February 29, 2012 — Samsung Electronics Co. Ltd. recently spun off its liquid crystal display (LCD) operations, which IHS analysts say will boost the short-term competitiveness of the business, and may herald the long-term dominance of active-matrix organic light emitting diode (AMOLED) in display technology, according to the IHS iSuppli Display Materials & Systems Service.
Prior to 2011, Samsung’s LCD business unit had predominantly been profitable, buoyed by rising demand for LCD TVs in particular. In 2010, the LCD unit recorded an impressive operating margin of 6.7 percent, with annual revenue growing to 30 trillion Korean won. This changed dramatically in 2011, with the division recording four straight quarters of unprofitability, leading to an operating loss of 750 billion won in 2011.
Samsung’s LCD business is becoming a new company, Samsung Display Co., on April 1. Samsung Display Co. may well merge then with Samsung Mobile Display Co Ltd., a joint venture between Samsung Electronics and Samsung SDI Co. that makes both LCD and AMOLED displays. In addition to merging with Samsung Mobile Display, Samsung Display Co. may combine with S-LCD (A former Samsung/Sony Corp. joint venture for Gen-7.5 and newer fabs) in an effort to shore up its flagging business in television LCD panels.
Samsung’s LCD division is the second-largest LCD panel maker globally, in terms of unit shipments. Samsung Mobile Display is the top AMOLED display supplier, noted Sweta Dash, the senior director for liquid crystal displays at IHS. The potential merger represents combining the future-looking OLED technology with "internal prodigious experience and market influence in the LCD segment." AMOLEDs offer wider viewing angles, faster response times and lower power consumption than LCDs, and do not require the added power consumption and bulk of backlights. OLEDs are also compatible with flexible substrates.
In 2011, Samsung Electronics had the second-largest market share (22.9%) for global large-sized LCD shipments (see Table 1). Samsung Mobile Display dominated in AMOLEDs, with 85% share (see Table 2), although the new market is a fraction the size of the established LCD sector. Global AMOLED shipments are set to rise at a compound annual growth rate (CAGR) of 29% from 2011 to 2015, compared to 5.8% for LCDs.
AMOLEDs already have been used in large volumes in high-end Android smartphones. Samsung and LG Display have demonstrated 55" AMOLED TV prototypes at the Consumer Electronics Show in January.
AMOLED panel production costs are considerably higher than LCD fab, especially for 55"+ TVs. AMOLED manufacturing only takes place at Gen 4.5 and 5.5 fabs, which can make — at maximum — 2 55" displays per substrate. In contrast, 8.5-generation LCD fabs can make 6 55" displays on a single substrate. AMOLED costs are exacerbated by lower yields and a limited materials supply ecosystem. This costs barrier will abate over several years, IHS predicts.
|Table 1. Large-sized LCD panel market rankings in 2011 (by percentage share of unit shipments). SOURCE: IHS iSuppli February 2012.|
|Rank||Company||Market share (%)|
Samsung Mobile Display is making the largest investment in AMOLED manufacturing, planning a Gen-8 fab in H2 2013. Additionally, LG Display, Chi Mei Innolux, AUO Irico and Tianma are all aiming to enter or expand their AMOLED operations. LG Display’s current AMOLED capacity is limited to a 4.5 Gen fab, where the company is making panels for smartphones. However, LG also plans to commence operations at its own Gen-8 AMOLED fab in 2013.
|Table 2. Global AMOLED panel market ranking in 2011 (by percentage share of unit shipments). SOURCE: IHS iSuppli February 2012.|
|Rank||Company||Market share (%)|
|1||Samsung Mobile Display||85|
With its new independence from Samsung Electronics, Samsung Display Co. can "develop its own innovative products, expand its customer base and establish strategic partnership with other brands," said Dash, noting that is can attract many more customers without concerns about competitors with Samsung Electronics. Conversely, Samsung Electronics can source panels from multiple suppliers.
LCD panel suppliers have been losing money for the last four quarters due to the global economic slowdown, which has particularly hit television sales. This comes on top of over-expansion of fab capacity and fierce competition. More new suppliers from China are starting to enter the LCD market with new Gen 8.5 fab capacity. Because of this, the industry is bracing for more competition and further price erosion in the coming years. The antidote to lower profits is shifting production to larger Gen-6 and 8.5 fabs, as well as moving away from television panels and toward more profitable tablet and smartphone applications.
Also read: Large-size LCD panel prices stabilize