The Zhitong Finance App learned that Guojin Securities released a research report saying that starting in 23Q3, due to consumer electronics terminals pulling goods, increasing the price of small-size OLED screens, brand stocking, and LTPO technology upgrades for mobile phones, 24H1 may continue to rise due to structural shortages. Furthermore, Chinese OLED panel manufacturers, led by BOE, Vicente, and ShenTianma, have been actively laying out OLED production lines in recent years, and OLED production capacity is being transferred to mainland China at an accelerated pace. Looking at the supply side in the short term, the main ones that climbed the slope in 2024 were BOE's Chongqing, Vicino Hefei, and Tianma Xiamen TM18. Releases were concentrated in the second half of the year, and OLED panel prices may continue to rise in the first half of the year.
Guojin Securities's views are as follows:
As OLED technology matures and costs are optimized, penetration in various application fields is accelerating.
Starting in 23Q3, the price of the 24H1 may continue to rise due to consumer electronics terminals pulling goods, increasing the price of small-size OLED screens, brand stocking, and LTPO technology upgrades for mobile phones. Looking ahead to the medium- to long-term demand side: 1) Prices of small-sized terminals are sinking, and mid-size terminals are being equipped with OLED screens at an accelerated pace. The small size represented by smartphones accounts for the largest share (the OLED penetration rate of mobile phones was close to 50% in '23). As the price of mobile phones equipped with OLED screens sinks, domestic substitutions for brands such as Mi OV (originally using Samsung screens), and structural factors such as folding screens/LTPO will drive a steady increase in OLED demand for mobile phones. 2) There are broad prospects for OLED applications in mid-size IT, automotive markets, etc. In 2024, Apple is expected to launch OLED IPADs to further drive the trend of mid-size OLEDs, and the trend of automotive intelligence OLED will also become one of the mainstream solutions for high-end vehicles. 3) The OLED penetration rate in large-size TV and other markets is steadily increasing, and Korean manufacturers are focusing on the high-end market. Taken together, AMOLED is currently the mainstream product of OLED technology and is widely used in small-sized flat panel displays. As demand for high-quality displays in smart phones, tablets, wearables, vehicles and other products increases, the market demand for OLED panels continues to grow.
Mainland Chinese enterprises are speeding up production capacity allocation and improving the long-term supply and demand structure.
Chinese OLED panel manufacturers, led by BOE, Vicente, and Shentianma, have been actively laying out OLED production lines in recent years, and OLED production capacity is being transferred to mainland China at an accelerated pace. Looking at the supply side in the short term, the main ones that climbed the slope in 2024 were BOE's Chongqing, Vicino Hefei, and Tianma Xiamen TM18. Releases were concentrated in the second half of the year, and OLED panel prices may continue to rise in the first half of the year. Over the long term, it will continue to be deployed in mainland China in terms of technology layout and high-generation online platforms. From a technical perspective, domestic panel manufacturers continue to advance their technology against overseas standards, including LTPO, lamination and other technological upgrades, to meet the longevity and power consumption requirements of higher-end and medium-sized products. In terms of generation line construction, BOE announced in Q4 2023 that it plans to invest 63 billion dollars to build the first 8.6-generation AMOLED production line in China, mainly for medium size, to improve the production line structure and push the OLED display industry to start a new stage of medium size development.
It is time to replace organic light-emitting materials with domestic production. Looking at the upstream raw materials sector, organic materials are the core components of OLED panels, and organic materials account for 23% of OLED panel costs.
Overseas patent monopoly on organic light-emitting materials, Tokki monopoly on evaporators, leading the mask version by US and Japanese companies, and domestic manufacturers accelerate supporting cooperation, introduction and verification of downstream panel manufacturers. For OLED terminal material manufacturing, front-end material manufacturers first synthesize basic chemical raw materials as intermediates, then further process them into pre-sublimation materials, sell them to terminal material manufacturers, and finally form OLED terminal materials for use in the production of OLED panels. At the beginning of the production of OLED organic light-emitting materials, the raw materials were chemically synthesized to form intermediates, and the gross margin was lower by about 10-20%. The purity requirements after sublimation are very high, and the material's gross margin is also as high as 60-80%. Its core technology and patents are concentrated in a few overseas manufacturers. With the expiration of overseas patents and domestic technological breakthroughs, domestic manufacturers ushered in a good opportunity for development.
Investment advice:
Midstream: Continue to be optimistic about the sustainability of price increases driven by this round of small-sized structural supply shortages, as well as the improvement of the long-term supply and demand structure, which is beneficial to BOE A (000725.SZ), Vicino (002387.SZ), Shenzhen Tianma (000050.SZ), and TCL Technology (000100.SZ);
Upstream materials: Good for light-emitting materials & evaporation source equipment supplier Olaide (688378.SH), material manufacturer Wright Optoelectronics (688150.SH), OLED intermediates and front-end materials manufacturer Ruilian New Materials (688550.SH), Wanrun Co., Ltd. (002643.SZ).
Risk warning: Price increases fall short of expectations, demand recovery falls short of expectations, industry competition intensifies, and the upstream localization process falls short of expectations.