LCD to OLED Shift Accelerates for Koreans

IHS Markit has confirmed the switch in strategy from LCD to OLED by the Korean panel makers because of growing capacity and price competition from China. As we have previously reported, Samsung has already sold one fab to China (Truly) last year. It is expected to stop production at another G7 fab by the end of the year. 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.

“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 May Double its Panel Shipments in 2016

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 reorganisation 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 its production needs, for example, Innolux.

BOE is benefiting 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 its notebook business to more than 36 million units in 2017. BOE first began to supply panels for notebooks in 2009, and it has 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-organisation — 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 have used 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.

Analyst Comment

Samsung has made PLS (IPS) panels for some time, but has always prioritised VA technologies to support its TV business. Given the likely drop in capacity with Samsung Display moving from being a general merchant supplier to becoming very largely a supplier just for the in-house TV business, as Ross Young pointed out (Vendors Shutting Down a-Si TFT LCD Fabs) some months ago, it would be understandable if it just focused its LCDs on VA. Samsung’s notebook business has reduced its annual targets and the company no longer seems to have global ambitions in that segment. (BR)