After nearly two years, Huawei has updated the Mate series of new flagship models. According to supply chain news, in addition to the most core processor, Huawei Mate50 series of domestic accessories may account for more than 60%. In terms of OLED screens, BOE continues to supply Huawei, and Vixen is the first time it appears in the list of suppliers for the Mate series.

Although most of the high-end models of other brands still use Samsung screen, but the domestic OLED screen has been accelerating the penetration of the high-end market. At the same time, as a high-end machine standard OLED screen also began to radiate the thousand yuan machine market, and emerge as a leader.

The reporter learned in an interview, the domestic OLED industry in terms of technology and Korean manufacturers is not much difference, some parameters and even better; the industry's current highlights are mainly focused on technological innovation, such as high refresh rate, folding screen and pixel arrangement. The mainstream manufacturers in accelerating the penetration of OLED to cell phones, smart wear field, but also has IT (tablet, notebook), car, etc. as a potential target market, the industry expects that OLED will be the first in the IT field to get a breakthrough.

Full penetration of the cell phone market

Since the Mate9 series, Huawei Mate series flagships gradually reduce the dependence on Samsung OLED screen, at that time, China's flexible OLED industry is in its infancy, most of the domestic production line is still in the construction period, BOE with the layout of the earliest investment in the two production lines won the first order of Huawei OLED screen localization. Another big flagship P series is in the P50 series in the whole line using BOE OLED screen, before the P40 series or LG, BOE and Samsung mixed. In addition, Huawei's folding screen phone Mate X2 released last year also began to abandon the Samsung screen, BOE became the only screen supplier of the folding screen phone.

It's no surprise that Visionox entered Huawei's high-end supply chain. Before Huawei released the P50 series last year, there were reports that the series would be supplied with OLED screens by BOE and Visionox; although the reports were not entirely accurate, Visionox did supply the P50 Pocket model released by Huawei at the end of last year. From Huawei's series of moves, it is reducing its dependence on Korean manufacturers for OLED screens, supporting domestic suppliers and promoting supplier diversification.

Accelerate the import of domestic OLED cell phone manufacturers are not limited to Huawei, released at the end of last year Xiaomi 12 by TCL Technology's Huaxing photoelectric exclusive supply of OLED screen; this year's release of the Redmi K50 Supreme Edition also uses OLED screen, by Huaxing photoelectric and deep Tianma supply. In addition, recently there is news that Visionox has entered the OPPO supply chain and received a large amount of orders.

Data provided by CINNO Research senior analyst Liu Yushi shows that in the first half of the year, the global AMOLED smartphone panel shipments, two Korean companies accounted for 76.5%, domestic manufacturers shipments accounted for 23.5%, compared to 19.7% in the first half of 2021, an increase of 3.9 percentage points, the share of more than two percent, and gradually and steadily climbing.

Vice President Xu Fengying of Wearnes said in an interview that the company entered the high-end market early and has previously supplied flagships and folding phones to brand customers, including the high-end flagship Magic4 of Glory and the folding phone MagicV, etc. The current share in the high-end market is rising rapidly, mainly due to the company's innovative technology and the release of high-end production capacity.

"Standing firm in the high-end market is conducive to Wearnes' continued consolidation of supply relationships with core brand customers, enabling the company's products to gain a greater share of orders in the products of head brand customers, thereby increasing the supply share of important brand customers and forming a positive cycle to develop more brand customers and capture more market share in the future, as well as to more rapidly increase revenue scale and gross profit. " Xu Fengying said.

According to Xu Fengying's observation, in the high-end market, OLED screen is still dominated by Samsung, but the domestic screen is accelerating the breakthrough, especially Huawei and glory in the import of domestic screen is relatively more positive, related products are also welcomed by the market, is expected to be more brand terminals in the next year, high-end products equipped with domestic OLED screen.

The latest situation shows that not only the high-end market, OLED has begun to penetrate the thousand-dollar machine market. These include the OPPO K9 and Redmi Note 11 Pro, which use Samsung screens, and the Honor X40, which is equipped with Vixenor screens.

TrendForce Tibco analyst Zhou Shibo believes that the key to this change is due to the continuous accumulation of technology and the fact that OLED's price/performance ratio has been far better than a few years ago. "Driven by the supply side, more manufacturers have entered the ranks of OLED manufacturing and development, and the constant optimization of yields has led to a significant reduction in manufacturing costs, coupled with the successive launch of production capacity, gradually becoming the mainstream of the market and gaining recognition from brands."

Liu Yushi said, OLED cost reduction and expansion to the low-end market and other applications is an inevitable trend, for terminal manufacturers, the core of the thousand yuan organ note is the cost, as long as the cost of OLED is reasonable can be adopted; another analyst judged that carrying OLED can significantly improve the screen experience of the thousand yuan grade models, may drive a round of screen replacement trend.

A panel manufacturer said to reporters, it is because of the existence of domestic OLED screen, terminal manufacturers in the screen to have more choices, will no longer be "stuck neck" dilemma, and can even realize the customization of the screen, in different grades or the same grade on different terminals with different characteristics of the screen, to reflect The innovative personality of terminal products to meet the diversified needs of users.

Pull the local supply chain

OLED screen has been basically monopolized by Korean manufacturers, cell phone manufacturers to accelerate the import of domestic OLED screen means that the industry pattern is changing. In particular, the number of new domestic OLED production line investment has exceeded that of South Korea, according to Omdia forecast, looking at the announced projects alone, by 2026, China's OLED panel production capacity is expected to account for 49.04%, and the Korean OLED panel manufacturers on an equal footing.

From the whole industry chain, OLED is divided into three parts: upstream for equipment manufacturing, materials manufacturing and parts assembly, midstream for OLED panel manufacturing, module assembly, and downstream for display terminals and other applications. The data provided by Visionox shows that the domestic OLED module segment has achieved more than 90% localization, and this ratio is still increasing.

Zhou Shibo told reporters that OLED-related raw materials, such as OLED focus on light-emitting materials, vapor deposition equipment and fine metal mask version, as well as the folding OLED need to protect the glass, although has achieved partial localization but still need to continue to promote. It is reported that the differences in key materials will eventually be reflected in the performance and reliability of each OLED product.

Group intelligence consulting vice president and chief analyst Chen Jun said to reporters, due to the late start of the domestic OLED display industry, the current OLED upstream core production equipment and materials localization rate is still low, the short and medium term is still dominated by Japan, South Korea, the United States, Europe and other overseas companies, equipment and materials based on the development of relatively difficult, long cycle, and foreign still have a large gap.

Wright photoelectric is the earliest domestic OLED panel manufacturers to enter the supply chain system and achieve the import substitution of OLED terminal material manufacturers. Company secretary Pan Xiangting told reporters, OLED terminal material manufacturers need to pass the customer's strict supplier qualification certification, including the company's qualification review and factory audit, product patent review and multiple rounds of test verification, verification through the formation of stable mass production but also through the sample, small test, pilot, small batch supply, batch supply five stages.

Pan Xiangting introduced, the patent barrier is the key factor that restricts the domestic OLED material enterprises to the terminal material expansion, there are only a very few domestic enterprises break through the patent blockade to achieve mass production supply. At present, OLED panels are developing rapidly, and domestic OLED panel manufacturers have a more urgent demand for domestic terminal materials due to the security of the material supply chain and comprehensive consideration of costs.

It is reported that Wright Optoelectronics Red Prime material and HTL material has achieved import substitution, the company is also the exclusive supplier of BOE Red Prime material.

AOLED has provided organic light-emitting materials to Wearnes, Huaxing Optoelectronics, BOE and other enterprises; domestic panel manufacturers have been bidding for the procurement of the 6th generation AMOLED linear evaporation source from AOLED, South Korea YAS, Japan Aifaike, South Korea SNU, etc., AOLED is the only domestic enterprise.

The localization of the OLED industry chain also depends on the cooperation of upstream and downstream manufacturers. Xu Fengying told reporters that in the face of the highly unstable global environment, the company will strengthen the cooperation and risk control of the supply chain, establish stable and good cooperation with suppliers, and then cultivate a risk-resistant community to reduce production costs and ensure stable production.

It is reported that Visionox and flexible circuit board (FPC) company to jointly develop, so that the multi-layer board design into a double-layer board design, the cost dropped significantly; and PI company to carry out the technical research of flexible PI substrate material, material mass production process development, panel production line import verification; also upgraded the new VM6 material system, which is the first time the domestic panel manufacturers to disclose their own material system.

Production line investment of more than a trillion

"Compared with foreign countries, the domestic flexible AMOLED production line construction overall late, the main production line is still in mass production after the crop rate upgrade stage and construction and production in the early stage, the overall production line crop rate is still in continuous improvement." A panel manufacturer told reporters that although the domestic OLED production line has not yet achieved break-even, but the industry pattern is accelerating concentration, BOE, Wearnes and other panel manufacturers share in the accelerated expansion.

Take BOE as an example, the company has three OLED production lines, according to the company's statement in the research, AMOLED business involves new technology, customer certification, etc., still need a period of investment, the company is still focused on improving the product, technical capabilities, to achieve the real value of the product.

BOE regular reports did not separately disclose the OLED business operations, but the industry believes that the possibility of profitability is not large, mainly because the company's OLED screen shipments, higher profitability of high-end models accounted for a relatively low, and slightly lower profitability of low-end models accounted for a relatively high, at the same time, BOE in the low-end market to face the price competition from other OLED screen factory.

Visionox currently has an OLED production line in Gu'an, Kunshan, and a stake in Hefei Visionox, by the new production line to solid factors, the first half of this year, Visionox net profit loss has expanded. Huaxing photoelectric and deep Tianma's OLED production line is facing similar problems, shipping customers concentrated in a few manufacturers such as millet, also facing the pressure between manufacturers, want to profit is not easy.

"The panel industry has a long cycle, capital-intensive and technology-intensive characteristics, due to the laws of the industry, production line pre-equipment investment, plant construction and other fixed asset investment costs are large, the annual average depreciation and amortization and other fixed costs remain high, seriously compressing profit margins, it is difficult to achieve profitability." The above-mentioned panel manufacturers said that these amortization costs do not cause current cash expenses, so the daily production and operation also does not produce pressure and impact.

Through a few figures can be initially cognitive OLED production line of capital-intensive properties, Hefei Wearnes and Noble 6th generation AMOLED production line total investment of 44 billion yuan, design capacity of 30K / month; BOE Chengdu 6th generation AMOLED production line total investment of 46.5 billion yuan, Chongqing, Mianyang's two AMOLED production line total investment is also close to 100 billion yuan.

In the view of Xu Fengying, OLED panel industry in the early stage of development belongs to the technology-led stage, end products around the screen form of innovation, display effect while constantly optimized, therefore, panel companies should pay attention to technological innovation, and constantly strengthen the production line operational capacity, promote the supply chain system innovation to reduce costs, improve the production line yield level and mass production delivery capacity, to be able to create cost-effective products, access to the head customer trust and favor.

"Panel industry in the production line with scale efficiency, capacity release more, raw materials and other costs are lower, enterprise revenue and profitability and other indicators will be significantly improved." Xu Fengying further explained that the future gross profit improvement will come from the scale benefits and industrial synergy, especially after achieving a relatively sustained high crop rate, the scale advantage of the production line will gradually appear, the costs and expenses will be more reasonable and effective sharing.

Chen Jun believes that, taking into account the depreciation, market demand and other fluctuations, OLED production line want to achieve profitability in the short term or even 5 years is relatively low, the real value of OLED production line investment is the upstream raw materials, equipment and peripheral industry chain products, technology to play a driving effect, simply according to the profitability to assess the value of OLED production line is too limited and the lack of hidden value of the embodiment.

According to statistics, China's new and proposed OLED production line has reached more than 20, with a total investment of more than a trillion yuan, which also directly led to the expansion plans of domestic supporting manufacturers. For example, Wright Optoelectronics current OLED terminal material capacity of 3 tons / year, another 1 ton capacity reserves, the company is promoting the OLED terminal material research and development and industrialization project planning capacity of 15 tons / year. OLED also has a total of 15 tons of light-emitting material planning capacity, Changchun, Shanghai plant planning capacity of 5 tons, 10 tons.

A member of the investment community told reporters that for the capital market, it is recommended to use EBITDA (earnings before taxes, interest, depreciation and amortization) on the OLED industry valuation, which also better reflects the operation of OLED companies, thus reflecting the true value of the enterprise's long cycle. "Many foreign asset-heavy industries use EBITDA for valuation, and since many domestic display companies have LCD business and have passed the performance loss stage in the early stage of industrial development and achieved profitability, the market is still accustomed to using profit and loss to measure enterprise value. As long as the enterprise cash flow is stable and the enterprise revenue scale is still growing, it has a good investment value. Therefore, EBITDA to OLED enterprise valuation can more accurately analyze the investment value of enterprises."

Expanding into IT and automotive markets

Earlier this year, BOE set a target of 100 million pieces shipped in 2022 for its OLED business, but from BOE's recent statement, the company has adjusted its OLED shipment target to 80 million pieces. Although more and more domestic OLED manufacturers are importing products to high-end cell phone models, and the coverage is improving, the decline in smartphone boom has obviously affected panel makers.

"This year and next two years, by the general economic environment, the cell phone market is likely to continue the downturn, the overall strategy of cell phone manufacturers will gradually conservative." Chen Jun told reporters, the cost and high-end technology breakthroughs become the main demand of cell phone manufacturers at this stage, low-end flexible OLED panel has formed a more obvious impact on the rigid OLED panel.

If there is any bright spot in the cell phone market, folding screen may be one of the few. Zhou Shibo pointed out that the technology upgrade has triggered a redistribution of OLED panel manufacturers' production capacity, especially rigid OLED will begin to shift from cell phones to IT to de-capacity, and flexible OLED will focus on the folding market. "Folding cell phone penetration is expected to reach 1.1% in 2022, driven by improved specifications and more competitive prices, the penetration rate is expected to reach 2.5% in 2024, which will have the opportunity to provide the market with a new wave of switching trend."

In Chen Jun's view, in the short term, cell phones, smart wear is still the main operating position of domestic OLED manufacturers, at the same time, expand OLED in the downstream application scenarios category will become the main business strategy of the panel factory in the future. The reporter noted that OLED manufacturers basically will be IT (tablet, notebooks, etc.) and car as an important new target market.

Pan Xiangting said to reporters, at present, smart phones are the main application areas of OLED panels, with the improvement of technology and cost down, OLED display from high-end machine gradually to the middle and low-end models penetration, and in the flat panel, TV, car display, AR / VR, smart wearable devices and other applications, these areas of penetration is still relatively low, the future of OLED in the terminal electronics application market there is still a lot of Growth space.

In the first half of this year, deep Tianma's car display business revenue growth of more than 20%, the company said in the research, with the AMOLED industry chain and the overall maturity of the technology, coupled with the future scale application of more competitive prices, the penetration of the car field will gradually increase.

About the car application, Pan Xiangting said, OLED response speed, strong resistance to strong outdoor light interference, wide viewing angle, conducive to safe driving; at the same time, can withstand a wide range of temperature domain, can adapt to the majority of environmental requirements for outdoor driving; OLED can also achieve excellent image quality, can be made into a curved screen, bringing better visual experience.

According to Visionox's judgment, medium-sized OLEDs will penetrate the flat panel, notebook and car fields in turn, with flat panels and notebooks accelerating. Currently, several terminal manufacturers have launched OLED medium-sized products, and the company believes that future display innovation solutions in the tablet and notebook fields will mainly focus on OLED.

Zhou Shibo believes that this year and next two years, the OLED industry is worthy of attention changes one is the folding screen cell phone will gradually expand market share, through the continuous accumulation of technology, price, cell phone weight and functional configuration will achieve the best balance; the second is whether Apple can follow the plan in 2024 to launch the iPad and Macbook series of products using OLED panels one after another. "Although subject to the large generation of equipment and material efficiency of the slow evolution of factors such as the impact of the last two years OLED panel in the development of medium-sized IT products will still be slow to move forward."

As Zhou Shibo said, OLED can quickly penetrate in the IT field, to a certain extent depends on Apple's progress. The industry expects that Apple's three extremely important product lines, iPad, MacBook and iMac, will gradually adopt OLED screens in the future and regard them as benchmarks.

Chen Jun pointed out that the increase of OLED penetration in other areas is mainly constrained by high costs and high prices. He provided forecast data show that in 2022, the global OLED panel in the field of automotive display shipments penetration rate of about 0.3%, is expected to 2026 the penetration rate is expected to increase to 2%, subject to the cost price and other factors, the penetration rate of OLED in the field of automotive is still relatively low.

Deep Tianma said that the application of AMOLED technology in the field of in-vehicle display is still facing the test of automotive-grade stability and life, and the industry is continuing to increase investment in related technologies and programs to improve and enhance, which requires a certain amount of time to settle. Wearnes mentioned the longer validation cycle of in-vehicle products.

"Under the recent OLED technology improvement and material optimization, the reliability required for in-vehicle and the power saving efficiency needed for notebooks should gradually pass the verification, coupled with the preparation of large generation factories to start one after another, and the support of famous brand factories, it is estimated that after 2024, the penetration rate of IT and in-vehicle will have a significant breakthrough." Zhou Shibo said.