Big Picture: OLED Display

Electronic displays are an underappreciated yet integral feature of our digital economy—they are literally all around us. A quiet revolution is taking place in this market, as the dominant liquid crystal display (LCD) technology yields ground to a superior substitute: the organic light-emitting diode (OLED).

OLED displays produce more vibrant colors than LCDs and can be used to make flexible screens. Although OLEDs are still relatively expensive, rising demand is expected to increase production and drive down prices. By most industry indications, the OLED display seems to be the future.

It is therefore imperative to understand the concentration of OLED supply chains in East Asia, even as the United States remains a significant source of OLED inputs. We begin by examining the market ascendancy of OLEDs.

Rising Demand for OLED Displays

The key demand driver for OLED displays is the smartphone market. In addition to being a mini-computer in your pocket, improvements in processing power and larger screen sizes are turning smartphones into the “ultimate TV” for streaming content and playing games.

OLED technology is superior to LCDs for smartphone displays because OLEDs use organic materials to illuminate displays that are thinner, brighter, and higher contrast, are faster but more power-efficient, and are viewable from wider angles. OLED smartphone shipments are expected to skyrocket from 390.6 million units in 2016 to 812.4 million units in 2021, with the proportion of OLED displays rising from 17% in 2015 to 43% by 2024.

AMOLED Smartphone Shipments (million units)

Note: AMOLED is the major type of OLED display used in smartphones. Source: IHS.

Smartphone by Type of Display (%)

Source: IHS.

Beyond smartphones, OLED displays are also penetrating smart wearables (like watches), head-mounted displays for virtual reality, televisions, and tablets. The latest applications include digital signage, interactive kiosks, and automobile displays, particularly in autonomous vehicles. These OLED products are expected to achieve a compound annual growth rate (CAGR) of 23%, even higher than the 15.7% CAGR projected for OLED smartphones.

AMOLED Non-Smartphone Shipments (million units)

Source: IHS.

To accommodate this demand, new and existing manufacturers have been expanding OLED capacity over the last decade. By 2022, OLED production capacity is projected to be almost 25 times greater than what it was in 2012.

OLED Capacity (million meters2)

Source: IHS.

Stronger demand for OLED displays will also translate into greater revenue for OLED producers. The market for OLED flat panel displays is forecast to increase from $12.2 billion in 2015 to $58.7 billion in 2024, when OLEDs will constitute over 40% of flat panel revenues, up from 10.7% in 2015.

Flat Panel Display Revenues (USD billions)

Source: IHS.

A key distinguishing feature of OLED displays compared to LCDs is their potential flexibility, as OLED displays are lighter and thinner and can be engineered to bend, curve, and fold.

Flexible OLED displays are only just starting to emerge, and their full commercial potential is still unrealized. But industry observers seem confident that flexible displays will soon become a common choice. Shipments are anticipated to surge from 1.5 million units in 2019 to 53.4 million units in 2025, with the market hitting $24.5 billion by 2023.

Flexible Display Panel Shipments (million units)

Source: IHS Markit.

Flexible vs. Rigid AMOLED Shipments (%)

Source: UBI Research.

Falling Cost of OLED Displays

OLED technology has not yet displaced LCDs mainly because it is costlier to produce. But as demand for superior displays and flexible devices increases, OLED production will invariably grow, creating greater economies of scale.

For example, from 1Q 2015 to 2Q 2017, the cost of manufacturing a 55-inch UHD TV panel with an OLED display fell from 426% of LCD costs to 245% of LCD costs. If this trend persists, as seems likely, then OLEDs could reach cost parity with LCDs in the coming decade, accelerating OLED’s adoption as the preferred display technology by major producers.

Unit Manufacturing Cost of 55-inch UHD TV Panel (USD)

Source: IHS; Statista.

East Asia is the Epicenter of OLED Display Production

If costs continue to fall—and lingering technical issues like “burn-in” are resolved—then demand for OLED technology should rise accordingly. As such, OLED displays will be ubiquitous in the coming decades of our digital future, touched every few minutes by billions around the world.

Because electronic displays are a capital-intensive, volume-based business, OLED manufacturing will naturally concentrate in regions and countries that can produce these displays at the largest scale and at the lowest cost.

The industry was until recently dominated by South Korean companies, especially Samsung, but China’s BOE is now the world’s second-largest producer of OLED smartphone displays. Corning and UDC are the major American players in the sector because they control market-leading technologies for key inputs like high-tech glass and organic materials.

Mapping the highly-concentrated OLED supply chain is thus essential to understanding the risks and opportunities for a product that is becoming a crucial component of consumer lifestyles, workplace productivity, and even military hardware.