Samsung Corp. , the world's biggest maker of the LCD panels used in laptops, notebooks, TVs, and phones, is spinning off its LCD business. Samsung will continue to control all the shares of the new Samsung Display Co., which is scheduled to launch in early April.
As part of this restructuring, Samsung intends to devote more resources toward organic-light-emitting diode (OLED) displays. OLEDs have a number of advantages over LCDs: they have their own light source; they are thin; they can be sprayed onto flexible substrates such as plastic; and they consume a lot less power. For most applications, OLED is simply the perfect display technology.
OLED displays continue to be prohibitively expensive, however. Unlike LCDs there is no OLED manufacturing infrastructure in place. There are very few materials suppliers. Until OLED reaches volume manufacturing levels and more competition develops, the displays will be rare and costly. IHS iSuppli says:
AMOLED TV prices will remain dramatically higher than those of liquid crystal display (LCD) TVs during the next few years because of manufacturing yield issues, combined with inflated material costs due to the small pool of suppliers. A 55-inch AMOLED TV will be priced at $8,000 in 2012, more than twice the $3,700 average expense for an equivalent LCD TV. And although AMOLEDs deliver a dramatically superior viewing experience compared to LCDs, consumers are unlikely to buy large quantities of AMOLEDs until their prices fall to within a 20 percent premium of comparable LCD TVs.
Samsung is making the right move.
The LCD panel market has been struggling with steep price declines and overcapacity on and off for a number of years. Although prices stabilized in December, IHS iSuppli reports that they are unlikely to increase any time soon:
"The firming in panel prices in December can be attributed to lean inventories throughout the supply chain and to lower factory utilization rates, after suppliers were forced to cut production in order to control supply and stem financial losses," said Sweta Dash, senior director for LCDs at IHS. "Sales also picked up in the United States and China, helping to further boost the market. Despite this, there will be little opportunity for suppliers to increase pricing even after the market has evened out, due to continuing uncertainties in the global economy."
As massive as Samsung's LCD business is, LCD is increasingly price-competitive. Other major display manufacturers, such as Toshiba Corp. (Tokyo: 6502) and Sharp Electronics Corp. , have been outsourcing some of their production to ODMs and EMS companies to save costs. There has also been a move toward manufacturing the panels closer to where end-demand is. Rather than invest in more LCD factories, outsourcing enables panel OEMs to build where demand exists.
Samsung is also holding onto the display business, which is another smart move. Samsung consumes almost as many panels internally as it sells in the merchant market.
IHS iSuppli expects AMOLED display suppliers, equipment makers, material makers, and TV makers to cooperate in developing more efficient and cost-effective ways in order to make large-sized AMOLED panels. As a result, prices are expected to decline:
Early production of 55-inch AMOLED panels is likely to be conducted at existing eighth generation amorphous silicon (a-Si) LCD fabs that will be converted to make the oxide silicon backplanes needed for AMOLEDs. Both LGD and Samsung plan to move mass production to eighth generation AMOLED lines in the future. And as manufacturing matures, large sized AMOLED panels have the potential of becoming cheaper.
Samsung may end up being its own biggest customer.
It is apparent the OLED is the next big thing in TV market and the demand will increase. Samsung doesn't have a choice but to move on to OLED TV, OLED is a promising technology.
It is a right move for Samsung spiining off its unprofitable LCD business, I'm suprised it has taken them this long to have upgraded to the recent OLED technology, LCD has been around for about ten years.
I think its more about being the innovation and cost leader rather than fear of competition for Samsung. Atleast in the LCD market, Samsung's brand name has become almost as strong as Microsoft's in OS's market. You might argue about LG as a challenging competitor, but Apple has still alot to achieve to make its brand name in LCD market.
@hm: The lawsuits between Apple and Samsung can't help matters much. I think LG is the second largest supplier of displays to Apple, and then Sharp. Apple is also reportedly working with China-based AU Optronics. There is no shortage of options for Apple, but as long as Samsung retains control of its panel business, there is still opportunity in LCDs. And, if Samsung suceeds in volume production of OLEDs, it may have Apple banging on its door again for the latest generation of panels.
@Jacob: I'm a little out of my depth here, but AMOLED is active-matrix OLED. I think that is the same as AM LCD, which means there is a backplane and current that runs across the screen to provide light. I think OLEDs need a lot less current and possibly non. I know there are passive matrix LCDs and OLEDs, but the performance is not as good.
And yes, those TVs are expensive. I'll do with my LCDs for awhile longer!
Barbara, now we are paying more than double the price of LCD for AMOLED screen. So far AMOLED screens are not in wide spread use and once it becomes popular, mass production happens and hence obliviously the price may come down.
Am not getting the difference between OLED and AMOLED? Is OLEDs are going to use in AMOLED Screens.
With Apple inclined to get LCD from Japanese vendors and LG with huge investment with them, Samsung will face new challenges. If this decision is out of this fear, it may not be good for Samsung.
This move by samsung is definitely a gud one. The LCD market is becoming price competetive and we have also heard of joint venture of sony, toshibha and hitachi to reduce the operational expenses incurred in manufacturing. So this is the right time to invest in future display tachnolgies and evolve as a leader.
"There has also been a move toward manufacturing the panels closer to where end-demand is."
Such a strategic shift is likely to put costs down as many of the supply chain obstacles and price-build ups will be avoided. Also the qualititative factors in favour of production near source of end-demand should be the major considerations to further motivate OEMs to make such a shift i.e. the time and custom duty saved in shipments and avoidance of risk incorporated in cross border trading. However, such shift towards outsourcing should be made cautiously by the OEMs as the perceptions and rumours about low quality products manufactured by the outsourced manufacturer may contributesignificantly towards decline in sales.
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Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
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You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
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