Why LCD still dominates display technology

11 Dec 2012
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LCD screens were meant to be replaced by OLEDs - but there's plenty of life left in them yet

LCD screens were expected to slowly fade and die, giving way to lighter, thinner and tougher organic light-emitting diode (OLED) panels in everything from smartphones to tablets, TVs and monitors.

But LCD is refusing to go quietly as its picture quality keeps improving. At the same time, the major backers of credit card-thin OLED panels - led by Samsung and LG - are struggling to make the technology cheap enough to mass produce.

The two South Korean firms this year showcased 55in OLED TVs, but priced at around $10,000 - 10 times that of an LCD equivalent - they have yet to reach the commercial market.

OLED displays, used on Samsung's Galaxy S and Note smartphones, have been touted as the future display model to replace LCDs across the consumer electronics spectrum - from TVs to computers, laptops, tablets and smartphones. The technology is potentially more energy efficient and offers higher contrast in images than LCD, and is so thin and flexible that future mobile device screens will be unbreakable. They could even be folded or rolled up like a newspaper.

OLED still has a long way to go to become a mainstream display, as it has to become bigger and improve picture quality

But OLED panel makers such as Samsung and LG have yet to address major manufacturing challenges to drive down costs to compete against LCD panels, which also effectively killed off plasma screens.

"OLED still has a long way to go to become a mainstream display, as it has to become bigger and improve picture quality," said Chung Won-seok, an analyst at HI Investment and Securities. "The use of OLEDs will continue to be confined to small displays at least for the next two to three years. Its usage as a mainstream TV panel is only likely in 2014, but even then there's a possibility of intense competition with LCD TVs as that technology keeps improving."

According to DisplaySearch, it will take another four years for OLED screens to capture even a tenth of the global TV screen market.

Pixel battle ground

Far from fading, LCD panels now offer better picture quality and use less power, creating robust demand from smartphone and tablet makers alike.

Apple moved the goalposts by upgrading the display resolution for its iPhone and iPad, still the high-end LCD market's gold standard, prompting rivals to upgrade their display panels. Analysts at Macquarie predict Apple will adopt high-resolution screens for the MacBook Air and iMac next year, accelerating the industry's shift to high-resolution displays.

"It's only a matter of time [before] other high-end notebook companies such as Sony, Toshiba and Samsung upgrade their screens to high-resolution to compete with Apple's MacBook series," said Macquarie analyst Henry Kim.

Taiwan's HTC has introduced the Droid DNA smartphone with a 440 pixel per inch (ppi) density - the sharpest smartphone screen yet, with far higher resolution than the iPad's 330ppi and the iPhone 5's 326ppi. Samsung's Galaxy S III, which uses an OLED screen, has 306ppi density.

"The pixel war is an absolute bonanza for LCD makers," said Kim Byung-ki, analyst at Kiwoom Securities. "Manufacturers from LG Display to Samsung, Sharp and Chimei (Innolux) all will gradually convert their traditional lines into more high-end product fabs, and that will curtail supply and boost profitability."

These higher-resolution panels cost more than double the commodity-type LCD screens, boosting panel producers' profits. Even Samsung, the standard bearer for OLED panels and also a major LCD manufacturer, is actively promoting LCD screens for tablets and laptops over OLED, said one source familiar with the matter.

Supply crisis on horizon

However, the push for more profitable models with higher resolution could create its own set of problems – with a shortage in supply a real possibility. To squeeze in more pixels per inch, panel makers are upgrading their thin-film transistor (TFT) panel production facilities to new IGZO or LTPS processing technologies that require almost twice as many processing steps and which suffer higher faulty product rates and lost output.

Japan's Sharp is the frontrunner in IGZO technology, which uses indium gallium zinc oxide instead of amorphous silicon, in panel manufacturing. LG, a major supplier to Apple, is investing $1.1bn over the next year in its production of low-temperature poly silicon (LTPS) panels - a technology used to make screens for the iPhone and iPad.

While new technologies can be game-changers, these panels are not simple to produce, limiting availability and driving up manufacturing costs.

"The LCD industry is improving more strongly than expected and panels are likely to be in short supply from 2013, as manufacturers upgrade their lines to increase high-end products. This requires more processing time and steps, reducing total output," said Kim Dong-won, an analyst at Hyundai Securities.

Converting a line to IGZO and LTPS processing can cut LCD output by 30-70%, according to BNP Paribas.

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