South Korean IT Display Manufacturers Replacing LCD with OLED, IHS Markit Says

South Korean IT Display Manufacturers Replacing LCD with
OLED, IHS Markit Says

LONDON (October 4, 2016) – Due to increasing capacity from
China, South Korean LCD panel makers are quickly realizing that LCD
displays profitability may eventually erode, due to growing capacity and
price competition from China, so they are betting their future on organic
light-emitting diode (OLED) displays. Because of lower profit margins and
slowing market growth, the IT display category has become the first product
line that LCD display manufacturers are quitting, according to IHS Markit
(Nasdaq: INFO), a world leader in critical information, analytics and
solutions.

Samsung Display was the first company to do so, selling a fifth
generation (Gen 5) fabrication plant (fab) to a Chinese touch and module maker
last year. In the future, more fab restructuring is expected, especially
the facilities dedicated to making IT panels.

“Brands like HP and Lenovo expected notebook panels to be in a
surplus situation, and they were therefore keeping their panel inventories at
very low levels,” said Jason Hsu, senior
principal analyst, IHS Markit. “This shift from Samsung Display
could cause some brands to experience panel shortages in the third quarter of
2016.”

BOE to possibly double its panel shipments this year

Samsung Display delivered 30 million notebook panels in 2015,
according to the latest information from the IHS Markit Tablet
and Notebook Display Market Tracker. With the
company’s latest fab reorganization plan, notebook PC LCD panel shipments could
fall to 12 million units in 2016 and to 4 million in 2017. There will be an 18
million-unit gap this year, which means brands might not be able to find other
sources to keep up with production needs.

When reviewing the supply chain mix in the first
quarter of 2016, it is clear that HP has been affected by these changes more
than other companies, with shipments from Samsung Display down from 1.1 million
units in first quarter to 350,000 units in the second quarter. However, HP has
shifted its orders to other panel makers to secure enough panels for itsproduction
needs, for example, Innolux.

BOE is another panel maker benefitting from the exit of Samsung
Display from this market. Panel shipments from BOE increased from 4.9 million
units in the first quarter to 7.2 million in the second quarter. BOE is
expected to grow itsnotebook business to more than 36 million units
in 2017. BOE first began to supply panels for notebooks in 2009, and ithas now become
one of the largest IT panel suppliers. Furthermore, BOE has a Gen8 fab
in Chongqing, China — near the world’s largest notebook production base.
In fact, notebook panel shipments from the Chongqing fab are expected to grow
quickly next year, thanks to the more efficient logistics.

Chinese and Taiwanese makers to increase unit shipments of
premium panels

LG Display and Samsung Display used to supply Apple with
notebook panels; however, the fab re-organization — especially the
reallocation of oxide capacity — has increased Apple’s concerns about a
potential panel shortage and possible low yields. For this reason, Apple
is expected to add another panel supplier for its new MacBook Pro, to diversify
the risk from Samsung Display business changes. For its legacy MacBook Air line
of notebook PCs, Apple is considering diversifying its supply chain to Chinese
makers, which is the first time Apple will use LCD panels from China. 

Samsung Display’s exit from the LCD display business has also
affected the supply of wide-view-angle in-plane switching (IPS) and
plane-to-line switching (PLS) displays. Samsung Display has been one of the
major suppliers to offer wide-view-angle panels, and its shipment volume is
second only to LG Display.

In order to source IPS and PLS panels, brands must
find other sources to replace Samsung Display, after the company begins to
reduce production. AUO is one of the qualified candidates, and apparently it
is receiving more orders from notebook PC brands. AUO,
Innolux and other Taiwanese manufacturers and BOE and other Chinese suppliers
are all expanding IPS panels to respond to increasing panel requirements.