Liquid-crystal display (LCD) screens were expected to slowly fade and
die, giving way to lighter, thinner and tougher organic light-emitting
diode (OLED) panels in everything from smartphones to televisions.
But
LCD is refusing to go quietly as its picture quality keeps getting
better. At the same time, the major backers of credit card-thin OLED
panels - led by Samsung Electronics Co and LG
Electronics Inc are struggling to make the technology cheap enough to
mass produce. The two South Korean firms this year showcased 55-inch
(140 cm) OLED TVs, but priced at around $10,000 - 10 times that of an
LCD equivalent - they have yet to reach store shelves.
OLED
displays, used on Samsung's Galaxy S and Note smartphones, have been
touted as the future display model to replace LCDs across the consumer
electronics spectrum from TVs to computers, laptops, tablets and
smartphones. OLED is more energy efficient and offers higher contrast
images than LCD, and is so thin that future mobile devices will be
unbreakable, and will be able to be folded or rolled up like a
newspaper.
But OLED panel makers such as Samsung Display and LG
Display have yet to address major manufacturing challenges to lower
costs to compete against LCD panels.
At the same time, LCD panels,
which are used on 9 of every 10 television sets, are still evolving and
show no sign of giving way in this latest battle to set the global
standard - less than a decade since LCD effectively killed off plasma
screens.
"OLED still has a long way to go to become a mainstream
display, as it has to become bigger and improve picture quality," said
Chung Won-seok, an analyst at HI Investment & Securities. "The use
of OLEDs will continue to be confined to small displays at least for the
next 2-3 years. Its usage as a mainstream TV panel is only likely in
2014, but even then there's a possibility of intense competition with
LCD TVs as that technology keeps improving."
According to
DisplaySearch, it will take another four years for OLED screens to
capture less than a tenth of the global TV screen market.
Pixel war
Far
from fading, LCD panels now offer better picture quality - up to four
times better than OLED - and use less power, creating robust demand from
smartphone and tablet makers.
As has often been the case, Apple
Inc moved the goalposts by upgrading the display resolution for its
iPhone and iPad, still the high-end LCD market's gold standard,
prompting rivals to upgrade their display panel qualifications. Analysts
at Macquarie predict Apple will adopt high-resolution screens for the
MacBook Air and iMac monitor next year, accelerating the industry's
shift to high-resolution displays.
"It's only a matter of time
(before) other high-end notebook companies such as Sony Corp, Toshiba
Corp and Samsung upgrade their screens to high-resolution to compete
with Apple's MacBook series," Macquarie analyst Henry Kim wrote in a
recent client note.
Rivals are taking note.
Taiwan's HTC
Corp has introduced the Droid DNA smartphone with a 440 pixel per inch
(ppi) density - the sharpest smartphone screen yet, with far higher
resolution than the iPad's 330 ppi and the iPhone 5's 326 ppi. Samsung's
Galaxy S III, which uses an OLED screen, has 306 ppi density.
"The
pixel war is an absolute bonanza for LCD makers," said Kim Byung-ki,
analyst at Kiwoom Securities. "Manufacturers from LG Display to Samsung,
Sharp Corp, AU Optronics Corp and Chimei (Innolux) all will gradually
convert their traditional lines into more high-end product fabs, and
that will curtail supply and boost profitability."
These
higher-resolution panels cost more than double the commodity-type LCD
screens, boosting panel producers' profits. Even Samsung, the standard
bearer for OLED panels and also a major LCD manufacturer, is actively
promoting LCD screens for tablets and laptops over OLED, said a person
familiar with the matter, who was not authorised to talk to the media so
didn't want to be named.
Sharper resolution LCD TV screens also mean OLED is struggling to make inroads in that market.
Both
Sony and LG Electronics now sell ultra HD (high definition) LCD sets
that boast four times the picture quality of HD TVs. The two firms,
which are selling 84-inch TVs, aim to reduce that size to cater for more
popular smaller sets.
In tight supply?
To squeeze more
pixels per inch, panel makers are upgrading their thin-film transistor
(TFT) panel production facilities to new IGZO or LTPS processing
technologies that require almost twice as many processing steps and
which suffer higher faulty product rates and lost output.
Japan's
Sharp is the frontrunner in IGZO technology, which uses indium gallium
zinc oxide instead of amorphous silicon, in panel manufacturing. LG
Display, a major supplier to Apple, is investing 1.2 trillion won by
end-2013 in its production of low-temperature poly silicon (LTPS) panels
- a technology used to make screens for the iPhone and iPad.
While
new technologies can be game-changers, these panels are not simple to
produce, limiting availability and driving up manufacturing costs. Some
warn of an LCD supply shortage.
"The LCD industry is improving
more strongly than expected and panels are likely to be in short supply
from 2013, as manufacturers upgrade their lines to increase high-end
products. This requires more processing time and steps, reducing total
output," said Kim Dong-won, an analyst at Hyundai Securities.
Converting a line to IGZO and LTPS processing can cut LCD output by 30-70 percent, according to BNP Paribas.
As
LCD prospects improve, LG Display, the world's top LCD maker, swung to a
quarterly profit in July-September, ending a run of seven straight
quarterly losses.
LG Display is expected to continue its solid
performance, as Apple buys fewer parts from rival Samsung and moves more
to high-end displays on a wider range of its products. LG Display
shares have risen by around a third in 3 months, double Samsung's gains.
In Taiwan, AU Optronics shares are up 41 percent over that same period
and Chimei is up 45 percent. Shares in cash-strapped Sharp hit a 2-month
high on Wednesday after the company secured an up to $120 million cash
injection from Qualcomm Inc, which will help it fund development of its
IZGO technology.
As the global TV market is forecast to shrink 1-2
percent next year, panel makers with higher exposure to the booming
mobile markets will lead a recovery, say analysts, though some caution
that shares may be rising too fast.
"LG Display and its peers are
actually sowing the seeds of the next cycle downturn by doing what they
always do - wherever they see a profit opportunity, they focus on it,
adding capacity and dissipating the excess returns," said Stanford
Bernstein analyst Alberto Moel.
© Thomson Reuters 2012