Source: SDIC Securities, Author: Zhu Si, Ma Liang
The penetration rate of OLED panels in smartphones is gradually increasing, and the penetration is accelerating from high-end models to low-end models. According to Omdia data, from 2014 to 2022, the global shipment area of mobile phone AMOLED panels increased from 1,227,800 square meters to 5,916,500 square meters, with a compound growth rate of 21.72%. In the mid-size field, Apple is expected to launch OLED tablets and laptops in 2024 and 2026, and the penetration rate of medium-sized OLED is expected to continue to increase. In this context, on November 29, 2023, BOE announced that it plans to invest in the construction of the 8.6th generation AMOLED project, with a design capacity of 32,000 pieces/month, focusing on medium-sized OLED IT products. With a total investment of 63 billion yuan, the project will be constructed in two phases with a period of about 34 months, bringing new demand for upstream equipment and materials.
1. The panel industry has a variety of technologies, and LCD and OLED are the two main technologies
1.1. LCD downstream application 7 becomes TV, and OLED is mainly for mobile phones
LCD (Liquid Crystal Display) technology is based on the optoelectronic properties of liquid crystal molecules, when the voltage is not applied, the arrangement of liquid crystal molecules allows light to pass through, and the molecular arrangement changes after the voltage is applied, thus blocking the passage of light. LCD technology consumes less energy, especially when displaying still images, and is relatively cost-effective and large-format for production, and is widely used in a wide range of devices such as TVs, computer monitors, mobile phones, and tablets.
OLED (Organic Light Emitting Diode) technology displays images by emitting light from a layer of organic material. When an electric current is passed, the holes created by the anode and the electrons produced by the cathode move and inject in the layers of organic material. These electrons and holes are transported within the organic layer and recombined within the light-emitting layer to form excitons. When the exciton releases energy, it can excite molecules in the light-emitting layer, producing visible light that enables OLED displays to produce high-contrast images.
Unlike LCDs, OLEDs do not require a backlight, so they can be made thinner and allow for larger viewing angles and higher contrast. The advantages of OLED technology also include excellent color performance and fast response time, making it ideal for high-quality video and dynamic image display. However, OLED screens are more expensive to produce and may not be as bright as LCDs in terms of brightness and longevity, but have become the technology of choice for smartphones, high-end TVs, and wearables due to their superior image quality and flexibility.
According to different driving methods, OLED display technology is divided into two categories: passive matrix (PMOLED) and active matrix (AMOLED).
PMOLED has a simple structure and high driving voltage, which is suitable for low-resolution panels, such as bracelets and smart watches. AMOLED has a complex process, low driving voltage, and long life of light-emitting elements, which is suitable for high-resolution panels, such as mobile phones, TVs, computers, tablets, VR devices, and automotive displays. AMOLED is currently the mainstream technology for OLED screens
Based on the different substrate materials, OLED displays can be divided into glass substrates, silicon substrates, and flexible substrates. Micro OLED technology typically uses silicon substrates with higher pixel density (PPI), while small, medium, and large OLED displays are more likely to use glass substrates or flexible substrates. Micro OLED is considered to be the cutting edge of display technology, with its high resolution and small size, and is mainly used in display scenarios that require close observation, such as electronic viewfinders and head-mounted displays. Unlike PMOLED and AMOLED display panels, Micro OLED technology manufactures OLED devices directly onto monocrystalline silicon integrated circuit chips that integrate video signal processing and pixel driver arrays, eliminating the need for traditional external display driver chips through a bonding process, thereby reducing size and weight while maintaining the high contrast ratio and other excellent features of OLED technology.
Global LCD panel production is concentrated in Asia, especially in China, South Korea, and Taiwan, and is led by BOE Technology Group, Shenzhen Huaxing Optoelectronics Technology Co., Ltd., and Innolux Co., Ltd., among others. Although the rise of OLED technology poses a challenge to the LCD market, LCD remains highly competitive in many fields due to its mature production process and low production costs. OLED is mainly dominated by Samsung Display and LG Display, and domestic companies such as BOE, Visionox and Tianma Microelectronics are accelerating their market expansion.
LCD downstream TVs and monitors account for the largest share of the market, while OLED is mainly used in mobile phones. LCD downstream products can be mainly divided into TVs, monitors, laptops and smartphones. TVs account for the largest share at 72.1%, followed by displays at 12.3%. Smartphones, tablets, and automobiles are the three categories with the smallest proportions, accounting for 5%, 2.9%, and 2.1% respectively. In the OLED downstream segment structure, smartphones account for the largest share at 75%. This is followed by smartwatches, accounting for 18%. Mobile PCs and OLED TVs share the same share at 1%.
The panel industry is highly competitive, and mainland manufacturers have significant advantages in low cost. From 2018 to 2019, the panel industry experienced a downward cycle, with panel prices continuing to fall, and manufacturers generally facing losses. Entering 2020, the industry began to enter a period of adjustment.
Against this backdrop, Samsung Display decided to withdraw from the LCD panel market, selling its Gen 8.5 line and module production line in Suzhou, and closing three LCD production lines between 2021 and 2022, withdrawing its 390K production capacity. At the same time, Samsung transformed all of its production lines to produce OLED panels. By the end of 2022, LG Display also announced the closure of its Paju P7 factory, which is the last LCD TV panel (LCD) production line in South Korea. At this point, the production capacity of LCD TV panels in South Korea has been completely withdrawn from the market. In the face of fierce competition in price wars, Japanese and South Korean panel manufacturers are difficult to compete with mainland manufacturers in terms of cost control, and gradually close their local production capacity.
South Korean panel manufacturers withdrew from the LCD business, and the share of mainland panel factories further expanded. The market share of South Korean panel factories has gradually declined since 2016, while the market share of mainland panel factories has been expanding, with the proportion of mainland panel production capacity accounting for only 36% in 2018 and increasing to 54% in 2022. After years of construction, the domestic panel factories represented by BOE have many multi-category production lines and are still expanding, including a-Si LCD production lines, LTPS AMOLED flexible production lines, and silicon-based OLED production lines.
1.2. As an upgrade of LCD technology, MiniLED is gradually increasing in the field of high-end TV
Mini LED technology, also known as sub-millimeter light-emitting diodes, refers specifically to LED devices with chip sizes in the range of 50 to 200 micrometers (μm). Compared to traditional LED backlighting technology, MiniLED allows for a more delicate local dimming strategy, which significantly improves the fineness of contrast and brightness control, effectively improving the performance of darkfield detail and the dynamic contrast range of the overall picture. This technology bridges the performance gap between traditional liquid crystal display technology (LCD) and organic light-emitting diodes (OLEDs) while optimizing the inherent brightness benefits and durability of LCDs, providing a solution that approaches OLED-level contrast and color performance, while avoiding the drawbacks of OLEDs that burn in. This technology sits between traditional small-pitch LEDs and microLED technologies, representing the evolution of small-pitch LEDs to a higher level of fineness. Mini LED and Micro LED technologies are a direct product of the refinement process in the field of LED displays, marking that they are expected to open up a new blue ocean for the application of LED display technology as the technology development trajectory becomes clearer.
MiniLEDs have the technical advantages of high contrast, high brightness, and vivid colors, and the penetration rate of high-end TVs has bucked the trend. Since the beginning of 2023, the sales volume of China's TV market has continued to decline, according to Aowei Cloud Network (AVC) data, the cumulative sales of domestic color TVs in the first three quarters of 2023 will be 21.62 million units, a year-on-year decrease of 13.02%, and sales will fall to 72.7 billion yuan, a decrease of 5.46%.
However, during the "Double 11" period in 2023, although the sales of color TVs continued to decline to 4.03 million units, a decrease of 14.5%, the total retail sales of the market unexpectedly increased to 15.8 billion yuan, an increase of 8.2% year-on-year. This phenomenon is mainly due to the strengthening of the trend of large screens in the domestic market and the boost in sales of high-end TVs represented by Mini LED. Mini LED TVs saw particularly strong market acceptance, with a 2.3% market share and 8.7% of sales in the first half of the year. In addition, the market penetration rate of Mini LED TVs during the "Double 11" period exceeded 4.5% for the first time, doubling from the same period last year. Data from market research firm Omdia also confirms the global trend of large screens, especially the growth in shipments of large-size LCD TV panels, which has driven the phenomenon of average sales sizes exceeding 52 inches. It can be seen that,Despite the decline in overall sales,But the trend of large screens and the popularity of Mini LED technology,Especially the strong growth in the high-end market,Brought new vitality to China's color TV market,Make the average sales price of products in "Double Eleven"3910 yuan,A year-on-year increase of 26.5%,A new high in the past five years。
In the consumer electronics industry in 2023, in addition to Mini LED backlight display technology, Mini LED direct display technology also shows a clear recovery trend. At present, this technology is mainly used in the ultra-large commercial display market of 110 inches and above, covering a variety of scenarios such as cinema display and sports display. Compared to Mini LED, OLED TVs have performed poorly in the first three quarters of 2023. According to Omdia data, the cumulative shipments of OLED TVs worldwide during this period were about 3,703,300 units, a year-on-year decrease of 17.77%. The decline also reflects the fierce competition between South Korea- and Japan-led OLED direct display technology and China-led Mini/MicroLED technology, with LCD technology dominating the TV segment.
1.3. Lightweight, portable and foldable, the penetration rate of OLED in mobile phones is increasing year by year, and it is expected to be applied in medium-sized terminals
The penetration rate of OLED in smartphones has exceeded 50%, and the mid-size display market is expected to gradually penetrate. With thinner, better color contrast and faster response times, OLEDs are ideal for the growing demand for mobile devices. According to TrendForce, the market share of OLED panels in smartphones has exceeded 50% by 2023, mainly due to the continuous decline in costs and technological advancements. But the penetration of OLEDs in other applications such as TVs, laptops, and tablets is still below 3%, indicating that there is significant growth potential in these areas. Japan Display Corporation (JDI)'s eLEAP technology, which uses maskless technology for higher brightness and longer life, and Visionox's maskless ViP technology, which improves pixel density and longevity, are addressing some of the major challenges facing OLEDs on larger displays. These innovations are expected to improve production efficiency and support the development of higher-generation OLED panels. Moreover, major industry players such as Samsung, BOE, JDI, and Visionox are investing heavily to advance OLED technology, especially for mid-size applications. As OLED technology continues to evolve and improve material life, the penetration of OLED products in the midsize display market is expected to increase significantly by 2025.
According to market research firm Omdia, Apple plans to launch at least nine new devices with OLED displays in the iPad and MacBook lineup in the future, and the new 11-inch and 13-inch iPad Pro models to be released this year are expected to feature OLED screens with resolutions of 2388 x 1668 and 2880 x 1920, respectively. Apple is the first to adopt OLED technology on the iPad, which is expected to accelerate the penetration of OLED in the mid-size.
Silicon-based OLEDs are more expensive, but they can provide high-resolution, high-pixel density microdisplays, mainly in the augmented reality field. Silicon-on-OLED technology is a microdisplay technology that combines semiconductor technology with OLED (organic light-emitting diode) based on monocrystalline silicon and integrated CMOS driver circuit. Taking advantage of the emissive properties of organic materials, the pixels are placed directly on the silicon wafer instead of the glass substrate, allowing for smaller pixel sizes and higher PPI (pixel density). According to Panox Display, a significant advantage of silicon-based OLED in the micro field is its ability to achieve ultra-high PPI, which makes it ideal for near-eye display devices such as AR/VR glasses, offering extremely high pixel density (over 3000PPI) and extremely small physical size (less than 1.5 inches). Back in 2005, eMagin introduced the Z800 3dvisor, a consumer head-mounted display with SVGA resolution. At MWC 2016, Epson also showcased its new AR glasses, the Moverio BT-300, which also features Micro-OLED technology. One of the main challenges of silicon-based OLED technology is its high cost, but its application in the VR and AR fields has been recognized by market leaders, and on June 6, 2023, Beijing time, Apple released its first MR headset, the Apple Vision Pro, with two 4K, 1.4-inch silicon-based OLED screens from Sony.
2. The supply and demand pattern has changed significantly, and the LCD panel cycle has started again
2.1. LCD panel cycle review, mainland panel factories continue to expand production to improve concentration
At the beginning of the 21st century: domestic enterprises began to enter the industry mainly by introducing foreign LCD production lines and imported LCD products, and after 2009, BOE started to build the first 8.5 generation TFT-LCD production line independently designed and built in Chinese mainland, with a total investment of 28 billion yuan. In the same year, CSOT independently launched the 8.5 generation TFT-LCD production line. Many domestic panel companies are moving towards the road of independent innovation, and the mainland panel industry is expanding rapidly.
2012-2015: The rise of new terminals such as mobile phones and tablets, in 2015, three domestic high-generation lines, BOE Chongqing B8, Huaxing Shenzhen T2, and Panda Nanjing C2, were put into production, and the supply of LCD panels increased significantly.
2016-2017: In the face of the expansion of LCD production capacity in the mainland, South Korean manufacturers Samsung and LG shrank part of their LCD production capacity and expanded OLED production capacity instead, and in 2016, Samsung/LG withdrew from production capacity of 3.98 million square meters / quarter (equivalent to 240K/M of the 8.5 generation line, which is about equal to the production capacity of Chinese enterprises to expand production), the relationship between supply and demand was repaired, panel prices soared, and the panel market recovered.
2018-2019: BOE Hefei B9, BOE Wuhan B17, Huaxing Shenzhen T6, Huaxing Shenzhen T7, Sharp Guangzhou 10.5, etc. continue to expand production, the industry began a downward cycle, due to the decline in panel prices, panel manufacturers have suffered widespread losses.
Since 2020, Samsung and LG have continued to shut down, withdrawing a total of 8.16 million square meters per quarter, equivalent to 270K/M for the 10.5 generation line, which is about equal to the 10.5 generation line production capacity expanded by domestic enterprises, and China continues to seize the share of Korean enterprises by expanding production. Since the second half of 2021, the terminal demand for panels has been saturated, the market has been oversupplied, and panel prices have begun to fall sharply.
At present, the global market share of mainland panel production capacity is nearly 70%. According to Lotu Technology data, Chinese mainland's market share in the global LCD TV field will be 66.9% in 2022, and it will have the right to speak in the LCD TV panel industry, and it will be 68.7% in 2023, an increase of 1.8 percentage points over 2022 and a new historical high. Most of the global LCD TV panel shipments come from Chinese companies, and the top eight panel manufacturers with the largest total shipments in 2023 are BOE (mainland), Huaxing Optoelectronics (mainland), Huike (mainland), Innolux (Taiwan), Sharp (Japan and South Korea), Rainbow Optoelectronics (mainland), AUO (Taiwan), LGD (Japan and South Korea), BOE, Huaxing Optoelectronics, and Huike are firmly in the top three.
Under the competitive pressure of mainland panel manufacturers, the LCD production capacity of Korean enterprises has been basically cleared, and the LCD industry has been further concentrated in mainland manufacturers.
Samsung successively shut down its G8.5 generation lines in Guangzhou, Suzhou, Asan and other places, and completely abandoned its LCD business in June 2022. LGD, on the other hand, shut down its LCD production line in Paju, South Korea, at the end of 2022 and will retain only 50% of the capacity of its Guangzhou plant in 2023. The two South Korean companies have restructured their business and are gradually transitioning to a more lucrative OLED industry. Due to Samsung's withdrawal, the Japanese and Korean systems will only be composed of Sharp and LGD in 2023, and the market share of this camp in the LCD TV industry will only be 10.8%, a decrease of 4.6 percentage points from 2022. Among them, LGD's total shipments in 2023 will be about 9.2 million units, a year-on-year decline of about 58% compared with 2022.
At present, due to the rise in panel prices and the return to above the LGD total cost line, it plans to resume the full production operation of the LCD Guangzhou factory in 2024.
LGD plans to sell its LCD plant in Guangzhou, and the market share of Chinese manufacturers is expected to reach nearly 8%. According to WitDisplay, LGD's Guangzhou factory sale plan is accelerating, and will conduct a limited competitive bidding and selection of priority negotiation targets for BOE, Huaxing Optoelectronics and Skyworth in 24H1, and the three shortlisted companies are currently undergoing local due diligence work. LGD's Guangzhou factory is 70% owned by LGD, 20% by Guangzhou Development District, 10% by Chuangsu, with a capital of about 2.13 trillion won and an investment of about 4 trillion won, the Guangzhou factory was put into operation in September 2014, with a monthly output of 220,000 pieces, mainly producing 32/43/55/65/86-inch LCD TV panels. If a Chinese manufacturer successfully acquires LGD's Guangzhou factory, the market share (in terms of production volume) of Chinese LCD panel manufacturers will reach nearly 80% in 2025, which will further consolidate the leading position in China's LCD industry.
2.2. The LCD panel cycle is back in motion, and prices continue to rise in March
On the demand side, the trend of large-size TV panels is clear, and the shipping area of the industry has grown steadily. According to Lotu Technology data, the average size of the global LCD TV panel in the world has increased from 46.1 inches in 2022 to 47.9 inches in the first half of 2023, and the average size of the Chinese market has exceeded 60 inches in June 2023. The "2023 China Color TV Market Summary Report for the First Half of 2023" released by Aowei Cloud Network shows that in the first half of 2023, the sales volume of China's color TV market will be 14.67 million units, and the retail share of 75-inch large-screen TVs will increase by 7.1%, becoming the size with the fastest growth in share.
Large-scale sports events have further stimulated the recovery of TV panels, and the Olympics are expected to be a catalyst for the recovery of TV market demand. According to the Trendforce report, the display panel market is expected to achieve both volume and price growth in the first half of 2024. TV panel shipments are expected to increase by about 5.3% year-on-year in the first quarter, and the peak demand season is expected to continue to rise in the second quarter as major sports events are stocked up and the peak demand season arrives earlier, and the increase is likely to expand further. Under this expectation, the performance of leading panel manufacturers such as TCL Technology and BOE is expected to improve significantly, especially TCL Technology may continue to exceed market expectations.
According to TrendForce data, the 55-inch LCD_TV has risen by an average of $1 as of April 8, and has risen by $4 in a row since February. Among them, the price increase of 27-inch monitors and 14-inch laptops is smaller, reflecting the highest concentration of TV panel suppliers and a stronger voice in price.
3. OLED is expected to replicate the development process of LCD, and upstream equipment materials are promising
3.1. The penetration rate of OLED panels continues to increase, and Apple's pre-launch of OLED mid-size products has increased new demand
The penetration rate of AMOLED panels in smartphones is gradually increasing, and the penetration of AMOLED panels is accelerating from high-end models to low-end models. In 2017, Apple launched its first OLED mobile phone, the iPhone X, and then domestic mobile phone manufacturers Huawei, OPPO, Xiaomi, etc. launched their own OLED models, and AMOLED screens began to be widely used in high-end smartphones. According to Omdia data, from 2014 to 2022, the global shipment area of mobile phone AMOLED panels increased from 1,227,800 square meters to 5,916,500 square meters, with a compound growth rate of 21.72%. With the maturity of OLED technology and the reduction of costs, OLED mobile phone panels are gradually accelerating from high-end models to low-end models.
The leading OLED enterprises in mainland China, led by BOE, have continuously improved the process level and improved the yield of OLED, which has gradually reduced the cost of OLED and further expanded the downstream application space of OLED.
In the mid-size segment, OLEDs will be dominated by the 34-inch market in 2023 and are expected to hold 37% of the market share. The 27-inch display group is a close second with about 32%, followed by the 49-inch display with about 14%. 10% market share in the 45-inch category. Looking ahead to 2024, TrendForce expects 27-inch displays to expand their market share and become the star of OLED products.
Apple is expected to launch OLED tablets and laptops in 2024 and 2026, and the penetration rate of medium-sized OLED is expected to continue to increase. In 2022, the global shipments of laptops and tablets will be 286 million and 162 million units, respectively, of which 9.7 million OLED products will be shipped, with a penetration rate of 2.2%, and there is still a lot of room for improvement. In 2023, hit by the sluggish demand in the PC market, global OLED tablet panel shipments will only reach 3.6 million units, a decline of 9% year-on-year. Omdia predicts that notebook OLED panel shipments will reach 12.9 million units in 2023, including 7.7 million units for laptops and 5.2 million units for tablets, and the penetration rate of OLED in notebook computers will reach 14% by 2028.
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Unlike small-size OLEDs, medium-sized OLEDs have a greater impact on the yield of the product during the production process, so medium-sized OLEDs have a lower yield rate and a higher price during the production process. The current high pricing is still an important factor limiting the increase in the penetration rate of medium-sized OLEDs, and it is also the main reason why the market share of OLED laptops and tablets is not as high as that of LED laptops and tablets. However, with the continuous maturity and development of technology, the size yield rate in the panel industry continues to improve, and at the same time, with the 8.6 generation line of medium-size production entering a rapid layout period, the manufacturing cost per unit area of medium-size OLED panels produced by the 8.6 generation line can be reduced by 48%, thus making medium-size panel manufacturing more cost-effective. Apple, Huawei, Samsung and other leading manufacturers have accelerated the switch of medium-sized products to the OLED route, which will drive the penetration rate of medium-sized products into a period of rapid growth.
In 2023, Apple will ship about 48.5 million iPads worldwide, with a share of about 38%; MacBook shipments were about 2,170 units, with a share of about 8%. As an international consumer electronics leader, Apple's application of OLED in tablet computers has a significant impact on the market. According to Omdia data, since the fourth quarter of 2023, Samsung and LG have begun to develop OLED panels for the latest iPad Pro, with dimensions including 11 inches at 2388x1668 and 12.9 inches at 2880x1920. In 2024, as Apple's medium-sized products begin to switch to the OLED route, and at the same time, Samsung, Huawei, Honor and other brands will deploy OLED technology in high-end product lines, and the penetration of OLED in the mid-size field is expected to achieve rapid growth.
According to Sigmaintell's forecast, the penetration rate of OLED panels in tablets and laptops will increase to 3.6% and 5.7% in 2024, and is expected to increase to 21.5% and 17.9% in 2028. Based on 2022 sales (1.2 billion smartphones, 160 million tablets, and 290 million laptops), the total screen area of a mid-size product is 1.5 times that of a small-sized product, assuming that the area of a mid-size product is 4 times that of a small-size product (142/72=4).
3.2. BOE plans to invest in the construction of the 8.6th generation AMOLED line, and the upstream equipment and materials will usher in new opportunities
On November 29, 2023, BOE announced that BOE plans to invest in the construction of BOE's 8.6th generation AMOLED production line project with the first phase of the Chengdu major industrialization project equity investment fund and Chengdu High-tech Zone Electronic Information Industry Development Co., Ltd., with a design capacity of 32,000 pieces/month, mainly positioned in high-end touch displays such as laptops/tablets, and mainly targeting medium-sized OLED IT products. The total investment of the project is 63 billion yuan, and the construction will be carried out in two phases with a period of about 34 months.
This project is a key measure for BOE to seize the market share of medium-sized OLEDs, driving new demand for OLED upstream equipment materials. According to DSCC, OLED will grow at a compound annual growth rate of 51% to 44 million units in the high-end IT market by 2026, and OLED panels will account for 75% of the high-end IT market share. At the same time, DSCC forecasts OLED tablet panel revenue to exceed $2 billion in 2026, during which OLED tablet screen shipments and revenue are expected to grow at a CAGR of approximately 49% and 46% respectively.
3.2.1. The core equipment is monopolized by foreign enterprises, and domestic equipment manufacturers usher in new development opportunities
The upstream of the OLED industry chain includes material manufacturing, equipment manufacturing and assembly parts, the midstream is mainly panel manufacturing, and the downstream includes various end applications. From the perspective of the layout of the industrial chain, OLED manufacturing equipment is in the upstream of the industrial chain, mainly including development, evaporation, packaging, testing and other equipment. In recent years, China is the world's largest OLED application market, and domestic manufacturers continue to expand OLED production lines to provide supporting industries for the development of upstream equipment and related technologies. Due to the gradual transfer of OLED panel production capacity to China, domestic OLED equipment manufacturers will usher in new development opportunities.
The preparation process of AMOLED panel mainly includes array engineering, organic evaporation engineering (OLED), module engineering (Module) and other links. The array project mainly uses the process of film formation, exposure, etching on the substrate to repeatedly superimpose layers of different patterns and materials to form LTPS (low-temperature multi-product silicon) semiconductor thin-film transistor driver circuits. Organic evaporation engineering mainly uses vacuum evaporation to combine organic light-emitting materials and cathode materials on semiconductor thin-film transistor drive circuits to form light-emitting devices, and package them in an environment-free environment. The module project is mainly to cut the packaged panel according to the application requirements of different products, and form a full module product through polarizer attaching, chip (IC) binding, flexible printed circuit board (FPC) binding and cover plate lamination, and packaging and warehousing after module testing.
The key equipment of the array project includes cleaning machine, ion implanter, coating machine, coating machine, exposure machine, developer machine and etching machine, the key equipment of organic evaporation engineering includes evaporation equipment and various packaging equipment, and the key equipment of module engineering includes laser stripping equipment, cutting equipment, laminating equipment, binding equipment and testing equipment.
OLED devices are typically technology-intensive industries with high technical barriers. In recent years, as the new display industry has entered a mature development period, the global new display industry equipment has entered a stage of rapid development. According to DSCC statistics, the OLED equipment market has become the main growth force of the market since 2017, and the revenue of the display equipment market in 2018 was about 22.8 billion US dollars, of which OLED equipment revenue accounted for 52.63%, reaching 12 billion US dollars.
OLED devices are the most significant source of cost for OLED panels. From the perspective of cost structure, OLED equipment and organic materials are an important part of its cost, of which OLED equipment accounts for the highest cost in the entire industry chain, accounting for 35.4%, and organic materials account for 22.8% of the cost in the entire industry chain.
Most of the key equipment in the industry is monopolized by Japan, the United States, Israel and other countries, and the domestic production rate is low. The competition among OLED device companies has typical oligopoly characteristics, with the top equipment companies accounting for more than 85% of the total market share. For example, when it comes to evaporation equipment, Canon Tokki alone has a 90% share of the market.
Among them, the evaporation equipment is a special equipment unique to AMOLED. In the whole evaporation system, the evaporation source is the core component of the evaporation equipment, which plays a decisive role in the evaporation effect of the material and the yield rate of the panel. At present, since only South Korea and Chinese mainland have large-scale OLED panel production lines, evaporation source enterprises in South Korea and Chinese mainland are more competitive.
Evaporation source equipment has been replaced by domestic production, and is expected to usher in a new wave of demand. With BOE's investment of 63 billion yuan to build an 8.6 generation line with a design capacity of 32,000 pieces/month of glass substrates, there will be more OLED panel products for the domestic market in the future.
3.2.2. Mainland manufacturers are actively developing upstream materials, and the localization rate of OLED organic materials is expected to continue to increase
OLED organic materials are the core raw materials in the OLED panel industry chain, which can be divided into intermediate materials, pre-sublimation materials and terminal materials according to the production process. The device structure of OLED panels can be divided into cathode, electron injection layer (EIL), electron transport layer (ETL), hole blocking layer (HBL), light-emitting layer (EML), hole transport layer (HTL), hole injection layer (HIL) and anode (Anode), and the light-emitting layer includes three layers: Dopant, Host and Prime. In addition to the cathode and anode, OLED terminal materials are used in other 6-layer plate devices, which are organic materials that can be directly evaporated onto substrates for the production of OLED after being processed by chemical raw materials through synthesis, sublimation and purification.
Luminescent materials are the core part of OLED organic materials, and their role is to combine the injected charge to make it emit light with high efficiency. OLED light-emitting materials are mainly composed of light-emitting doped materials (Dopant materials), light-emitting host materials (Host materials) and light-emitting functional materials (Prime materials). The three types of light-emitting materials work together with each layer of general-purpose layer materials to ensure that the device can present a good luminous effect stably and efficiently. In the cost structure of OLED organic materials, the cost of light-emitting layer materials accounts for the largest proportion. In mobile phone OLED panels, the cost of light-emitting materials accounts for 12%, and in TV OLED panels, the cost of light-emitting materials accounts for 27%.
OLED materials have stringent performance requirements. On the one hand, it must have excellent luminescence ability, appropriate energy level and carrier mobility, good stability, and excellent film-forming ability, which puts forward extremely high requirements for the molecules of organic materials.
On the other hand, because OLED devices use a sandwich-like structure with multiple layers of organic film sandwiched between the electrodes, the organic functional layers of a single device can be as high as dozens of layers, and the performance requirements of each layer of material are different, so the complexity of the material design is correspondingly high.
OLED material certification barriers are high, and customer stickiness is high. For the selection of suppliers of OLED organic materials, panel manufacturers adopt strict standards, which usually include three main links: qualification review, factory audit, and material certification. Because the performance of OLED devices reflects the combined effect of various layers of organic materials, panel manufacturers often do not easily change the materials used after determining the material combination and forming a complete device system. Due to the extremely strict scrutiny of upstream material suppliers by panel manufacturers, once material suppliers are included in the supply system, they tend to maintain long-term relationships and show strong customer loyalty.
The market for OLED high-end terminal materials is mainly controlled by foreign companies. Luminescent materials are used directly in the production process of OLED screens and require extremely high purity. Materials that are less pure or contain non-light-emitting impurities can cause black spots in OLED displays and accelerate the oxidation of organic light-emitting materials, which in turn can cause large-area defects on the screen, reducing the life of the product. Due to the late start of China's OLED industry, key end-use material technologies and patents are mainly concentrated in the hands of a few overseas manufacturers, resulting in a dependence on these key raw materials. Currently, the field is dominated by companies from the United States, Japan, South Korea and Germany, including Japan's Idemitsu Kossan, Germany's Merck, and the United States' UDC, Dow Chemical, and Sumitomo Chemical, with the first three companies having a market share of more than 65%.
In the OLED industry, the development and application of terminal materials, especially light-emitting materials, are facing significant challenges. In terms of price, the price range of red, green, and blue light-emitting body materials ranges from 2,000 yuan to 5,000 yuan per gram, while the price of doped materials ranges from 5,000 yuan to 20,000 yuan per gram. On the supply side, companies such as LG Chem, Samsung SDI, and Japan's Toray are competing fiercely in the field of basic materials. For the main material, Dow Chemical occupies a market leadership position in red light-emitting materials
China Merck has a large market share in green light-emitting materials, while Japan's Idemitsu and Germany's Merck are in the leading position in the market in blue light-emitting materials. In the doped materials market, UDC and Dow Chemical almost monopolize red and green phosphorescent materials, while Japan's Idemitsu and Germany's Merck dominate the majority of the market share of blue fluorescent materials.
With the investment of domestic OLED production lines and the ramp-up of production capacity, domestic OLED organic materials are promising. In recent years, mainland manufacturers have been actively developing OLED organic materials, and the domestic production rate of OLED materials has been greatly improved, and the market size of China's OLED organic materials has expanded year by year, according to WitDisplay data, the organic light-emitting diode (OLED) light-emitting materials market is expected to grow to more than $2.4 billion by 2028. China's share is expected to continue to grow, reaching 44%. According to UBI Research, the OLED light-emitting materials market is growing at an average annual rate of 5.8% and is expected to grow from $1.84 billion in 2023 to $2.43 billion in 2028.
4. China's local representative enterprises
4.1. BOE
BOE is an Internet of Things company that provides smart port products and professional services for information interaction and human health, and its core business includes display devices, smart systems, and health services. Products are widely used in mobile phones, tablet computers, laptops, monitors, TVs, vehicles, digital information display, health care, financial applications, wearable devices and other fields. The company has a number of manufacturing bases in Beijing, Chongqing, Hefei, Anhui, Chengdu, Mianyang, Fuzhou, Xiamen, Suzhou, Jiangsu, Ordos, Inner Mongolia, Gu'an, Hebei and other places, and has subsidiaries in the United States, Germany, the United Kingdom, France, Switzerland, Japan, South Korea, Singapore, India, Russia, Brazil, the United Arab Emirates and other countries and regions, and the service system covers Europe, the United States, Asia, Africa and other major regions in the world. The company adheres to the innovative concept of "leading technology, global first, and value co-creation".
4.2. TCL Technologies
Founded in 1981 and listed on the main board of the Shenzhen Stock Exchange in January 2004, TCL Group has been sticking to the industry for 38 years and highlighting its competitive advantages in continuous reform and innovation. At the end of 2018, TCL Group launched a restructuring with professional operation as the core, transforming into a technology innovation industry group focusing on semiconductor display and materials business, and developing industrial finance and investment business with industrial traction. TCL Group takes product technology innovation as an important driving force, improves technical and industrial capabilities, and maintains efficiency and benefit indicators that are better than those of the industry. TCL Huaxing is a leader in the global semiconductor display industry, with 2 8.5 generation panel production lines, 2 11th generation ultra-large and commercial display production lines, 1 6th generation LTPS panel production line and 1 AMOLED production line, and the current market share of 55-inch TV panels ranks first in the world, and the market share of LTPS mobile phone panels has increased to the second place in the world, and AMOLED is about to be mass-produced. TCL will aim to be the leader of the global industry, continuously improve its competitiveness, continue to develop healthily, contribute to China's economic and social development with excellent performance, and create greater value for shareholders.
4.3. Rainbow Shares
Rainbow Co., Ltd. is one of the most competitive enterprises in the field of display devices in mainland China, its main business is the research and development, production and sales of liquid crystal substrate glass, and it is the world's only "panel + substrate" upstream and downstream industry linkage enterprise. The company is the first liquid crystal glass substrate manufacturing enterprise in China and the fifth in the world with liquid crystal glass substrate production technology and production capacity, filling the gap in this field in China and breaking the international monopoly. In order to comply with the trend of flat panel display industry to high generation, the company continues to adjust product structure and industrial upgrading, the company's main products G5, G6, G7.5, G8.5 LCD glass substrate products are sold to Chinese mainland and Taiwan panel manufacturers for LCD panel manufacturing. The company's holding subsidiary, Rainbow Optoelectronics, is mainly engaged in the research and development, production and sales of LCD panels, the products are 32"-100" ultra-high-definition TFT-LCD panels, which have a wide range of application fields and market prospects in high-end display products such as high-end tablets, laptops, large-size TVs and ultra-high resolution.
4.4. Deep Pegasus
Shenzhen Tianma is an innovative technology enterprise that provides display solutions and fast service support around the world, mainly engaged in liquid crystal display (LCD) and liquid crystal display module (LCM). The company focuses on the mobile terminal consumer display market and the automotive, medical, industrial control and other professional display markets, which are widely used in smart phones, tablet computers, vehicle displays, medical displays, industrial instruments, smart wearables and smart homes and many other fields. The company is one of the largest manufacturers of LCD displays and modules in China. In 2018, the company owned 100% of the equity of Xiamen Tianma and 60% of the equity of Tianma Organic Light through major asset restructuring, which is conducive to the listed company to give full play to the synergy effect and scale advantage, enhance the comprehensive competitiveness of the market, and improve the profitability and sustainable development ability of the listed company.
4.5. Visionox
Visionox is an innovative supplier of new display solutions, formerly known as the OLED project team of Tsinghua University, which was established in 1996. The company adheres to independent innovation, masters a number of key OLED technologies, and has won the "First Prize of the National Technological Invention Award" issued by the State Council, the "China Patent Gold Award" jointly issued by the United Nations World Intellectual Property Organization and the State Intellectual Property Office of the Mainland. He has led the formulation of a number of OLED international standards and national standards. The company focuses on cutting-edge technology and has created a number of world firsts, including the world's first AMOLED fully curly curly display, the world's first arbitrary bend flexible screen full module and the world's first mass-produced under-display camera solution, and other products, and the flexible OLED technology has reached the world's advanced level.
4.6. Olaid
Olaide is a leading OLED organic light-emitting materials and evaporation source equipment manufacturing enterprise in China, mainly engaged in the upstream links of the OLED industry chain in the organic light-emitting materials terminal materials and evaporation source equipment research and development, manufacturing, sales and after-sales technical services, of which organic light-emitting materials are the core materials of OLED panel manufacturing, and the evaporation source is the core components of the key equipment evaporation machine for OLED panel manufacturing. Xinli Group and other well-known OLED panel manufacturers provide organic light-emitting materials, and have provided evaporation source equipment to Chengdu BOE, Yungu (Gu'an), Wuhan Huaxing, and Wuhan Tianma, and signed an evaporation source equipment contract with Hefei Visionox, among which the evaporation source equipment of Chengdu BOE and Yungu (Gu'an) has completed acceptance, and the production line has been put into operation and is in good condition. With stable and high-quality product quality, the company has established a stable cooperative relationship with the above customers.
4.7. Wright Optoelectronics
Wright Radio and Television has realized the whole industry chain operation of OLED organic material intermediates synthesis, pre-sublimation material preparation and terminal material production. The company has a variety of independent patents for OLED terminal materials and has achieved large-scale production. Relying on excellent R&D technical strength, excellent product performance and perfect supporting service system, the company has gained good industry recognition and accumulated a wide range of customer resources. The company's OLED organic materials customers include BOE, Huaxing Optoelectronics, Hehui Optoelectronics and other world-renowned display panel manufacturers. The company is a national high-tech enterprise, Shaanxi Provincial Enterprise Technology Center, Shaanxi Provincial Small and Medium-sized Enterprise Innovation and R&D Center, selected as a national key specialized and special new "little giant" enterprise by the Ministry of Industry and Information Technology in 2021, and selected as a China Patent Excellence Award and Shaanxi Intellectual Property Demonstration Enterprise in 2020. The company is one of the top 100 future stars in Xi'an in 2018 and a potential unicorn enterprise in Xi'an High-tech Zone.
5. Potential Risks
1. Intensification of market competition: The competition in the panel industry is very fierce, and if the market competition continues to intensify, it will bring risks to the business operations of related companies.
2. Lower-than-expected downstream demand: Industry growth ultimately depends on market demand. If market demand recovers slower than expected, the industry's growth potential could be affected.
3. The introduction of new product development is not as expected: The development and introduction of new products will have a significant impact on the company's business, and if it is not as expected, it will have an adverse impact on the company.