Market Insight

[Display Dynamics] Rapid flexible AMOLED capacity growth and concerns about future demand saturation

July 25, 2017

Charles Annis Charles Annis Senior Director, Display Manufacturing Technology

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Key findings

  • Flexible AMOLED capacity is growing at a 91% compound annual growth rate (CAGR) from 1.5 million square meters in 2016 to 20.1 million square meters in 2020.
  • IHS Markit forecasts that the tight AMOLED supply in 2016 will continually give way to a growing capacity based glut, predicted to exceed demand by more than forty-five percent in 2020.
  • Rigid AMOLED prices are projected to remain 40% above equivalent LCDs, while flexible AMOLED prices will remain 100% higher. This is expected to limit adoption in mid and low price smartphone segments as well as into new applications such as tablets and notebooks, at least through 2020.

The outlook for AMOLED in mobile applications, particularly smartphones, could hardly be brighter than it is in 2017. With Apple on the verge of adopting flexible AMOLEDs in its iPhones and almost every panel maker in Japan, Korea, and China building new fabs to chase after a piece of the high-end phone market and position themselves to supply next generation display products, the industry in the midst of a flexible display “gold rush.” But therein lay the seeds of concern that producers are moving to supply flexible AMOLED panels faster than the market may be able to absorb them.

Between 2016 and 2020, 18.6 million square meters of new flexible AMOLED capacity—more than thirteen times the industry’s current capability—will be ramped to production. In other words, flexible AMOLED capacity is growing at a 91% compound annual growth rate (CAGR) from 1.5 million square meters in 2016 to 20.1 million square meters in 2020. In 2016, flexible capacity, or factories with the ability to produce AMOLEDs on plastic substrates, only accounted for 28% of total AMOLED capacity targeting mobile applications. This will increase to 80% by 2020 as almost every new Gen 6 and smaller factory built over the next four years will be flexible compatible.

As shown in the graph above on the right, all of the new capacity will also facilitate a rapid increase in flexible AMOLED adoption in smartphones. Nevertheless, so much new flexible capacity is being added it is starting to raise concerns that the market will not be able to utilize all of the potential output.

As shown the graph below on the left, IHS Markit forecasts that the tight AMOLED supply in 2016 will continually give way to a growing capacity based glut, predicted to exceed demand by more than 45% in 2020. Even when a high demand scenario where demand was increased above the official forecast by 10%, 20%, and 25%, respectively, for 2018, 2019 and 2020, the trend continues to constantly shift to a higher supply glut. 

Samsung currently accounts for more than 99% of mobile AMOLED shipments and essentially all flexible AMOLED shipments, and it is also adding new capacity at a significantly higher rate than any one of its individual competitors. The company appears to be pursuing strategy of leveraging its two to three year technology and cost lead over other makers in order to raise the barrier to market entry even higher. As shown in the graph above on the right, if the AMOLED market grows in-line with the current IHS Markit forecast, Samsung will be able to maintain its dominant position and fulfill most global AMOLED demand through 2020 by itself. If the market grows faster than currently expected, Samsung will need to add capacity at a faster rate or cede some of the market to its competitors.

If AMOLEDs offer image quality and form factor advantages over LCDs, and the industry continues to trend toward excessively high AMOLED glut levels, why doesn’t IHS Markit expect faster demand growth through more rapid LCD displacement? The main reason is high AMOLED costs and prices.

As shown below in the graph on the right, AMOLED adoption into smartphones is forecast to grow from 24% in 2016 to 39% in 2020, and grow only moderately after that. However, that 40% represents nearly all of the high-end market. At the same time, and although there will likely be large cost differences between makers due to scale and yield rate variances, on average, high manufacturing costs for most makers will keep rigid AMOLED prices 40% above equivalent LCDs, while flexible AMOLED prices will remain 100% higher. So although smartphone makers targeting mid and low-end market segments may want to adopt flexible AMOLEDs, it is assumed they will be restricted in doing so by lingering high prices. Further challenging makers is the fact that the mid and low-end market segments are expected to account for a substantial portion of future smartphone demand growth.

 The race to add new flexible AMOLED capacity, to win some of Apple’s business, to stay ahead of competitors, to utilize local Chinese government funding while the opportunity still exists, and to avoid being left behind as FPDs transition to a new technology is creating a capacity bubble ahead of market maturation.

To rectify this dilemma and absorb all the new capacity in the pipeline, flexible AMOLEDs will need to expand beyond smartphones to tablets, notebooks and new form factors enabled by foldable displays. Samsung is already considering expansion of applications, particularly larger ones, as it plans its new enormous A5 factory that could eventually reach more than 300,000 substrates per month of Gen 6 flexible AMOLED capacity.

Ultimately, the rapid growth of flexible AMOLED capacity and the resulting increase in panel production will help to lower costs, increase yields and improve quality. In the long-run this will spur further adoption into more applications. Samsung may well be able to smoothly make this transition by metering how fast it adds capacity at A5 according to technology and market development. However, the challenge for most other makers, as they ramp their new flexible AMOLED fabs in 2018-2020, is how will they be able take share in niche high-end market segments, or push high cost panels into the mid and low price segments. Based on modeling of current forecast demand to capacity, all the recent excitement surrounding the outlook for AMOLEDs may transition to a difficult period a few years down the line as the industry cycles through a period digesting the forty-two new flexible fabs now being planned and constructed.

Research by Market
Displays
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