The smartphone market is expected to experience growth in shipments in 2020 after three years of decline. Brands are hoping to drive replacement demand with introduction of 5G products at a wide range of prices.
The push for 5G adoption in many different countries, and especially in China, is driving our growth forecast. The introduction of 5G products needing slimmer displays to accommodate 5G-enabling components will increase flexible OLED display demand. However, recent news of the coronavirus outbreak in China has created short-term disruptions both in the demand and supply sides, creating uncertainties. If the situation can be controlled and resolved in the near term, stronger growth can still happen.
Affordable 5G products: Driving growth
According to IDC’s press release in November 2019, the worldwide smartphone market is expected to grow 1.5% year over year in 2020 with shipment volumes of just over 1.4 billion. IDC expects 190 million 5G smartphones to ship in 2020, accounting for 14% of total smartphones shipped.
The company expects China to be a leader in terms of 5G volume but also conveyed that other important markets like the U.S, Korea, United Kingdom, and Canada are expected to help drive 2020 volume. The IDC press release noted that accelerated 5G adoption globally will depend a lot on factors like the arrival of 5G networks and operator support, as well as substantial price reductions to offer more affordable 5G devices.
Already there have been many introductions of affordable 5G smartphone devices. TCL announced 5G smartphones with Qualcomm’s 765G priced below $500 at CES 2020. Xiaomi recently introduced the 5G “Redmi K30” with the price reaching below $300. Many smartphone brands including Samsung, Sony, Oppo, Vivo and others are expected to showcase new 5G models at MWC 2020 at the end of February.
While flagship 5G products for many brands will be above $1000, the availability of lower cost sets in the below $500 price range is expected to drive replacement demand to increase. Smartphone manufacturers will also show new versions of foldable phones. Samsung is expected to show a new design foldable flip-phone based on an OLED display but with ultrathin glass rather than plastic. Apple is also expected to introduce 5G iPhones in the 2nd half of 2020. These trends will help to drive flexible OLED display demand.
The introduction of 5G-based products needing slimmer, lighter, lower power consumption displays to accommodate 5G-enabling components will increase flexible OLED demand. It will also support better designs and higher display performance. Support of dark modes and the availability of LTPO will further help shift to OLED. Integration of new technology such as fingerprints under display, in-cell touch display, and other features to reduce border & an increased screen to body ratio can open up new opportunities. Most brands are adopting flexible OLED for their high-end 5G flagship products. The need for affordable 5G products at less than $500 or even less than $300, is leading suppliers to LTPS LCD at lower costs. This will enable LCD to have a presence in the 5G market.
Higher costs, high prices, seasonal demand patterns, a slower smartphone market demand and an uncertain economic outlook created challenges for flexible OLED displays in 2019. Those factors led to lower fab utilization rates and surplus capacity. Flexible OLEDs met only high end product requirements in 2019.
Samsung Display dominates the flexible market but LGD and BOE are increasing production. More capacity will also come from companies such as Tianma, Visionox, China Star (CSOT) and others in 2020. This can help to reduce costs and improve adoption rates in 2020. More focus on cost reductions, new features, increased product differentiation, new form factors and the need for 5G-based models can bring new opportunities for flexible OLED.
Rigid OLED had a dominant share of the OLED smartphone market in 2019. Samsung and other Chinese brands found success in meeting mid-range price requirements by reducing the price gap with LTPS LCD models, with new designs and larger sizes. Rigid OLED fab utilization rates stayed higher than flexible in 2019. It led to some suggestions that flexible fabs should convert more displays to rigid format for lower cost production of thinner and lighter display. Eliminating polyimide coating and producing a rigid OLED with thin film encapsulation can lead to ultra thin rigid OLED with only one glass substrate and higher yield rates.
Coronavirus situation: Creating short-term disruptions
The recent news of the coronavirus outbreak in China has created short-term disruptions both in demand and supply side creating uncertainties. According to some industry reports smartphone sales in China were already weak in Q4 2019, due to trade issue with U.S and low availability of competitively priced 5G smartphones and services.
Chinese brands were planning to offer more of lower priced products and bigger push for 5G sales in Q1 2020, especially for Lunar holiday sales. Coronavirus situation has negatively impacted the demand in Q1. On the supply side, both IHS and DSCC reported that production in the CSOT, Tianma and BOE fabs in the Wuhan area have been impacted negatively. There has been labor shortage, components shortage, and transportation issues disrupting production and panel supply in Q1.
China Star has a Gen 6 LTPS LCD fab and Gen 6 flexible OLED fabs and Tianma has an older Gen 4.5 a-Si LCD fab and a Gen 6 OLED (Rigid/Flexible) fab in Wuhan focusing on mobile applications. Disruption in those fabs will impact the smartphone market. BOE has a Gen 10.5 a-Si LCD fab focusing on TV. According to DSCC,
“In 2020, Wuhan is expected to account for 6% of worldwide mobile OLED capacity, 3% of mobile LCD capacity and 2% of LCD TV capacity”.
Disruption may also delay ramp-up plans and future production. Disruptions in both the demand and supply sides are certainly creating uncertainties for the smartphone display market.
Smartphone display: Stronger growth can still happen
The Coronavirus situation is impacting the near term global panel supply and demand for smartphones in Q1 2020. Delayed or pent-up demand may lead to stronger demand in future quarters. Smartphone brands are introducing flagship high-end 5G models with flexible foldable OLED displays, better designs, foldable formats, better features and performance to drive demand. They are also announcing affordable 5G models at less than $500 and even down to $300 to drive replacement demand at the low- and mid- range. If Coronavirus situations can be controlled and resolved in the short term, the industry could experience stronger demand and supply in the second half bringing growth opportunities to the smartphone display market. (SD)
Sweta Dash, President, Dash-Insights