OLEDs - Overhyped and Over Priced.
If you have heard of Motorola’s Nexus One handset, you probably know that it supports Google’s Android operating system. What you are less likely to know is that it sports an Oled - organic light emitting diode - screen. Oled screens are supposed to be brighter and have a wider viewing angle than conventional LCD screens. Last year, 15 mobile handsets, supplied by Samsung, Nokia and Sony Ericsson, were equipped with Oled screens. Few people know this and fewer people care.
According to Display Search, the leading independent experts on screen technologies, in 2008, the global market for Oled was worth $600m. The two companies offering the most exposure to Oled are Universal Display (PANL US), and DS Hi Metal Display (077600 KS).
Samsung SDI, which has a 50/50 joint venture with Samsung Electronics, also offers exposure. LG Display and AUO of Taiwan are two of the other leading Oled wannabes. For each of these quoted companies, Oled is a miniscule part of sales.
In the last two weeks, Sony announced that it was closing its Oled effort because of technical problems. Oled screens work fine for the small screens used in mobile phones unfortunately, they are between three to five years away from prime time as far as TVs are concerned. More worrying are the latest results of an independent test carried out by Displaymate, which found that for all the excitement, the Oled screen on the new Nexus was inferior to the conventional LCD screen found on Apple’s iPhone. Oled’s and most other hardware innovations are a side issue. In the era of the Smart Paradigm, content, applications and brand determine the success of a product. This is bad news for Asian handset makers who depend on hardware innovations to make their products stand out.
Besides the brighter colours and the greater viewing angle, Oled technology will, one day, be cheaper than TFT LCD screens to produce. To understand why, a basic comparison of the two technologies will suffice. TFT LCD is made by laying an array of thin film transistors upon a glass substrate. Then, when an electrical current is applied to this matrix, some of the transistors are turned on while others remain turned off. This combination of on and off transistors create pixels, which are the basic element of any electronically created video, or picture.
Like a TFT LCD, an Oled screen also requires a back pane, but instead of a matrix of thin film transistors a layer of organic diodes are deposited. When an electrical current is applied to the back pane the organic diodes emit different coloured lights.
A TFT LCD screen requires a back light source, which increasingly is supplied by LEDs; in addition, various colour filters have to be applied to the glass. Non of this is required in an Oled screen, which is why the technology promises, one day, to be cheaper to produce. In addition, to cheapness, Oled screens are thinner, consume less power and eventually will be flexible. What’s not to like?
Unfortunately, the technical problems behind creating Oled are daunting, which is why Japanese manufacturers, such as Sony and Kyocera, have either abandoned or moth balled their Oled efforts. For the time being, Oled screens are expensive, as a quick analysis of the handset market will underline.
Today, an Oled screen in a mobile handset costs about 50% more than a comparable LCD screen. Even by 2013, it is believed that Oled screens will still be 8% to 10% more expensive than LCD screens. For televisions the comparisons are worse. By next year the production cost of a 42 inch Oled TV panel is expected, according to standard industry estimates, to be 73% more costly than LCD. By 2013, Oled screens will still be almost 40% more costly than LCD. Therefore, Oled is unlikely to be a significant feature in the TV market before the second half of the current decade. This is why Sony has just withdrawn from the market.
Oled, therefore, will remain a side issue for a few more years. Any investor wishing to keep abreast of Oled should monitor Universal Display in the US. This company is the world’s leading supplier of both Oled intellectual property and the chemicals used to make the diodes. In particular, Universal Display is a leading supplier to the Samsung joint venture that is currently the biggest producer of Oled screens for smart phones.