Key Takeaways
- The future is increasingly digital and much human interaction with digitization will occur through high-definition glass touchscreens. Already ubiquitous, such screens are spreading beyond consumer electronics to surfaces in offices, homes, and vehicles.
- OLEDs are becoming the industry standard for display technology. The OLED display market is expected to experience strong growth in coming years, driven by demand from smartphones, TVs, tablets, wearables, and even automotive. Production volumes should respond to rising demand, leading to falling costs that could soon reach parity with existing LCDs. Because OLED is a superior display technology that also enables flexible devices, when it overcomes the cost challenge, OLED will almost certainly supersede LCD.
- As OLED displays will be integral to our economic future, it is important to know how their supply chains are concentrated overwhelmingly in East Asia—mostly in South Korea and China, with Japan a distant third. This is largely because those countries are also where the consumer electronics industry, the largest source of OLED demand, is based.
- The most important segment of the OLED supply chain is the midstream manufacturing of various critical display inputs. This happens to be an area in which some American firms have a significant presence. In particular, New York-based Corning is the largest supplier of smartphone glass. UDC, a US firm that makes organic materials needed for displays, is a major supplier to both South Korean and Chinese OLED manufacturers.
- These US firms have competitors in Japan and Germany, but they control key technologies and far outspend their rivals on R&D. Corning is estimated to have spent 20x more on R&D than Japanese manufacturers from 2013-2017. Corning has also made it costlier for display manufacturers to switch suppliers by co-locating its facilities with customers in China and South Korea. This makes sense because producing both glass and organic materials is very capital intensive, so producers benefit from being where end demand is robust.
- When it comes to the upstream segment, largely composed of the silica sand that is the main ingredient in glass, there’s presently little risk to supply, though over-mining could be an issue down the line. But the monopolization of downstream OLED manufacturing among a handful of companies in South Korea and China could pose a risk. With South Korea maintaining a 90% global market share in terms of OLED sales, some device makers have recently sought to diversify suppliers. Recent economic skirmishes between Japan and South Korea have only exacerbated this dynamic.
- One supplier that stands to gain from the latest frictions in East Asia is China’s BOE, which also happens to pose the greatest long-term challenge to South Korean producers in the OLED displays market. The Chinese firm can easily access state financing and tap an enormous domestic market. Although BOE still trails Samsung on cost and yield rates, it is catching up fast. Moreover, BOE could exploit the recent push by OLED display customers to reduce dependency on South Korean manufacturers and bolster its own market share.
- OLED display supply chains demand the attention of policymakers and market participants because it will soon become a commodity product that fuels our digital economy. Consumers use screens for productivity, communication, commerce, and entertainment. Both blue-collar and white-collar workers depend on screens to do their jobs. Militaries compete over better screen technologies for training simulations, head-mounted displays, and vehicular control panels. Disruptions to OLED supply chains could threaten to increase consumer prices, interrupt business operations, and potentially hamper certain military needs.