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Technology Stocks : Investing in Exponential Growth

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From: Paul H. Christiansen1/2/2018 2:57:50 PM
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The OLED market continues its rapid growth

Display analysts from DSCC say that OLED revenues reached over $5 billion for the first time in Q3 2017, and revenues are expected to jump 88% in Q4 to $10 billion Samsung starts to supply flexible OLEDs to Apple. Most of the growth will come from flexible OLEDs, as shipments will surpass rigid OLED shipments for the first time in Q4 2017. According to UBI, by the way, flexible OLEDs will only overtake rigid ones in 2019.

Looking further ahead, DSCC sees OLED revenues dropping 11% in Q1 2018 and a further 10% in Q2 2018 - mostly due to seasonal weakness and a low demand in China due to high prices. Growth will return in the second half of 2018, and altogether 2018 OLED revenues will be 56% higher than in 2017 and will reach $37.7 billion. By 2022 the market will reach $80 billion.

Financial analysts from CLSA, reporting from Asia, say that spending in the OLED industry has peaked and OLED producers are not expecting to place any new equipment orders in the near future. This coincides with IHS estimates of over supply in the flexible OLED market in 2018. According to CLSA, Samsung has a current capacity in its A3 and A4 (which should be ready by Q2 2018) OLED fabs to produce about 330-385 million OLED displays per year which SDC expects to be enough to satisfy Apple's and Samsung Electronics' demand. SDC does not see a strong demand from China's smartphone makers, surprisingly, due to the high cost of OLED displays.

According to Business Korea, Samsung Display will ship 50 million flexible AMOLED displays to Apple in 2017. Next year that amount is set to quadruple to 180-200 million panels, as Apple aims to adopt OLED displays in more iPhone models. Samsung will produce all of these OLEDs bound for Apple at its A3 fab. Initially SDC aimed to construct a new fab for Apple (the A5 fab) but earlier reports suggested that these plans have been delayed. Samsung managed to increase the yields at its A3 line from 60% in early 2017 to around 90% today.

It is estimated that the iPhone X AMOLED displays cost around $110-120 each. If Samsung will indeed supply almost 200 million OLEDs to Apple in 2018, this means around $20 billion in revenues from Apple alone for SDC.

Apple is obviously not happy to rely on a single supplier for such a critical component as the display, but it has no choice as no other display maker will be able to supply quality OLEDs at such quantities. Apple is reportedly in talks with other companies (most notable LG Display and BOE) but such supply deals will not be possible in 2018.

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