TV Market Tough to Crack for OLED Makers

September 3, 2013 Leave a comment

Sep 2, 2013

TV Market Tough to Crack for OLED Makers

By  Juro Osawa and Min-Jeong Lee

Long touted as the next-generation display technology, organic light-emitting diode or OLED screens have made it to the mainstream in the world of smartphones, with market leaderSamsung Electronics Co.005930.SE -1.24% using them in popular models like the Galaxy S4 and Galaxy Note II. But when it comes to larger screens for televisions, OLED is still far from taking off. Technology for producing TV-size OLED screens hasn’t yet matured, and it’s also difficult for electronics makers to make a lot of capital investment in that area, given low expected returns in the thin-margin TV market.“Making large TVs with OLED screens is still uneconomic,” says Sanford C. Bernstein analyst Alberto Moel. Mr. Moel, who recently co-authored a report on the OLED market, estimates the world-wide sales of OLED TVs at just over 20,000 units this year, accounting for only 0.01% of the global flat-panel TV market. For the OLED TV market to take off, the industry still needs more breakthroughs in large-size OLED production technology that can dramatically improve cost efficiency, Mr. Moel said.

Samsung and LG Electronics Inc.066570.SE +1.10%, both based in South Korea, are the world’s two leading producers of OLED TVs today. Back in January, LG started selling its first flat-screen 55-inch OLED TV in South Korea for about $10,000, and then later released a more expensive OLED TV with a curved screen. Samsung soon followed suit with its own curved OLED TV.
Last week, LG said it would cut the prices of its curved OLED TVs by nearly 30% to roughly $10,000. LG’s price cut followed a similar move by Samsung, which also lowered the price of its curved OLED TVs by 30%.

“It’s true that market creation has been slow due to relatively high prices,” Samsung said in a statement in August when it slashed OLED TV prices.

While Samsung, the world’s largest smartphone vendor, has built an efficient, profitable business around small OLED screens for mobile handsets, repeating the success in the less-lucrative TV market is much more difficult, said Bernstein analyst Mark Newman.

For the time being, production of large-size OLED screens is far less cost efficient than that of small OLED screens for smartphones. And it is uncertain how much extra money consumers are willing to pay for OLED TVs, when they can find the best LCD TVs at lower prices.

Some of the key advantages of OLED screens – such as the fact that they can be made very thin – are of greater value when they are used in smartphones than in TVs, Mr. Newman said.

“OLED TVs may have long-term potential, but we don’t expect the market to take off in the short term,” Mr. Newman said.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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