool.
We expect SDC is not betting the ranch on the Ulvac tool and is likely looking to Canon-Tokki (CAJ), the company with the largest OLED deposition tool base, for an alternative, although we expect the tool development process is further along at Ulvac, but SDC is likely looking to get the new fab in place in time for Apple’s (AAPL) OLED iPads, which are expected in 2024. SDC could produce such OLED displays on existing Gen 6 production lines, but would have little cost advantage over LG Display, who will be competing for the Apple business, which is why we expect a decision to be made within the next 30 to 60 days.
We would expect SDC to convert existing Gen 8 LCD capacity to this new process, as the TFT portion of the display process would be quite similar to what had already been in the LCD fab, which would save considerable time and cost, but at the time of our note, much depended on whether the technology was viable and cost effective. We expect that SDC has decided that the technology is viable but has yet to decide whether the process is cost effective, with a large portion of that cost being the Gen 8.5 vertical deposition tool designed by Ulvac. Typical Gen 6 OLED deposition tools range from $350m to $400m with Ulvac asking for $540m to $617m for the new tool, which is far above SDC’s $309m offer. SDC is saying that they are currently the only buyer of the tool and that Ulvac has yet to complete the final version, while we expect Ulvac is building in a premium to cover sunk development costs, the larger format, and the fact that no other manufacturer has made such a tool.
We expect SDC is not betting the ranch on the Ulvac tool and is likely looking to Canon-Tokki (CAJ), the company with the largest OLED deposition tool base, for an alternative, although we expect the tool development process is further along at Ulvac, but SDC is likely looking to get the new fab in place in time for Apple’s (AAPL) OLED iPads, which are expected in 2024. SDC could produce such OLED displays on existing Gen 6 production lines, but would have little cost advantage over LG Display, who will be competing for the Apple business, which is why we expect a decision to be made within the next 30 to 60 days.
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