Mobile devices have, to a large degree, been carrying the positive development of the CE industry in recent years. The high consumer demand for mobile devices offset the lackluster needs for PCs and TVs. From a display perspective that meant that large size displays where replaced with many more smaller displays. Unfortunately one 40″ display panel yields roughly one hundred 4″ displays.
In 2012 and 2013 the TV unit sales dropped by roughly 15 million units. This equates to roughly 1.5 billion 4″ displays or 300 million 9″ displays. While the sum of tablets and smartphones may have grown significantly in those two years, this growth could not have made up for the decrease in TV display panels.
This has led to a relative weakness in the display manufacturing base. We all have experienced times of decreasing display panel pricing driven by manufacturing overcapacity based on weak market demand or new fabs coming online. This is different from the current display industry issues.
In the recent industry downturn, display makers have turned to higher resolution as an option to get a higher price per display area. This trend was strongly driven by the higher pixel density requirements of tablets and smartphones.
With a slight uptick in the TV market, the display manufacturers will have to deal with an increased panel demand. With higher manufacturing capacity utilization will hopefully come better economic times for the display makers. If history is any indication, this cycle will turn quickly into an under supply situation.
Yesterday we all witnessed another well polished Apple presentation with the announcement of the iPhone 6 and the Apple Watch. As many expected, we saw an increase of display area in the iPhone 6 and especially the iPhone 6 Plus. Many will think that this is a rather insignificant development and in line with all the other smartphone makers.
The question is if these changes will influence the display industry at all.
Here is a graph showing some display sizes in relation to their pixel density from Apple, Samsung and LG.
Typically the pixel density increases with smaller display sizes, which makes some sense, as smaller displays may be viewed at a shorter distance to the eye than larger displays. It also shows the disappearing gap between smartphones and tablets. While some smaller tablets and larger smartphones exist in the market than the models from three big CE companies used in this comparison, this comparison is only made for making a general point. Market leaders are best in this kind of comparison as they typically command a large portion of the total market.
While there is still a small gap between phablets and tablets today, this gap may completely disappear in coming years. With Apple still being a major driver in the mobile device business, we can expect other makers to increase their display size in coming models to stay more competitive. This even small increase in display size leads to an increase in used display panel area. For example, going from a 4″ display to a 4.7″ display increases the display area by roughly 40%. If the average 4″ display grows to a 5″ display, the display area increases by roughly 56%. This will of course lead to a much increased utilization of the existing capacity. At the same time the device makers are pushing for higher pixel density, requiring panel makers to invest in upgrading existing fabs.
With increasing TV sales and growing demand for higher priced 4K panels as well as mobile displays, the display manufacturers will have to invest in new production lines. This may happen at a much faster pace than everyone expects today. So far LG, Samsung and others are investing into OLED lines to cover the expected demand for flexible displays. But this will not be enough to cover the increasing demand as described above.
So the display industry may be at a crossroads now. If OLED plants are comparable in investment per units output, this scenario could easily lead to a much faster adoption of OLED technology going forward. On the other hand, if display makers feel that OLED is not competitive with LCD on a dollar for dollar investment, they may build more LCD fabs and so further delay the introduction of OLED technology.
Very interesting times. – Norbert Hildebrand