How Foxconn breaks through the OLED panel market is not easy and difficult

Hon Hai attached great importance to Sharp's technological advantages in OLED panels when acquiring it, hoping to quickly achieve large-scale production through large investments in order to win Apple's orders. However, facing the reality that Apple will purchase OLED panels from Samsung this year and from Samsung and LGD next year, it intends to reduce its investment in OLED panels and proceed slowly.

It is not easy to enter the small and medium-sized OLED panel market

Samsung currently has an absolute advantage in the small and medium-sized OLED panel market. It began developing AMOLED panels as early as 2008. In fact, Taiwan's AUO also developed its own AMOLED panels at that time, but it did not persist because AUO was worried about the prospects of the technology and the huge investment required. Samsung persisted and had its own mobile phones, eventually achieving its current status.

Earlier this year, Samsung announced an investment of $8.9 billion to expand its AMOLED panel production line to further consolidate its advantage in the small and medium-sized OLED panel market. While consolidating its AMOLED panel advantage for smartphones, Samsung also plans to invest $3 billion to expand its panel production line for flexible OLED panels in the fields of foldable smartphones and wearable electronic devices.

LGD currently has an advantage in the large-size OLED panel market. The world's OLED panels for TVs are mainly supplied by LGD, which uses white OLED + color filter technology (RGBW for short), which is less technically difficult and less expensive than Samsung's AMOLED. Samsung's AMOLED is RGB three-primary color OLED technology, which is more technically difficult and more expensive, but has better picture quality. For digital products such as smartphones, which require higher picture quality and have much smaller screens than TVs, the cost is affordable.

Last year, the OLED panels used by the domestic mobile phone brand Xiaomi were partially supplied by LGD, but users found that its color performance was far inferior to Samsung's AMOLED, so Xiaomi turned to Samsung to reach an AMOLED supply agreement. Since LGD can become the OLED panel supplier for Apple's iPhone next year, it shows that it has made progress in upgrading the technology of small and medium-sized OLED panels and is expected to enter large-scale mass production at the end of this year or early next year.

In addition to these two major OLED panel suppliers, China's BOE, Everdisplay Optoelectronics, and Royole Technology are also promoting their OLED panel production. Royole Technology has received investment support from the top three mobile phone brands in mainland China, Huawei, OPPO, and vivo. BOE's OLED panels have been recognized by Apple, proving that its technology is no longer a problem. However, it is generally believed that their large-scale production may not start until 2019.

This means that although the market prospects for small and medium-sized OLED panels are generally optimistic, competition will soon enter a red ocean stage. Foxconn will of course have to make more careful and detailed plans for investing in small and medium-sized OLED panels.

How should Hon Hai plan its panel business?

After successfully acquiring Sharp last year, Hon Hai publicized its plan to promote OLED panel production, hoping to obtain Apple's orders next year. However, after Apple decided to purchase mainly from LGD and Samsung next year, this means that it will have to wait until the year after next to get Apple's orders at the earliest. By the year after next, BOE's OLED panels may also become Apple's supplier after large-scale production. Sharp is obviously facing tremendous pressure to obtain its orders.

Sharp has IGZO technology. IGZO (indium gallium zinc oxide) is the abbreviation of indium gallium zinc oxide. Amorphous IGZO material is the channel layer material used in the new generation of thin film transistor technology. This technology can be used on traditional TFT-LCD panels as well as OLED panels. Sharp is an important global TFT-LCD panel supplier, with the world's most advanced 10th generation panel production line currently in production (China's Huaxing Optoelectronics and BOE's 10.5/11th generation lines are under construction but have not yet been put into production). It is also currently investing 61 billion yuan in Guangzhou to build a 10.5th generation panel production line. In the case of losing the battle for Apple's small and medium-sized OLED panel orders, it is obvious that it has to comprehensively consider the development of its TFT-LCD, IGZO, OLED and many other technologies.

In addition to the panel business, Hon Hai is also actively promoting the revival of Sharp TV and Sharp mobile phones, among which Sharp TV is developing the fastest. According to IHS data, in the first quarter of this year, Sharp TV's market share in the Chinese TV market reached 6.8%, a 325% increase from 1.6% in the same period last year. With the support of the good performance in the first quarter, it has raised its TV shipment target this year from 10 million to 14 million. Sharp mobile phones will also be released and sold in the Chinese market in the near future, and the main selling point is said to be full screen.

The revival of the Sharp TV brand is mainly due to its own TFT-LCD panel advantages. In 2016, the global OLED TV shipments were estimated to be around 1 million, while according to data released by WitsView, the global LCD TV shipments reached 219 million units, and the proportion of OLED TVs in LCD TV shipments is still too small. Sharp TVs still have to rely on TFT-LCD panels to continue to grow in shipments, and IGZO technology used in TFT-LCD can give it performance close to OLED, and its current panel production line is also TFT-LCD.

For smartphones, OLED panels are obviously more important. Samsung has become the world's largest mobile phone brand thanks to the advantages of its own AMOLED panels. The hyperbolic AMOLED panel technology used in the S6 edge released in 2015 has become an important innovation in the smartphone industry. If Sharp wants to revive in the smartphone market, Foxconn may need to invest more funds in OLED panel technology.

However, Samsung currently has technological and production capacity advantages in the OLED panel market, and LGD will quickly catch up next year. For Sharp, I think the best approach is to quickly combine its IGZO technology and OLED panel technology, and rise in the small and medium-sized OLED panel market with differentiated competitive advantages, while also helping the development of its own smartphone business.

Of course, combining two highly difficult technologies and achieving large-scale mass production requires a lot of financial support. Foxconn ranked 25th among the Fortune Global 500 in 2016. It has sufficient financial support, so it depends on whether its chairman Terry Gou has the determination.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.