News is abuzz today with the Reuters report that Sony and Panasonic are in talks to develop next gen OLED TVs. The media company’s Japan unit quotes two security analysts Masayuki Otani, chief marketing analyst at Securities Japan, and Myojo Asset Management’s CEO, Makoto Kikuchi with knowledge of the deal that most likely includes a Taiwan-based fab maker AUO.
Sony refused to confirm or deny the reports but Panasonic did confirm work on the technology through its corporate spokesperson, Kyoko Ishii who said, "The content of the report is not announced, Panasonic will continue its development and verification of OLED based on the result of research the company has been doing at its laboratories. The timing of the commercialization of OLED has not been decided yet."
For both Sony and Panasonic, fiscal 2011 ended on March 31st and the results for the once titans of the TV industry, wasn’t pretty. In fact the three top Japanese TV brands (that includes Sharp) all lost money-again in 2011 with Sony (-$5.78B) and Panasonic (-$9.9B), suffering record-breaking losses and Sharp not doing much better with a loss of $4.7B for the year.
Factors include the ASP (average selling price) plunge for flat screen TV sales and a strong Yen to US dollar that made Japan brand sets more costly in the global market. Even mother nature wasn’t cooperating with flooding disrupting component suppliers in Thailand for the Japanese set makers; all this on top of the continuing tsunami recovery efforts from Japan’s March-2011 force majeure.
Toshiba was the only one of these four Japanese brands to turn a profit in the period with $770M mostly on smartphone component demand and efforts of non-display related businesses like its steam-powered turbines. Even so, the company saw net profits drop 46.5%, operating profit was down 14% and sales down 4.7%. Note: For a good review of Q1′12 financials and industry trends, see Friday’s Display Daily by Norbert Hildebrand.
Suffice it to say these display makers are looking for a way out of the declining ASP cycle and one big bet is AMOLED TVs. Both Samsung and LG are on record with commitments to provide the next generation display technology this year with prices that may start in the $8K range. But we found a recent AMOLED TV price forecast from NPD DisplaySearch that reckons the Korean 55-inch models shown at CES will drop to $6K by Q1′13, and half of that ($3213) by Q1′14, and half again by Q4′15 ($1515). The chart does contain the caveat, "there is a great deal of uncertainty around this."
But these numbers may not go far enough. For example, back in April, DigiTimes reported that by 2013 the price premium of AMOLED TVs over LCD technology was predicted to be in the 30% range, and said AUO believes the new OLED technology will account for 5% to 10% of the Taiwan-based company’s overall revenue.
Both Sony and Panny have been in the OLED display technology game for some time. Sony currently sells a 24.5-inch AMOLED based professional grade master monitor (BVM -E250) that retails for north of $23K, far from a mainstream price point, and one that even makes the Korean $8K look good. In 2007, Sony showed its first commercial OLED prototype "TV" an 11-inch model at CES that included a 960 x 540 pixel resolution display (XEL-1) that began selling commercially in Japan in December that same year.
For its part, Panasonic is on record researching the technology and is in a joint partnership with Sumitomo Chemical as far back as 2009. Back in April Asahi Shimbun Digital (Japan language) reported Panasonic was investing between $245M to $370M in a Gen6 OLED TV pilot line at Himeji. The paper also reported on April 9th, 2012 that Sony was in negotiations with Taiwan display maker AUO for its AMOLED panel production.
So we find ourselves at yet another display technology crossroad. And like before, big bets are being made on technology that will determine winners and losers in the display space. But even making the right investment at the right time, like Sharp’s decision to get into LCDs early, contrasted with Sony’s delay is no guarantee of success. Both are losing money now, albeit arguably for two completely different reasons. What is important to note is that to remain relevant in the TV industry, AMOLEDs are going to be a requirement and partnerships like Pana-Sony with an AUO kicker, may be the best road to profits for these CE titans to follow.