By Ross Young, Bob O’Brien and Yoshio Tamura
Jan 6, 2017: The TV market is the largest market in the display industry, representing about 2/3 of total display area, though a smaller portion of display value since TV prices are extremely competitive. From the advent of TV in the 1940s, and especially since the transition to flat panel TV in the 2000s, the TV market has been characterized by continuously improving performance and continuously declining prices.
Historically in the TV market, new product features such as 1080p resolution, LED backlights, Smart TV (internet capability) and the like follow a penetration path.
In the introduction phase, premium features are introduced at the high end of the market by one or two brands with a significant price premium (< 2x the conventional product). At this point, costs are high because economies of scale are not yet in place; high prices compensate the costs, but limit adoption to a small segment of the market.
In the proliferation phase, the premium feature is adopted by more brands and across more product lines, and the higher scope and scale allow for more competitive price positioning, which makes the feature more attractive to consumers, but equally attractive to producers since they can get premium prices. Finally, in the domination phase, the premium product rapidly approaches 100% penetration, and the conventional product requires ever-deeper discounting before it is abandoned by manufacturers.
Behavior of the market
The behavior of the market following a penetration curve requires an industry with sufficient capacity to migrate forward to the next phase: if you only have enough capacity to satisfy 1% of the market, better to keep your price at 3X rather than reduce the price to 1.5x and have unmet demand. For this reason, with respect to OLED TV we do not expect a transition from LCD to OLED, at least not in the next five years. OLED TV will be limited by capacity constraints to serving <3% of the whole TV market and 6% of the 55”+ market even in 2021; for this reason, we believe OLED TV will likely be stuck in the introduction phase for the next few years.
DSCC expects that the market for TV panels will grow slowly in units, from 261 million in 2016 to 282 million in 2021, for a CAGR of 1.5%. Compared to the total market, we expect OLED TV panels to grow rapidly, from 0.9 million in 2016 to 6.6 million in 2021, a 48% CAGR, but even with this growth, OLED will represent only 2.3% of the TV market in units in 2021.
Battle between OLED and QD LCD
OLED TV penetration will be highest at 65” reaching 11% of the 2021 60”-69” market. QD LCD, on the other hand, will progress rapidly into the proliferation phase, reaching 95 million or 34% of the market for TV panels, at a CAGR of 88%.
QD LCD panels are expected to reach 88% penetration of the 70”+ market, 71% of the 60”-69” market and 65% of the 50”-59” market.
The growth of quantum dot TV will start with premium products, which in TV means the largest sizes, and migrate steadily towards smaller sizes. The largest volume of QD LCD panels will be in the 55” size category, since this size is made very efficiently with a 6-cut on Gen 8.5 fabs, which represent more than 50% of LCD industry capacity.
The 65” category will also see tremendous growth. Many 65” panels today are made on Gen 6 lines with an efficient 2-cut, but starting in 2019 this will be a target size for BOE’s Gen 10.5 fab, which will cut 65” efficiently at 8-up. Because QDs can be used across the gamut of LCD capacity, they will be introduced at a wide variety of screen sizes and by almost all brands.
In contrast, OLED TV today relies on a single panel supplier (LGD) with a single Gen 8.5 fab. This fab has an efficient cut for making 55” panels (6-up), but not for making larger sizes.
Unfortunately, for LGD, 55” sits at the low end of screen sizes for the premium TV market, and they have pressure to produce a richer mix of 65” & 75” size panels. Although we expect additional OLED TV suppliers, BOE and CSOT, to enter the market later in the forecast period at small volumes, we anticipate that these companies, as LGD did, will struggle in the early years to get adequate yield, and their output will be limited.
In many ways, the global TV market is not for the faint of heart: ruthless price-cutting is the norm, and relentless performance improvement is the expectation. The industry has few barriers to entry at the low end: Chinese TV brands compete with local brands around the world to capture the value-conscious consumer.
The total TV market is hardly growing in unit terms, but the continuous growth in average screen size, coupled with the introduction of new features like QD and High Dynamic Range, steadies the overall value of the market. There remains some opportunity for a new technology with a clear value proposition to penetrate the market, and quantum dots are likely to lead the next wave of innovation.
The battle between OLED and QD LCD will be a defining feature in the TV marketplace for the next few years. Both technologies have achieved unprecedented levels of picture performance; although OLED TV claims the crown on picture quality on the strength of impressive black levels, that claim is still in dispute as it is clear that QD LCDs outperform OLED on certain metrics of growing importance.
Beyond picture performance, though, the wider business battle is more one-sided in favor of QD LCD. Although there has been a lot of excitement about the rapid growth in OLED capacity, consumers and investors need to realize that most of that capacity will be dedicated to mobile displays. Today’s OLED TV displays have both high fab costs and high material costs, creating a wide cost difference with QD LCD TVs, which are coming down in cost rapidly and can support much higher volumes. Because of the huge investments required with uncertain returns, OLED TV will be limited in its share of the market by capacity constraints, while continued LCD expansions will allow rapid growth of QD LCD.
Although both technologies have a bright outlook, we believe QD LCDs will grab a much larger share of the TV market and approach 100M units by 2021 with OLED TVs at less than 7M units.
Source: Display Supply Chain