Korean display manufacturers boost investments for survival after JOLED collapse

[Image captured from JOLED homepage]

Uncertainty is looming over the global display industry after Japan’s organic light emitting diode (OLED) display manufacturer JOLED Inc. entered bankruptcy proceedings on Monday due to chronic losses amid market stagnation and fierce competition from China, sending shockwaves through South Korean players that are looking to increase investments for survival.

According to industry sources on Tuesday, JOLED filed for rehabilitation proceedings with the Tokyo District Court on Monday as the company judged it was difficult to continue its business in the face of deteriorating financial soundness and debts totaling 33.7 billion yen ($257.3 million).

JOLED was established in 2015 as a joint venture between Japanese companies such as Sony Corp., Japan Display Inc. (JDI), and Panasonic Corp., and the Innovation Network Corporation of Japan (INCJ), a public-private fund made up of 26 major Japanese corporate investors.

However, the results were not good.

The inkjet printing technology that JOLED touted as a way to differentiate itself from Korean companies turned out to be the cause of its downfall. Compared to Korean companies that use a vacuum deposition method to apply OLED components, JOLED’s inkjet printing method delivered much lower yields and could not compete with China’s cost-effective products.

JOLED has been surviving by receiving funds from external sources.

In 2018, it raised 47 billion yen from companies such as Denso Corp., Toyota Tsusho Corp., and Sumitomo Chemical Co. In 2020, it also secured funds by selling a 10.76 percent stake to China’s TCL Technology Group Corp. Despite these efforts, the company’s chronic losses led to huge liabilities exceeding assets since March last year.

JOLED ultimately chose the rehabilitation procedure because the market slump was expected to continue. Market tracker Display Supply Chain Consultants forecast that global display equipment investment would decline for the next three years. This year’s investment would drop by 48 percent to $6.1 billion from last year’s $11.9 billion.

Samsung Display‘s flexible OLED display [Photo provided by Samsung Display]

Korean display manufacturers, in the meantime, cannot afford to be complacent in the current situation. China, which already surpassed Korea in liquid crystal displays (LCDs), is continuously increasing its market share in OLED displays.

China’s BOE Technology Group Co. recorded a 15 percent market share in OLED displays in the first quarter of this year, up 4 percentage points from the previous quarter. In contrast, the market share of Korean companies Samsung Display Co. and LG Display Co. declined over the same period.

According to research firm Omdia, the market share of OLED in the premium TV market, which costs more than $1,500 per unit, is expected to increase from 36.7 percent in 2022 to 46.1 percent this year, and 53.5 percent in 2024.

Korean companies are bound to shrink as Chinese companies expand into large, value-added markets with government subsidies.

Samsung and LG are doing everything in their power to stay ahead of China in the OLED market. LG Display, which posted an operating loss of more than 2 trillion won ($1.5 billion) last year, started to secure liquidity by borrowing 1 trillion won from LG Electronics Inc. on Monday.

Samsung Display is also accelerating its OLED investment. The company is expected to announce an investment of up to 5 trillion won in OLED panel production facilities as early as next week.