China's OLED catch-up road
Due to its late start, China still relies heavily on imports in terms of upstream core production equipment and materials.
Recently, data released by market research institute Stone Partners showed that in the second quarter of this year, China's flexible OLED shipments are expected to account for more than 50%, surpassing South Korea for the first time.
This is a historic moment that marks China's OLED catching up with South Korea.
What other neck risks does China have to get stuck and can you have the last laugh?
01 What is OLED?
In Who Killed Plasma TV? In the article, the positive solution bureau introduces the dispute between plasma and liquid crystal.
After defeating plasma, liquid crystals encountered a new opponent, which is OLED.
OLED generally refers to OLED display, which is a display made of organic electronic light-emitting diodes.
Compared with liquid crystal (LCD), OLED has the characteristics of active light-emitting, thinness, fast response, rich color, high resolution, etc., and flexible OLED can be bent and used.
LCD and OLED belong to the same panel, that is, the panel of various display devices, widely used in mobile phones, monitors, TVs and other products.
LCD and OLED display technology comparison
Throughout the panel industry, from a technical point of view, it is migrating from LCD to OLED; Regionally, it is migrating from Japan and Taiwan to South Korea and Chinese mainland.
Especially after LCD defeated plasma TV, the main players in the global panel industry are basically left in South Korea and China.
A watershed in the LCD field, in 2008.
Prior to this, South Korea had replaced Japan as the hegemon in the field, and Taiwan also occupied an important position.
At that time, the global financial crisis broke out, the global economy fell into recession, and the panel industry was not spared.
The panel industry in Taiwan has been hit hard, and mergers and reorganizations have been merged to save themselves, leaving only 2 of the 5 major panel factories.
South Korean manufacturers made "a difficult choice" to cut LCD production capacity and maintain OLED production capacity.
Chinese mainland manufacturers have adopted counter-cyclical operations, and Chinese enterprises represented by BOE, Huaxing Optoelectronics and CEC Panda have invested heavily in the construction of LCD production lines.
The subsequent economic recovery proved that Chinese companies were right.
South Korean companies reacted and reinvested in LCDs, but they could not stop Chinese companies.
In June 2022, Samsung shut down its last LCD panel production line in South Korea. In the first quarter of this year, LGD sold the last Guangzhou 8.5 generation LCD production line.
South Korean manufacturers abandon LCD, marking the beginning of China's dominance in the LCD panel field.
Although LCD is still the mainstream of the current market, it has to be admitted that OLED is the future development direction.
The OLED field has always been a one-man show for Korean companies.
Data show that in 2019, Samsung's OLED market share is as high as 88%, and the market share of Chinese manufacturers is only 3%. Looking at the data for 2022, the market share of Chinese manufacturers has increased to 30%.
LCD and OLED display technology comparison
Among the world's top ten OLED manufacturers, 5 are Chinese manufacturers.
Among them, BOE surpassed South Korea's LG with a 13% share and became the second largest manufacturer after Samsung.
South Korean media has made a prediction that it is expected that in 2025, China's OLED production capacity will surpass South Korea.
Now, this prediction may come earlier.
According to data from Stone Partners, South Korea's Samsung display flexible OLED market share has fallen below 50% for three consecutive quarters, while Chinese manufacturers BOE, Visionox, TCL Huaxing, etc. are increasing the market supply of flexible OLED.
Flexible OLED panel shipments and market share in the second quarter of 2022-2023: million pieces Source: Stone Partners
Between a fall and a rise, the market share of Chinese manufacturers flexible OLED is expected to exceed 50%, surpassing South Korea in the number of small and medium-sized OLED panels for the first time.
This is another historic moment.
02 The road to catching up
In China's science and technology circles, there was previously a saying of "lack of cores and less screens".
The screen here refers to China's insufficient panel production capacity and technology.
How did the Chinese screen catch up?
First, huge capital investment.
The OLED panel industry is a typical capital-intensive industry.
The investment cost of fixed assets such as equipment investment and plant construction in the early stage of the production line is large, and the fixed cost such as average annual depreciation and amortization is also high.
For example, BOE's 6th-generation AMOLED production line in Chengdu has a total investment of 46.5 billion yuan. Visionox built the 6th generation AMOLED production line in Hefei, with a total investment of 44 billion yuan. The number of similar production lines in China has reached more than 20, with a total investment of more than one trillion yuan.
Construction of AMOLED production lines in China
More importantly, the panel production line needs to be continuously upgraded.
Only by upgrading can we improve production efficiency, reduce production costs, and produce larger sizes.
This in turn forces manufacturers to continuously invest in new production lines.
Take BOE, Chengdu's 6th generation AMOLED production line has been in mass production for only 6 years, and it is planning to launch the 8th generation or higher IT OLED production line.
With such a huge investment, ordinary small countries simply cannot afford to play.
China's investment in new OLED production lines has exceeded that of South Korea, which has laid the foundation for production capacity to surpass South Korea.
The second is to narrow the technological gap.
Korean manufacturers were the first to mass-produce OLEDs in the world and also have the most patented technologies.
China started too late, and at the beginning, whether it was technology or talent, the gap with South Korea was very large.
Around 2012, South Korea's two major OLED giants Samsung and LG engaged in fierce confrontations around OLED panels, accusing each other of illegally stealing technology and filing lawsuits.
Snipe mussels compete for profits, which gives Chinese manufacturers opportunities.
Taking advantage of the fight between Samsung and LG, Chinese manufacturers threw olive branches, snatched a large number of engineers from South Korea, and filled the talent gap. With talent support, the technical shortcomings are slowly narrowing.
Taking flexible OLED as an example, China's technical gap with South Korea has narrowed to less than 2 years. According to the latest survey by KIPO, from 2011 to 2020, South Korea's OLED patent applications were 5,384, accounting for 43%, ranking first in the world. The number of patents in China is 3,273, accounting for 26%, ranking second.
Regional distribution of OLED patent applications
In particular, Chinese manufacturers have mastered 2K OLED, foldable OLED, rollable OLED and other technologies, which can basically meet the needs of market update and iteration.
Third, the domestic market is broad.
OLED panels have a large investment, and if you want to recover your costs, you must sell them.
Whether panel manufacturers can obtain the recognition of downstream customers has become the key to survival.
The customers of Chinese panel manufacturers are mainly divided into two categories:
One category is overseas customers, mainly Apple.
Apple is the leader in the smartphone industry, leading the trend of using OLED screens in mobile phones.
For a long time, Samsung has been the exclusive supplier of OLED screens for Apple mobile phones. In recent years, BOE has entered Apple's supply chain and begun to supply OLED screens to Apple.
In 2023, BOE will account for 18% of iPhone 15 series OLED panel shipments, which will be a significant increase from 10% of the iPhone 14 series.
The other category is domestic customers.
Mainland OLED manufacturers can develop, inseparable from Huawei's support.
OPPO, vivo, Xiaomi and other Chinese mobile phone manufacturers are also increasing the adoption rate of domestic OLED panels. Xiaomi's Xiaomi Mi 12 and Redmi K50 Extreme Edition respectively use OLED screens produced by Huaxing Optoelectronics and Shentianma. At the end of last year, Visionox entered the OPPO supply chain, which is another position after supplying flexible screens from brands such as Honor, Huawei, and Xiaomi.
In 2022, China's smartphone shipments exceeded 360 million units.
Global smartphone shipments and annual growth rate
More and more Chinese smartphones choose domestic OLED screens, which is the biggest confidence in the rise of Chinese OLED.
03 "stuck neck" risk
As mentioned earlier, after giving up LCD, South Korea is a little "regretful" and can only press all the treasure on OLED.
Now, China is catching up again in the OLED field, and South Korea certainly can't sit still.
South Korea's response is that, on the one hand, the South Korean government has increased its support, in addition to providing 670 million US dollars of loan support, but also giving tax credits and investment subsidies, and the tax reduction for equipment investment has also increased to 15%, which is comparable to semiconductors.
Under the guidance of the Korean government, Korean manufacturers are also making additional investments, and plan to invest more than 48.7 billion US dollars by 2027.
On the other hand, South Korea stopped transferring and selling some large-screen OLED technology and manufacturing equipment to China, which technically "delayed" China's offensive.
Note that this is talking about "large-screen OLED technology and manufacturing equipment". This is a short board of Chinese OLED.
OLED production lines are divided into generations, which are divided according to the size of the substrate.
The newer the production line, the larger the size, and the higher the technical difficulty.
At present, Samsung, LG and other South Korea are in an absolute dominant position in the field of large-size AMOLED panels, which can be used for TVs and large displays.
Most OLED panels produced in China are small and medium-sized OLED panels for smartphones.
China's market share in flexible OLEDs is expected to surpass South Korea's, and it is only a breakthrough in small and medium-sized enterprises. Being able to obtain the manufacturing capacity of large-size panels is the key to China's overall overtaking of South Korea.
From the perspective of the upstream and downstream industry chain of OLED, China also has shortcomings.
OLED industry chain
OLED is divided into three parts: upstream, middle and downstream, upstream for equipment manufacturing, material manufacturing and parts assembly, midstream for OLED panel manufacturing, module assembly, downstream for display terminals and other application fields.
In terms of splitting, the localization ratio of China's OLED in the midstream has reached more than 90%.
However, subject to a late start, China still relies heavily on imports in terms of upstream core production equipment and materials.
For example, OLED evaporation machine, is one of the core equipment for the production of OLED panels, the evaporation process plays a key role in restricting the yield rate, this field has long been monopolized by Japanese and Korean companies such as Canon Tokki in Japan and Sunic in South Korea.
Another example is organic light-emitting materials, accounting for about 12% of the cost of OLED panels, and is also one of the areas with the highest technical barriers in the industrial chain, monopolized by the United States, Japan, South Korea, Germany and other countries.
Another example is driver chips, which are mainly dominated by Korean manufacturers, Samsung, MagnaChip, Silicon Works and other companies monopolize 90% of the global OLED driver chip market share.
If these technical difficulties are not overcome, material gaps are not made up, and China's OLED industry always has the risk of being "stuck in the neck".
This article is from the WeChat public account "zhengjieclub" (ID: zhengjieclub), author: zhengjieclub