Guolian Securities: OLED supply and demand reversal, the industry may usher in a turning point

According to the information from Zhitong Finance and Economics APP, Guolian Securities released a research report pointing out that the OLED panel supply and demand is experiencing a reversal, and the industry's profit turning point is expected to come. Benefiting from the price reduction of OLED panels, the speed of AMOLED adoption by smartphone manufacturers in 2023 is accelerating. As AMOLED prices drop to a low point, the panel supply and demand are reversing. With the supply and demand reversal, panel prices are expected to rebound by the end of 2023, while demand remains strong. The OLED panel industry may usher in a profit turning point.

Key points from Guolian Securities:

AMOLED's advantages in the small and medium-sized field are gradually emerging

Compared to TFT-LCD technology, AMOLED has strong advantages in optical performance, electronic performance, integration functions, and appearance, making it a new direction for semiconductor display technology. AMOLED is currently widely used in applications such as smartphones, smart wearables, and is starting to be used in tablet PCs. Currently, in the smartphone field, AMOLED presents two major technological trends: flexible replacing rigid, and accelerated penetration of LTPO. In the medium-sized field, AMOLED is in the early stages of development, and in 2024, Apple may release an OLED version of the iPad, accelerating the penetration of AMOLED in the medium-sized field through promotion by leading manufacturers.

Smartphone demand: Recovery in the smartphone market & steady increase in penetration rate

Benefiting from the replacement cycle and increased demand in emerging markets (foldable phones, AI phones), the global smartphone shipments are expected to increase to 1.2 billion units in 2024, and the global phone market may maintain low single-digit growth by 2028. According to Omodia, the global OLED smartphone penetration rate was 51% in 2023, with shipments of 595 million units. It is expected that the global OLED smartphone penetration rate will reach 55% in 2024, with shipments of 661 million units. By 2028, the global OLED smartphone penetration rate is expected to reach 60%, with shipments reaching 750 million units. The CAGR of global OLED smartphone shipments from 2023 to 2028 is 4.74%.

Tablet/laptop demand: Apple's entry accelerates medium-sized penetration

Currently, Samsung Galaxy, Lenovo, HP, Dell, Asus, Huawei, BBK, Xiaomi, and LG Electronics all use OLED display panels in their PC products, with Apple joining in 2024. According to Omdia, Apple will gradually use OLED panels to replace LCD panels in its iPad and Mac series, with Apple's market share in tablets and computers reaching 40% and 9% respectively in 2023. Apple's layout may drive rapid penetration of OLED panels in the medium-sized display field.

Supply: China and South Korea dominate the market, LTPO supply is tight The global AMOLED supply market is mainly dominated by South Korea and mainland China. According to CINNO Research data, in 2023, the global smartphone AMOLED panel shipments accounted for 70.7% in South Korea and 29.3% domestically. There is a structural supply shortage in LTPO. LTPO technology emerged after 2020, while mainstream OLED panel factories in China were established and lit up earlier, resulting in a delayed layout for LTPO production lines. With the rapid growth in LTPO demand and slow release of LTPO production capacity, a supply shortage has emerged. We believe that domestic LTPO production capacity ramp-up and yield improvement will take time, and the supply shortage is expected to continue until 2025.

Investment Recommendation: Focus on beneficiaries of OLED supply and demand reversal

The domestic flexible OLED industry is showing improvements on both the supply and demand sides, with panel prices expected to rebound and an industry turning point on the horizon. As OLED panel supply shifts to domestic sources and domestic OLED production lines gradually increase their capacity utilization, a profit turning point is expected to arrive. We recommend focusing on: BOE Technology Group, TCL Technology, Visionox, and Hehui Optoelectronics.

Risk Warning: Lower-than-expected downstream demand, slower-than-expected increase in OLED penetration rate, and slower-than-expected ramp-up of OLED production capacity