One of the most heated topics for the smartphone industry definitely goes to folding phones:
On February 24th, Huawei released its long-expected 5G folding phone Mate X, and just a few days ago, Samsung released its Galaxy Fold, also a folding phone.
This is not only regarded as the battle between Huawei and Samsung, but also the battle between the electronic upper stream supply chains in both countries. And OLED panels, the critical technical challenge to build a folding phone, is where the fire at.
Samsung and LG have long been the only suppliers for OLED panels, which leave Chinese businesses little leverage power. But in recent years, Chinese suppliers such as BOE, EDO, and Tianma are seeing strong momentum, and their OLED panels now can be mass produced, have been included in the supply chains for many Chinese mobile phone developers.
Even so, it’s too early for us to say that Chinese panel suppliers can rest assured about what they’ve achieved so far: In the higher-end OLED panel industry, crucial materials and the upstream devices heavily depend on foreign suppliers.
1. Crucial materials for OLED rely on foreign suppliers
The overall OLED industry consists of 3 sections:
- The upstream suppliers are responsible for device and component manufacturing, and parts assembly;
- The midstream suppliers are responsible for the manufacturing of OLED panels and module assembly;
- The downstream suppliers are on the display screens and other applications.
In short, the critical devices and materials for OLED are still gripped on tight by foreign companies, and there is a long way to go before Chinese suppliers can catch up with them on the life cycle and machine precision fronts.
1.1 OLED organic materials
Let take the organic materials for OLED as an example.
The niche barriers for each and every manufacturing section are higher and higher, making it impossible for a single supplier to master the manufacturing skills for many components at a time.
The overall OLED material supply chain is divided into many niche sections, such as the suppliers for intermediates, macromonomer, and monomer, and the barriers among these sections have restrained a single supplier from mastering the technique to make multiple components.
In the case of Chinese suppliers, companies such as Puyang Huicheng and CECEP, two of the most known OLED luminescent material manufacturers, mainly focus on the intermediate and macromonomer manufacturing, which requires fewer technical skills and expertise. And it remains a big challenge for Chinese manufacturers to march into the higher-end manufacturing field due to the following two reasons.
- The international chemical giants such as Samsung, LG chemical, and Dow Chemical are basically monopolies in the monomer field, leaving little or close to no room for other manufacturers to survive, let alone grow.
- In addition, due to pattern restrictions, Chinese manufacturers still find it hard to be part of the sourcing for high-end OLED materials.
1.2 OLED upstream devices
Except for organic materials, Chinese manufacturers also need to import part of the upstream devices from overseas.
Let’s take a deposition as an example. Deposition is a crucial part of OLED manufacturing. It’s critical to the resolution and yield rate of the OLED panels. This is why the deposition is usually considered the heart of the OLED panel manufacturing process.
However, Canon Tokki from Japan and Sunic System, YAS, SFA from South Korea are the only suppliers in the field. Moreover, as the biggest OLED device supplier, Canon Tokki is almost the only supplier for the vacuum deposition machines for high-end OLED production.
Up until the first quarter in 2017, BOE, a Chinese manufacturer, was able to receive two of the Canon Tokki deposition machines.
1.3 Folding phones and Chinese upstream suppliers
The most eye-catching parts in folding phones are flexible OLED display and the hinge. These two features are what make folding screens “fold”, but they are extremely hard to produce.
Samsung mainly produced the core parts in its folding phones, including the flexible OLED screens and the RAM. While Huawei’s folding phones rely more on the supply chain in China. For example, the screens are from manufacturers such as BOE and Visionox. So the folding phones released by these two companies are regarded as the battle between the supply chains in China and South Korea, and the production capacity could be the game changer.
Even though Samsung occupies about 90% of the market for OLED panels for mobile phones, there is still a silver lining for Chinese suppliers.
In the AMOLED panel field, Chinese manufacturers coverage rose to 4% in 2018, from 2% in 2017, and is expected to increase to 10% in 2019.
In the case of the hinge, KH Vatec is the exclusive supplier for Samsung Galaxy Fold, while Huawei, TCL, and Royole-X develop their own hinge technologies.
There are some voices from the professionals say that if folding phones produced by Chinese manufacturers can set their foot in the global market, then the future will remain quite optimistic for the upstream suppliers in China.
2. The panel capacity is still promising for 2019
In an interview done by the vice president of the Ministry of Industry and Information Technology of the PRC, over the last year, there have been many panel production lines starting to be put into use in mainland China. This is especially true in terms of the 10.5/11th generation of the panels and the 6th generation of AMOLED production lines. He said that it’s expected that China is expected to produce more panels in 2019 than any other countries in the world.
The rise of panels made in China has also helped with the cost pressure on the lower end TV manufacturers. The LCD panels for TV were all imported from overseas, and the TV manufacturers had little leverage in negotiating for better prices. Now things are different.
