Market Insight

[Display Dynamics] Current state of China’s AMOLED panel industry - To become a giant or remain a dwarf

October 28, 2014

Jerry Kang Jerry Kang Senior Principal Analyst, Emerging Display Technologies & OLED

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Key findings

  • China’s panel makers are actively adopting qualified technologies to mass produce AMOLED panels. 
  • The Chinese government’s policy support encourages panel companies to aggressively enter the AMOLED panel market.
  • At the same time, however, the ever-intensifying price competition of smartphone panels acts as a hurdle to Chinese manufacturers entering the AMOLED market.

 

In 2014, a number of Chinese panel companies have rushed to unveil active-matrix organic light-emitting diode (AMOLED) panel prototypes. So far, as many as five Chinese panel makers—BOE Optoelectronics Technology Co., China Star Optoelectronics Technology Co., EverDisplay Optronics Ltd., Tianma Micro-electronics Co., and Visionox Co.—have rolled out prototypes and at least nine companies are planning to enter the AMOLED panel market. If they all succeed in mass producing AMOLED panels within a year or two, the current AMOLED panel market landscape dominated by South Korean companies may well change to great extent.  

 

Chinese makers adopt market leader’s technology

My years-long interviews with officials from Chinese panel makers conclude that their strategy towards AMOLED panel technology is to rapidly adopt qualified technologies. In fact, companies developing small- and mid-sized AMOLED panels tend to prefer a method that individually vapor deposits RGB subpixels, the technology the industry leader Samsung Display Co. has developed, using 4.5G or 5.5G LTPS TFT. They are also eager to adopt the technology and equipment used in the mass production lines (A1 or A2) of Samsung Display. Those considering producing large-sized AMOLED panels prefer the WOLED method, employed by LG Display Co., using 8.5G oxide TFT. They are actively reviewing and quickly addressing technological issues LG Display has experienced. 

Such technology strategy of Chinese AMOLED panel makers seems fairly efficient. Samsung Display first planned the AMOLED panel business in 2000, successfully mass produced the panel in 2007, and has led in AMOLED panel technology ever since. The moves by Chinese panel makers are designed to narrow the technology gap, quickly ensure their competitiveness in the market by actively adopting the technology and equipment of those that already succeeded in mass production, and advance the time of mass production as much as possible. In addition, they are actively hiring engineers of South Korean panel companies who have taken part in AMOLED panel mass production to tap into their expertise in production and development that are hard to attain from technology and equipment. 

 

Reasons why Chinese panel makers actively pursue the AMOLED business

In any given market, it is not surprising to see newcomers rapidly acquiring technology and gearing up for market entry. That being said, there is another story to Chinese panel makers trying to make it in the AMOLED business.  

Chinese display panel companies have undergone dramatic growth until recently in the large-sized a-Si TFT LCD panel market. As the industry grew, however, plenty of Chinese panel makers boosted their supply capacity for a-Si LCD in a competitive fashion, which resulted in fierce price competition in the global LCD panel market. Consequently, the LCD panel industry, once considered a higher value-added business, has gotten to the point where a company’s going into the black became news. 
In addition, major applications, including smartphones and TVs, started competitively adopting high resolution panels worldwide. Chinese panel makers faced no choice but to introduce high resolution technology such as LTPS LCD for survival.

In a bid to reduce the cutthroat price competition among Chinese panel makers, the Chinese government adopted policies that disapprove indiscriminate practices of increasing a-Si LCD supply capacity. Also, to maintain the high added value of the panel industry, the government instead took a step to foster panel businesses based on new technologies. Lately in China, it is hard to obtain the approval of the government on a plan to ramp up supply capacity having a-Si LCD technology only. On the other hand, it is relatively easy to receive approval for plans to produce new products such as LTPS LCD or AMOLED, which also give companies easy access to policy or even financial support.

BOE is currently in the process of installing equipment to mass produce LTPS LCD and AMOLED. It reportedly received considerable policy support for plant construction from the Ordos and Chengdu city governments in the Inner Mongolia region, in return for its promise to hire more employees and revitalize the market. Visionox and EverDisplay that are preparing for AMOLED panel mass production are found to build plants, partially funded by the local government or organizations.

From the perspective of panel makers, having access to such diverse support clearly minimizes burdens when starting a new business. The current AMOLED panel market is virtually dominated by a specific company and it is unclear how much investment will need to be made for how long. Given the circumstances, it seems only natural that panel makers are lining up to invest in the market with the financial and policy support provided by the central and local governments.

 

Factors adversely affecting the growth of China’s AMOLED industry

While a number of support programs are being prepared to help Chinese panel makers enter the AMOLED market, several factors are found to hamper the mass production.
First, expertise in production is yet to be built. It is true that Chinese panel makers have aggressively introduced already verified AMOLED panel production processes for the past year. But it is not easy to catch up on the accumulated technological know-how of Samsung Display within a short period of time. One of the biggest challenges Chinese panel makers with AMOLED production facility have been faced with is the vapor deposition of an organic light-emitting layer. They were able to buy externally-verified evaporation deposition equipment but more time is required to build internal expertise to optimize the materials, thickness, structure, process conditions, and performance of the light-emitting layer.  

Second, price competition has intensified significantly. The manufacturing cost of Chinese smartphone makers is usually half the level of other global companies. They tend to produce affordable smartphones with slightly lower performance, rather than high-end products that accompany high cost. The price of display panels used for these low-end products can only be lower. And some believe that there is no need at this point to rush and supply products with high resolution AMOLED panels whose productivity is low.  

Third, product differentiation is not great. The Chinese smartphone market does also have high-end products. For this market segment, the local smartphone makers mostly apply full HD (FHD) or higher level panels. For a 5.0-inch FHD product, LTPS LCD is preferably considered. As smartphone makers have every reason to adopt products with verified performance for their high-end smartphone models, many employ LTPS LCD panels from Japanese or South Korean suppliers. In other words, Chinese panel makers’ AMOLED displays, whose mass production just started, are largely considered unverified.

Fourth, Samsung Display has aggressively rolled out low-priced AMOLED panels. China’s smartphone makers have been reluctant to apply AMOLED panels because Samsung’s panels are expensive and there were only a limited number of suppliers in the market. However, lately, Samsung Display has made a clear move to work its way into the Chinese market with low-priced AMOLED panels in order to boost its low utilization rate. The price it is offering is about 120% of that of LTPS LCD models with similar specifications, which nearly tears down the existing price barrier. The gap in price, performance, and production volume between the Chinese newcomers and Samsung Display is already immense. The low-priced AMOLED products offered by Samsung will only make the Chinese panel makers to delay their AMOLED mass production plans. 

 

Outlook for China’s AMOLED panel industry

Due to above reasons, just one Chinese company is expected to start mass producing AMOLED panels within this year. Even in 2015, only three to four companies would follow suit. Even though AMOLED panels are successfully mass produced, the Chinese smartphone panel market is expected to strategically give priority to LTPS LCD. Thus, it would take several more years before AMOLED panels produced by a Chinese panel maker position strong in the market with its own competitiveness.

Yet, there is also a chance that Chinese panel makers, which have been examining AMOLED panel technology and its marketability, would start mass production in two to three years one after another. Therefore, China’s AMOLED panel market requires continued attention.  

 

 

 

Geography
China
Organization
BOE China Star (TCL) Tianma
Research by Market
Displays
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