OLED market projections

OLED market projections

The OLED display market was small in FY3/08 at around $500mn and centered on
mobile phone side-monitors and passive OLED displays for autos. But the pace of
growth began to accelerate from 2009 as smartphones drove demand for activetype
small OLED displays. We believe the OLED market will continue to grow,
supported by such applications as smartphones, tablets, FPD TVs, and lighting.
We believe the main OLED markets moving forward will be 1) small displays
(mobile phones, handheld games, tablets), 2) large displays (flat-screen TVs,
notebook PCs, monitors), and 3) lighting. Since OLED technology and specs differ
depending on the application, we estimate market scale based on our assumptions
for penetration rates in each application.

Also, OLED technology is still in the developmental stage, and technical innovation
(e.g., commercialization of oxide semiconductor TFTs and the printing method of
production) will likely have a major impact on market trends. Therefore, we make
two market forecasts, one based on our bearish scenario and another based on an
bullish scenario (Figure 11)

Under our bearish scenario, we forecast an OLED display market of $3.9bn in 2011,
$7.0bn in 2012, $10.8bn in 2013, $16.3bn in 2015, and $28.4bn in 2020. We expect
smartphone diffusion to drive demand for small OLED displays, but supply capacity
restraints and manufacturing technology problems to restrict OLED demand for
tablet, thin TV, and lighting applications (Figure 12).

Under our bullish scenario, we forecast an OLED display market of $3.9bn in 2011,
$7.5bn in 2012, $14.7bn in 2013, $28.7bn in 2015, and $57.5bn in 2020. We
assume a higher OLED penetration rate in mobile phones than we do under our
bearish scenario and we also assume that technical innovation results in the
growing use of OLEDs in tablets, thin TVs, and lighting (Figure 13).

Smartphones near term, tablets, TVs, lighting longer term
We believe the small OLED display market will continue to expand, thanks mainly to
the increased use of OLEDs in smartphone. The smartphone market is a fertile
ground because OLEDs facilitate the shift to higher spec displays and thinner
handsets. Display performance is also a point of differentiation for tablet PCs and
we thus expect OLED diffusion to progress here, also.

Our bearish scenario assumes Samsung Electronics leads the way for small OLED
display demand in the smartphone space. However, we think problems securing
stable supply will weigh on OLED display demand for tablets. Our bullish scenario
assumes small supply capacity expands and opens the way for OLED display
uptake by other smartphone makers. In this case, we expect the tablet OLED
display market to grow in earnest from around 2015.

In the large display market, we look for demand for OLED displays used in flatscreen
TVs to pick up from 2012 as South Korean firms roll out OLED TVs.
However, we see two issues regarding future market growth: 1) differentiation with
conventional LCD TVs and 2) refinement of mass production technology for large
OLED panels. As for panels used in notebook PCs and computer monitors, we think
diffusion will take some time due to issues with burn-in and lifespan.

Our bearish scenario for large OLED displays assumes that it takes some time to
get mass-production up and running and that use in thin TVs, notebook PCs, and
monitors is limited to high-end models. On the other hand, our bullish scenario
assumes smooth progress in the development of large OLED display production
technology and that there is good progress in diffusion for OLED TVs.

The OLED lighting market is starting to get off the ground, with lighting
manufacturers having invested in production facilities and begun shipping OLED
lighting panels. OLED light is close to natural light and therefore creates a
comfortable ambience, and its light is emitted from a flat surface. We believe these
characteristics will see demand for OLED lighting expand as a next-generation
interior lighting source.

Brightness, power efficiency, and lifespan remain issues for LED lighting and we
thus expect it take some time before the market expands. Our bearish scenario
assumes performance improvement will take time and that the OLED lighting
market grows slowly. Our bullish scenario assumes that technical innovation
improves performance relatively quickly and that diffusion starts in earnest from
around 2015.

Small OLEDs for smartphones to spread
We see mobile devices, primarily smartphones, as the products for which OLED
displays are most likely to have fast penetration. This is because OLEDs facilitate
the development of higher spec displays and thinner and more power efficient
devices. We believe thinner and more power efficient devices will in turn make it
easier to increase the performance of application processors and increase battery
sizes.

OLED has a shorter lifespan than LCD and costs more, but these are not such big
issues for mobile devices because 1) mobile devices have a relatively short product
life cycle and, 2) many mobile devices have touchscreens and the advance of On
Cell technology will enable touchscreens to incorporate OLED in the future, helping
to keep costs down. Also, the display size is small, meaning it should be relatively
easy to improve manufacturing efficiency.

While OLED also has inferior resolution to LCD, it is improving: the Super AMOLED
HD display in Samsung’s most recent handset, the Galaxy Nexus, has a resolution
of 316dpi (although it has a PenTile RGB array), which is almost the same as the
326dpi resolution of the Retina IPS display in the i-Phone4S.

Samsung and Nokia adopting OLEDs for smartphones
OLED penetration into the smartphone market is advancing, centering on Nokia and
Samsung Electronics (Figures 14-16). Samsung’s Galaxy series, the flagship model,
has adopted OLED to reduce width and weight and improve the spec (CPU
performance, memory capacity, battery storage capacity). The quality of the display
has proved popular with consumers. Nokia has also adopted an OLED display for
its flagship model, the Lumia 800, with the aim of differentiation.

Apple, HTC, LG Electronics and other smartphone makers are not actively adopting
OLEDs for their handsets. Reasons for this include 1) LCDs are superior in terms of
resolution and color and power consumption, and 2) SMD is the only OLED supplier,
which is a risk from a procurement perspective.

Like smartphones, we believe OLEDs can be expected to make inroads in the tablet
PC market because display performance can be used as point of differentiation.
Tablets with OLED displays are starting to appear; Samsung’s Galaxy Tab 7.7 has
one. In the mobile games space, Sony’s latest handheld game, the PS Vita, has a
5-inch OLED display. We believe this is to counter stiffening competition from
smartphones by appealing to hardcore gamers with high-level display performance.

Estimating market scale for smaller OLEDs
The market for small OLEDs is principally divided among mobile handsets, tablet
PCs, and handheld game consoles, and we have estimated the scale of the market
on this basis. Our bearish scenario assumes growth in demand for OLEDs driven by
Samsung smartphones, but rather sluggish expansion in tablet-related demand. An
bullish scenario would assume further adoption of OLEDs by smartphone makers
other than Samsung, and potential growth in tablet-related related demand from
around 2015 on technological advances (see Figures 17–19).

Samsung driving smartphone-related demand
In the smartphone segment of the market, we expect companies like Samsung and
Nokia to drive growth. About half of Samsung’s smartphones have OLEDs, and
given that 1) the company’s smartphone shipments will probably continue to rise
and 2) the proportion of its smartphones equipped with OLEDs is likely to increase
further, we expect that Samsung will continue to provide traction for growth in OLED
demand.

On the other hand, we think the use of OLEDs has to spread among other
smartphone makers if demand is to see additional growth. For that to happen, we
think that 1) increase OLED supply capacity, including the establishment of new
suppliers other than SMD, and 2) improved performance in aspects such as
resolution and energy-efficiency are needed.

Our bearish scenario assumes that issues of performance and supply capacity will
restrict the penetration of OLEDs among smartphone makers other than Samsung
to only around 7% in 2015 and 13% in 2020. A more bullish scenario would
anticipate the resolution of these issues going forward, resulting in a penetration
rate of 18% in 2015 and 36% in 2020.

Tablet applications gradually getting off the ground
We think there is a good chance the use of OLEDs in tablet PCs will begin to
increase gradually. First, tablet displays are around seven to ten inches, compared
to three to five inches for smartphone displays, so higher resolution is necessary,
increasing the complexity of OLED mass production. Second, due to the need for
stable supplies, as the number of makers using OLEDs increases, the suppliers will
have to expand their capacity.

Our bearish-case scenario assumes that the adoption of OLEDs for tablet
applications continues to progress, driven mainly by Samsung, but that penetration
in this area reaches only 9% in 2015 and 12% in 2020. Under a more bullish
scenario, assuming that issues related to mass-production technologies and supply
capacity are resolved, leading to the adoption of OLEDs in other tablets (including
the iPad), we would look for penetration of 19% in 2015 and 53% 2020.

Lingering large OLED supply/demand issues
One of the product areas where OLEDs are likely to find applications is flat-screen
TVs. The appeal of OLED TVs lies in their superior display performance; high
response levels and contrast ratio as well as better color allow excellent picture
texture and dynamic imaging. The adoption of OLED may also enable flatter
screens and improved energy-efficiency.

The commercialization of OLED TVs began with Sony’s 11-inch XEL-1 in 2007 and
LG Electronics’ 15-inch 15EL9500 in 2009. For both, however, the high production
costs of OLEDs were a major obstacle, and they have been taken out of production.
Due to the issues surrounding mass-production technologies, a sustainable model
of OLED TV has yet to emerge.

However, Samsung and LG have announced plans targeting the introduction of bigscreen
OLED TVs (about 55 inches) in 2012. We think the concurrent launch plans
reflect 1) efforts to use OLED TVs to regain profitability in flat-screen TV business
against a backdrop of ongoing commoditization and falling prices and 2) moves to
differentiate themselves from emerging Chinese LCD producers.

However, while there are high expectations for expansion by the OLED TV market,
we think there are many issues that need to be overcome in terms of supply and
demand. On the supply side, mass production technology for large OLED displays
needs to be refined. On the demand side, it is not clear how OLED TVs will be
differentiated from conventional LCD TVs.

For there to be real market penetration by OLED TVs, we think prices need to come
down (the current volume zone in LCD TVs is $600-$700 for 30”-40” TVs). For this
to occur, we think there would need to be significant progress in OLED mass
production technology, including productivity improvements and commercialization
of oxide semiconductor TFTs and the printing method of production.

Supply side: Mass-production technologies for large
OLEDs need to be refined
On the supply side, one problem is that mass-production technologies for large
OLED displays need refinement. Major issues include 1) the difficulty of producing
larger TFT backplanes with LTPS and 2) the low yields and productivity secured
using vacuum deposition methods. Substitute technologies such as oxide
semiconductor TFTs and printing methods are attracting attention, and we think they
need to be commercialized for mass production technology to be fully developed.

In the first place, with the low-temperature polycrystalline silicon (LTPS)
technologies used in current OLED TFTs it would be hard to enlarge substrate sizes
further. This is because 1) the laser annealing process can lead to mottling when
the amorphous silicon crystallizes; 2) there are technological obstacles to increasing
the size of excimer laser and ion injection equipment; and 3) because of the large
number of masks needed, required investment amounts can easily balloon.

Therefore, using LTPS is probably only practical for 4G and 5G substrates.
We think that the commercialization of oxide semiconductor TFTs is needed as a
replacement TFT technology for LTPS. Because of the high electron mobility of
oxide semiconductors, amorphous film can be used, so it is easy to increase the
size; furthermore, existing LCD facilities can be converted, so we think these
technologies are well suited to mass-production of large OLEDs. However, no
attempts to commercialize oxide semiconductors have yet been made (Sharp plans
to mass-produce them for LCDs, but actual yields, etc., are not clear), so many
questions are still unanswered. OLED displays require more complex TFT circuits
than LCD displays, so mass production is more difficult.

LG plans to release an OLED TV that uses oxide semiconductor TFTs in 2012,
while it is not clear at present what TFT technology Samsung will use in its OLED
TV. With commercialization of oxide semiconductor TFTs in sight, we think it likely
that Samsung’s OLED TV to be released this year will use LTPS technology. If this
is the case, we think 8G glass substrates will be divided into six parts, enabling TFT
circuit formation via LTPS (something that is difficult with this technology).

Another issue is that yields and productivity are not high in OLED device film
formation using the vacuum deposition method. In particular, the vacuum deposition
method uses metal masks and coats light-emitting materials in different colors, so
there are technical issues revolving around 1) the ease with which irregularities form
on large OLEDs and 2) the difficulty of improving material efficiency and yields
because of metal mask clogging. Unlike the case of LCDs, a single flaw in the
OLED device means that it cannot be used as a display, so low yields can easily
lead to cost increases.

We thus think that the print method needs to be commercialized as an alternative
film-formation technology to the vacuum deposition method. As it is easy to keep a
lid on capex with the print method, it is easy to cater to the shift to larger panels by
forming films by printing. However, we see two major issues in terms of
commercialization of the printing method: material development (primarily the useful
life of luminescent materials) and refinement of production processes (including
production equipment).

In recent years, there has been rapid progress in terms of material development.
For instance, thanks to improvement in the lifespan of blue luminescent materials,
Sumitomo Chemical plans to mass produce high-polymer materials for the printing
method from 2012. However, production process development remains an issue.
For commercialization, materials and processes need to be refined after panels
have actually been produced, so for now we think a trial-and-error approach will
continue.

In the OLED TVs it plans to launch in 2012, Samsung intends to use RGB coating
to produce color. It is not clear at the moment what technologies Samsung will use
for things like film formation, but we think it likely that Samsung will use vacuum
deposition. However, there is a lot of uncertainty regarding how to solve problems
related to vacuum deposition, so with commercialization of the printing method in
sight, we think for now Samsung plans to use the vacuum deposition method for
mass producing OLED TVs. On the other hand, LG plans to use the white color filter
method to mass produce its OLED TVs. The white color filter method uses masks,
so coating is unnecessary. As such, we think this method is more suitable for mass
production than vacuum deposition.

Demand front: Differentiation from LCD TVs an issue
The ideal scenario from the standpoint of flat-screen TV firms would be that OLED
TVs succeed in capturing surplus margin, as LED TVs were able to do in 2009. At
the same time, given increasingly sophistication and falling prices, it could well be
difficult for OLED TVs to differentiate themselves from LCD TVs. In our view, for
OLED TVs to leverage their performance advantages and realistically find traction
among consumers, prices need to fall via refinement in mass production technology.
The performance of LCD TVs continues to be enhanced and their prices continue to
tumble. Currently Samsung Electronics’ large TVs have impressive specs: a
thickness of approximately 3cm (with the displays themselves less than 1cm thick),
dynamic contrast ratios of 2.5mn to 1, and 240Hz response rates. They sell for
around $3,600. Large TVs (55-inch) from LG Electronics and Sony are also coming
down in price, retailing for $2,000-$3,000 (Figure 20).

On the other hand, while the OLED TVs set to be launched by South Korean firms
are superior to LCD TVs in terms of thinness and picture quality, we think they are
inferior in terms of price (we anticipate a 30%-50% premium) and product lifespan.
In addition to the price issue, existing LCD TVs have already reached impressive
levels of thinness and picture quality, so we think there may be little room for
differentiation in terms of OLED TV performance. Therefore, we think it likely that
traction among consumers for OLED TVs will likely depend on price reductions via
progress for mass production technology.

We also view the modest level of demand for TVs at the high-end of the market as a
potential barrier to the spread of OLED TVs. According to DisplaySearch, shipment
volumes of TVs that cost more than $1,000 account for only around 10% of all TVs.
We also note that in FY3/11, TVs of 50-inches or bigger accounted for a mere 6% of
total TV shipments (5.8mn LCD TVs and 6.5mn PDP TVs). As a result, unless there
are refinements in mass production technology, we do not see the potential market
scale for OLED TVs as being all that large.

Many issues in the way of the use of OLEDs for notebook
PCs and monitors, too
There are many issues in the way of the use of OLEDs for notebook PCs and
monitors, too. These include the following: 1) it is difficult in cost terms to use pricey
OLEDs for low-priced notebook PCs and monitors, 2) many of these devices are
used in office work and frequently only display stationary images, so issues such as
OLED burn-in and lifespan brevity are easily aggravated, and 3) display
performance on par with an FPD TV is widely considered to be unnecessary. We
thus think it will be difficult to create demand for OLEDs here. We envisage the
OLED market for notebook PCs and monitors ramping up slowly and mainly at the
top end, with real market expansion requiring progress in mass-production
technologies.

OLED market projections
We estimate the size of the market by classifying the large OLED display market
into FPD TVs, notebook PCs, and computer monitors. We expect the market for
FPD TVs to get off the ground in 2012 with the launches of OLED TVs by the South
Koreans. Our bearish scenario assumes the ramp-up will be leisurely due to issues
with mass production technology, but we also envision a bullish scenario in which
refinement in mass production technology goes smoothly, resulting in good
progress in OLED TV uptake. As for OLEDs used in notebook PCs and monitors,
we look for diffusion to progress gradually (Figures 21-23).

In our bearish scenario, we assume that it will take time to polish mass-production
technologies for large OLEDs and forecast that the spread of OLEDs for FPD TVs,
notebook PCs, and monitors will be confined to the top end of the market. We
model a market share for OLEDs in FPD TVs of just 0.02% in 2012, 0.1% in 2013,
0.9% in 2015 and 4.9% in 2020, with the market being worth $2.6bn in 2015 and
$5.7bn in 2020.

In our bullish scenario, we assume refinement in mass production technologies (e.g.,
commercialization of oxide semiconductor TFTs and the printing method) goes
smoothly resulting gin good progress for OLED TV diffusion. In this scenario, we
model a market share for OLEDs in FPD TVs of 0.1% in 2012, 0.6% in 2013, 4.3%
in 2015 and 23% in 2020, with the market being worth $8.3bn in 2015 and $15.4bn
in 2020.

LED TVs (LCD TVs that use LEDs as backlights), which appeared in 2008, have
spread quickly. We expect them to account for more than 50% of the LCD TV
market in just five years since their launch: we forecast a share of 55% in 2012 and
41% in 2011, against actual market shares of 18% in 2010, 3% in 2009, and 0.2% in
2008. We think they have spread swiftly for the following reasons: a growing global
eco-awareness, a successful differentiation strategy versus LCD TVs that use
established CCFLs, and falling costs against a backdrop of increases in the supply
of LEDs.

In contrast, we doubt that OLED TVs will spread rapidly in the way that LED TVs
have done, as LED mass-production technologies were already long established,
whereas currently mass-production technologies for large OLED TVs are not fully
developed.

In our view, diffusion of OLED displays for notebook PCs and computer monitors is
likely to progress slowly. Unlike OLED TVs, these monitor applications do not
require sophisticated display capabilities, so we see little reason why there would be
demand for more expensive OLED displays over cheaper LED displays in these
areas. In our bearish scenario, we assume the OLED display diffusion rate will be
0.1% in 2015 and 2.2% in 2020 for notebook PCs and 0.1% in 2015 and 1.8% in
2020 for computer monitors.

OLED lighting poised for take-off
Lighting is a market where we hope to see demand grow as the third application for
OLEDs. OLED lighting will be the fifth generation of lighting, following candles,
electric light bulbs, fluorescent lights, and LEDs, with the light emitted by organic
electroluminescence used as lighting. Unlike fluorescent lights and LEDs, which use
fluorescent substances to emit light, it is possible to produce OLED light that is
close to natural light, so it is easy on people’s eyes and skin. Another key feature of
OLED light is that it is surface emitted, making it possible to brighten whole walls
and ceilings, so it is in the spotlight as a next-generation lighting source that can
create new interior spaces.

In 2011, Panasonic Idemitsu OLED Lighting and Lumiotec started shipments of
OLED lighting panels and lighting firms everywhere committed capex to OLED
lighting, so the OLED lighting market is beginning to ramp up. We see this coming
against a backdrop of improvements that have been made to OLED lighting in the
areas of lifespans and power consumption, among others. Above all, 60lm/W
(lumens per Watt), the level required for the luminous efficiency of environment
lighting, has become a reality, so its seems as though lighting companies are getting
more serious about OLED lighting as part of their investments in environmental
lighting. Also, with the expansion of the OLED market itself, progress has been
made with cuts to the cost of materials and manufacturing equipment, which we
understand has lead to the ramp-up of the OLED lighting market.

Currently, however, OLED lighting is inferior to LED lighting in terms of brightness,
power efficiency, and longevity, so we think it will take time for the OLED lighting
market to expand (Figures 25 and 26). We think progress with light extraction
technologies, the commercialization of the print method, greater longevity for lightemitting
elements, and technical innovations of a host of other areas are necessary
for OLED lighting to spread.

OLED lighting market projections
In making our OLED lighting market projections, we assume that the recent overall
lighting market has been worth around $70bn and that it will grow in tandem with
global growth rates. We split the lighting market by region into major developed
markets and others and split demand into two: demand in areas such as offices and
stores that is relatively more sensitive to the light quality and demand in areas such
as general lighting and industrial applications that is relatively more sensitive to cost.
We then postulate OLED diffusion rates for the various segments and estimate the
potential size of the OLED market (Figure 27).

In our bearish-case scenario, we model an OLED lighting market of $33mn in 2011,
$86mn in 2012, $145mn in 2013, $530mn in 2015, and $3.3bn in 2020.We
conclude that it will take time for improvements to be made in the brightness, power
efficiency, and longevity of OLED lighting, and envisage a leisurely ramp-up for the
OLED lighting market.

By application, we model spread rates in lighting for offices and stores of 4.7% in
2015 and 16.5% in 2020, but only sluggish spread rates in other lighting markets,
including general lighting, of 0.4% in 2015 and 3.5% in 2020. We forecast that the
overall OLED lighting market will be worth $0.8bn in 2015 (uptake rate of 1.0%) and
$5.5bn in 2020 (5.5%). We assume that around 60% of OLED lighting will be for
light sources and then estimate the size of the OLED market itself.

In our bullish scenario, we model an OLED lighting market of $30mn in 2011,
$90mn in 2012, $150mn in 2013, $620mn in 2015, and $5.1bn in 2020. We assume
that OLED lighting really begins to spread from around 2015 thanks to
improvements in OLED lighting performance.

By application, we model spread rates in lighting for offices and stores of 4.7% in
2015 and 18.0% in 2020, and in other lighting markets, including general lighting, of
0.6% in 2015 and 6.9% in 2020. We forecast that the overall OLED lighting market
will be worth $1.0bn in 2015 (uptake rate of 1.2%) and $8.5bn in 2020 (8.6%).