OLED Profit Improves, Does the Panel Sector Usher in Investment Opportunities? | Kejin · Major Events

Author | Wang Hanyu

Editor | Zheng Huaizhou

On December 12, Huawei's new MatePad Pro officially went on sale. It is understood that this model adopts a 13.2-inch large-size flexible OLED screen. Earlier, it was rumored that Apple is planning to expand OLED to the entire iPad product series.

In fact, since last year, OLED has been frequently featured at the press conferences of major brands such as Apple, Huawei, and Dell. The recovery in demand for consumer electronic products such as mobile phones and tablet computers has also been continuously driving the increase in OLED shipments since a year ago.

Since October last year, the price of domestic flexible OLED panels has started to rise comprehensively, and this momentum has generally continued into 2024. At the same time, domestic related manufacturers have been laying out production lines and increasing production capacity. Based on this trend, after the release of related production capacity, what will be the demand for downstream terminal products in the future? Extending to the secondary market, how will the market situation of the OLED-related sector evolve?

Smartphone Rebound, OLED Volume and Price Rise Simultaneously

From the perspective of application fields, the demand side of OLED display panels is mainly mobile terminal devices. According to the statistics of the Zhongshang Industry Research Institute, the downstream application fields of OLED panels are mainly the mobile OLED market with smart phones and wearable devices such as smart watches, accounting for nearly 80%. Among them, smart phones account for about 73%, making it the largest OLED application market currently.

Looking at the demand in the smart phone market, the market has gradually recovered since the fourth quarter of last year. The Omdia report points out that 2023 is a year of explosive growth for foldable phones, with a total of 18 new foldable phone models released. Entering 2024, according to the latest report released by Canalys at the beginning of this month, the global smart phone market in the third quarter increased by 5% year-on-year, achieving a year-on-year rebound for four consecutive quarters.

This has reversed the trend of the global smart phone shipment decline in the past few years to a certain extent.

The recovery in smart phone demand has driven the simultaneous increase in the volume and price of OLED. In September 2023, the price of low-cost flexible screen products started a price increase trend. In October, domestic flexible OLED panels began to rise comprehensively, with an increase of less than 10%.

Looking at the whole year of this year, Canalys predicts that the global smart phone shipment in 2024 is expected to be 1.22 billion units, an increase of 6% year-on-year, while the demand for the high-end phone market remains strong. CINNO Research data shows that in the first half of 2024, the global market shipment of AMOLED smart phone panels was approximately 420 million units, a year-on-year increase of 50.1%. Omdia data shows that the global market penetration rate of AMOLED panel phones in the first half of the year has exceeded 50%.

Reflected in the performance of related panel companies, most have emerged from the decline of the past few years. Galaxy Securities' statistics on the first three quarters' performance of 40 core panel companies including BOE Technology Group Co., Ltd., TCL Technology Group Corporation, Tianma Microelectronics Co., Ltd., and Visionox Co., Ltd. show that a total of 31 panel industry companies have achieved a year-on-year positive growth in operating income, and 26 companies have achieved a year-on-year growth in net profit. At the same time, the 40 companies achieved a total operating income of 418.46 billion yuan, a year-on-year increase of 4.6%; and a total net profit attributable to the parent company of 2.42 billion yuan, a year-on-year increase of 144.6%.

Specifically for panel companies, the year-on-year revenue growth of Shanghai AVIC Optoelectronics Co., Ltd., Fujian CPT Technology Co., Ltd., TES Touch Embedded Solutions (Xiamen) Co., Ltd., Huasu Holdings Co., Ltd., Jiangsu Juncheng Technology Co., Ltd., and Visionox Co., Ltd. has exceeded 40%. The year-on-year growth in net profit attributable to the parent company of Shenzhen TXD Technology Co., Ltd., Rainbow Display Devices Co., Ltd., BOE Technology Group Co., Ltd., Harbin AURORA Optoelectronics Technology Co., Ltd., and Tianma Microelectronics Co., Ltd. has exceeded 70%. The companies with a significant quarter-on-quarter increase in gross profit margin are Visionox Co., Ltd. and Shanghai AVIC Optoelectronics Co., Ltd. The companies with a significant quarter-on-quarter increase in net profit margin are Shanghai AVIC Optoelectronics Co., Ltd. and Fujian CPT Technology Co., Ltd.

Galaxy Securities believes that the overall good performance of OLED panel companies benefits from the strong industry demand, the high overall capacity utilization rate, and the significant increase in the penetration rate of high-end products.

Domestic Substitution Promotes the Profit Improvement of OLED Manufacturers

The accelerated recovery of the global smart phone market seems to make the performance improvement of panel companies logical. An insider from Visionox told 36Kr that at the beginning of this year, the company did not pay much attention to product promotion at the operational level, but focused on coordinating the production schedules of various factories to meet the large number of customer demands as much as possible, because "the capacity demand of Visionox's Hefei factory in the first quarter is four times that of the same period last year".

However, just a few years ago, it was not easy for domestic panel manufacturers to get a share of the dividend from the rapid growth of the global smart phone market.

In 2018, South Korean OLED manufacturers still occupied 96% of the market share in this market, of which Samsung Electronics accounted for 84%. However, by 2022, the market share of Chinese manufacturers has increased to 43%. In 2023, according to CINNOResearch statistics, among the global AMOLED smart phone panel shipments in that year, BOE Technology Group Co., Ltd. ranked second with a 16% share, second only to Samsung Display's 50%, and Visionox also ranked third with a 10% share.

In the first half of 2024, The market share of domestic manufacturers in the AMOLED panel phone market has exceeded half, reaching 50.7%.

This indicates that the performance improvement of domestic OLED panel enterprises comes from the increase in the overall application rate of OLED screens in the field of intelligent terminal devices and the increase in domestic penetration rate.

Generally speaking, AMOLED is the mainstream technology of OLED panels. OLED can be divided into Passive Matrix OLED (PMOLED) and Active Matrix OLED (AMOLED). PMOLED is suitable for application on low-resolution panels, such as industrial control dials. AMOLED has low driving voltage and long luminous element life, and is suitable for application on high-resolution panels, such as mobile phones, tablets, VR devices, and vehicle-mounted displays.

Benefiting from the technological development and consumption recovery of these intelligent devices, domestic OLED panel enterprises have been increasing their layout of AMOLED production lines in the past year.

In September this year, the 8.6-generation AMOLED production line invested by BOE Technology Group Co., Ltd. in Chengdu was fully capped and is planned to achieve mass production in October 2026. The products are mainly used for high-end touch OLED displays for smart terminals such as notebook computers and tablet computers. In the same month, the 8.6-generation AMOLED production line invested by Visionox in Hefei started construction. The new production line is equipped with the ViP technology without FMM, which can realize an ultra-high-performance, full-domain size, and agile delivery AMOLED mass production upgrade solution.

Liu Buchen, a senior analyst in the home appliance industry, mentioned to 36Kr that in recent years, domestic display screen enterprises have actively laid out OLED production lines, and the increase in production capacity is the main supporting factor for the rapid increase in the domestic penetration rate of OLED. The Omdia report also shows that among the 18 new foldable phone models released in 2023, 16 are produced by Chinese brands, and 13 use flexible OLED panels made in China.

In addition, the investment and achievement implementation of domestic manufacturers in the development of OLED materials with high technical barriers are also important factors for the acceleration of domestic substitution.

Previously, OLED organic evaporation materials had high patent barriers, and the main market share was occupied by foreign suppliers. With the increase in domestic OLED shipments, domestic enterprises have also begun to layout the research and production of OLED evaporation materials one after another. For example, OLED Materials and Components Technology Co., Ltd. and Xian莱特光电材料股份有限公司 have gradually acquired the technical ability to produce some OLED organic evaporation materials and have entered the supply chain of domestic OLED panel manufacturers; Dingshi Technology Co., Ltd. hatched from Visionox conducts the research and production of OLED evaporation materials; China Star Optoelectronics Technology Co., Ltd. established Huarui Optoelectronics to develop OLED evaporation materials.

Large-Size Screen Layout Players May Benefit

Under the trend of the gradual autonomy and control of high-tech barrier materials in the upstream and the increase in display screen production capacity, will the subsequent demand for electronic device terminals continue to maintain this year's rhythm?

Canalys' forecast shows that after this year's strong rebound, in the long term, the growth of the smart phone market will enter a plateau period starting from next year, and the compound annual growth rate from 2024 to 2028 will be further reduced to 1%.

However, in other application scenarios such as notebooks, tablets, and vehicle-mounted displays, there is still room for growth in OLED shipments.

For example, based on the large-scale procurement of notebook computer brands, TrendForce expects that the OLED notebook penetration rate will rise to 3% in 2024. Although the growth rate in 2025 may be limited, as Apple plans to introduce OLED display technology in the MacBook series, it is expected to drive the operation of panel manufacturers' OLED high-generation production lines by the end of 2026, thereby pushing the OLED notebook penetration rate to exceed 5% in 2027.

At the same time, the demonstration effect of the high-end market will also affect the product strategies of other brands and promote the application of OLED technology in the IT market.

Omdia expects that the shipment of large-size OLEDs above 9 inches this year will increase by 116.5% year-on-year. Although the growth rate compared to this year will slow down next year, there will still be double-digit growth. The shipment of large-size OLEDs above 9 inches is expected to increase by 32.7% year-on-year.

In the medium and long term, from 2023 to 2028, the agency expects the compound annual growth rate of IT product AMOLED panel shipments to reach 56%, and the compound annual growth rate of vehicle-mounted display AMOLED panel shipments to reach 49%. AMOLED will further increase the market share of medium-size incremental markets.

Returning to the subsequent direction of manufacturers, the aforementioned Visionox insider also analyzed to 36Kr that OLED screens are gradually expanding to larger-size devices such as tablets and notebook computers, generally following the route of first small-size, then medium-size, and first high-end, then mid-to-low-end penetration.

"In the future, even car window glass, rearview mirrors, and even the entire car cover of this model can be made into display screens."

Focusing on the performance end, according to DSCC data, the OLED revenue is expected to reach 44 billion US dollars in 2024, an increase of 12% year-on-year. Specifically for the growth momentum of individual enterprises, Liu Buchen believes that several indicators can be paid attention to: First, pay attention to the production and supply capacity, whether it can meet the needs of ecosystem enterprises; second, how many famous whole machine brand manufacturers cooperate with it and purchase products; third, pay attention to its technological innovation ability.

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