Market Insight

Panasonic and Sony to collaborate on OLED

July 01, 2012

Tom Morrod Tom Morrod Research Director | Consumer, Displays, Media, Security & Telecoms

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Japanese consumer electronics manufacturers Panasonic and Sony will collaborate together on development and production of OLED panels, for televisions and large sized displays. The two companies will work together during 2012 to jointly develop printing-based methods for OLED displays, with the aim of establishing mass-production technology by 2013. It has not yet been declared whether the two companies will manufacture OLED panels jointly or separately once the technology has been developed.

South Korean manufacturers LG and Samsung both demonstrated their Full HD, 55-inch OLED TV screens at SID Display Week in June 2012, with LG having already launched low-volume prototypes into the commercial market. Sony were originally the first major TV manufacturer to launch a commercial OLED product, with small-size 11-inch XEL-1 OLED TV launched in 2007, but ceased production in 2010, whilst LG launched 15-inch OLED TVs commercially in 2009.

The move from Panasonic and Sony marks an important development in the current race to produce competitively priced, commercially available OLED TV sets. Both LG and Samsung have taken an early lead in this market, reaching the point of producing high-quality, 55-inch OLED TVs - via panels produced by sister companies LG Display and Samsung Display respectively. However, with neither company yet capable of mass producing the panels to deliver significant volumes at a competitive prices there is still an opportunity for other manufacturers to position themselves to compete during the early stages of OLED - particularly with the OLED TV market projected to remain nascent until 2014, when there will be 2.8m shipments (in a market of over 250m units).
There are several reasons why the early stages of OLED will be significant. Firstly, in the long-term OLED TV looks well positioned to be the screen technology to succeed LCD, with the market expected to reach 72m unit shipments by 2020 - so early market leaders will claim an important advantage amongst consumers that could take years to overcome. OLED TVs are capable of near-infinite contrast ratios, true black pixels, a thousand times faster response time and sub 5mm thickness and sub 10Kg weight. Furthermore, with OLED technology not requiring any backlighting (which accounts for approximately 15 to 20 per cent of the current cost of manufacturing an LED TV) once large-scale, more efficient production of OLED panels comes into play, the price difference between OLED and LCD panels will not be too dissimilar.
This leads on to the second point - in a low-margin, highly competitive business, the early adopters market offers manufacturers an opportunity to make higher margins on millions of TVs. IHS Displaybank forecasts that in 2015, the average cost of an LCD panel will be $286, whilst the average cost of an OLED panel will vary between $500-$700, depending on the technology used. Yet in 2015, the typical selling price of an LCD TV will be just $570, whereas that of an OLED TV will be $2,020. Assuming an additional $400 additional price required for an OLED panel, there will be an extra $1000 worth of revenue for the 4.8m OLED TV sets shipped in 2015 - or, more significantly, $4.8bn worth of profit, to be claimed by TV manufacturers. With prices of OLED TVs expected to significantly fall to sub $1,000 in late 2016 and early 2017, there is a window of perhaps two or two and half years, starting in 2014, when manufacturers can achieve potentially huge profit margins from OLED TV sales.
The decision for Panasonic and Sony to effectively cooperate together on OLED technology development is a sign of the urgency for both companies. It will take a year or two for any manufacturing facilities to be constructed for large scale OLED development, so the technology needs to be finalised by 2013 at the latest. Both Sony and Panasonic have hopes of printing OLED layers onto substrates - a technique which is currently not used by the major manufacturers, who use vacuum evaporation to deposit the organic layers. Printing technology potentially offers several advantages, not least the fact that it efficiently utilises materials (materials make up approximately 30-40 per cent of panel costs, and depositing techniques typically put excess material onto the substrate, much of which is then removed in later processes). However, unless the two companies can make this a viable procedure in the short-term, they run the risk of missing out on the early adopter market, and of strengthening the position of Samsung and LG as market leaders.


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