Some years ago, a group of academics studied the LCD industry and found that much of the rapid growth of the LCD business was a result of the cooperation between different LCD-making companies. Although each company did a lot to guard detail secrets, they basically all bought similar glass and LC materials and used equipment from the same suppliers (photo lithography etc). The wide use of the same technologies meant that there have been genuine economies of scale. When there are a lot of G8 fabs, the equipment makers can save a lot of design cost. Even if you are only making four examples of a machine, the design cost would reduce dramatically, compared to one. Further, multiple installations mean a lot of learning.
The side effect of this collaborative competition is that there are a lot of engineers in Asia that know how to make an LCD, there are a plenty of equipment suppliers and materials makers, and so it’s not that difficult to set up a G8 LCD fab. (Of course, in absolute terms, it’s not easy and it’s trickier still to develop the very high level of process stability needed for profitability, but it’s not as difficult as, for example, moving chip making to a new level of accuracy). The Chinese have been able to get into the business by basically throwing money at the task, although it has also helped to find some partners.
The down side of this development has been that it has been almost impossible for any individual panel maker to get ‘clear blue water’ between itself and any other supplier in costs. Combined with a relentless mentality of trying to maximise market share, the effect of this sharing of knowledge and technology has meant that it has been almost impossible to make profit despite the huge success of the technology as a whole. The phrase ‘profitless prosperity’ was popularised in the 1970s, when the aluminium business found itself in a similar financial position, but has been applied to the technology sector many times in recent years. It seems very accurate to describe the LCD business.
David Barnes of Bizwits made an analogy at the SID Business Conference that developing OLEDs is like exploring new islands. If everyone that’s in the LCD business gets to the new island of OLED, it may be very hard to make any money, but if only one or perhaps two do, then there are really good profit possibilities. At the conference, it was also said that engineers with good OLED experience can get ‘sign-on’ bonuses measured in the millions of dollars if they are prepared to move to China. This level of tension highlights the battle to not only get to the island, but also the need to make sure that others cannot get there, at least for a significant time.
Companies can use patent law to protect their inventions, but the disadvantage of this is that in order to get the protection, you have to publish the information. Where IP protection may be less rigourous, publishing a patent simply tells competitors how to approach a problem. In that case, it may be better to use secrecy to avoid information getting out. That is clearly the policy of Samsung, which is the massively dominant maker of OLEDs today. At SID last year, the company didn’t even show its shipping OLEDs, let alone anything from the development labs. At this year’s show, there was nothing that was not ‘close to market’.
So, the legal battle between LG and Samsung is just an opening skirmish in what may be a long battle by Samsung to make it as difficult as possible for others to get to the island that it is on. That island is the successful mass production of AMOLEDs.