OLED Shortages could cripple Android

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Android phones may be taking the world by storm, but a shortage in AMOLED displays could prove a stumbling block and hinder Google’s efforts to run away with the smartphone cup.
Analysis outfit iSuppli Corp says shipments of small-sized AMOLEDs used in cell phones are projected to reach 184.5 million units by 2014, up from 20.4 million units in 2009. That’s a Compound Annual Growth Rate (CAGR) of 55.1% but at present only Samsung Mobile Displays (SMD) and LG Displays makes AMOLED panels and demand is outgrowing supply.

Meanwhile, iSuppli notes the growth of dominant and incumbent AMLCD technology in the smart phone market is set to rise by a significantly larger amount, with predictions shipments could reach some 1.75 billion units by 2014 from 1.3 billion in 2009.
AMOLED suppliers seem to have missed the boat slightly, with SMD only now investing $2.2 billion in its AMOLED facility which should take effect and ramp up production by 2012, while LG has yet to even bother taking steps to increase its production.
In other areas of the world, Taiwan-based AU Optronics Corp. and TPO Display Corp. are purportedly planning to introduce AMOLED products towards the end of 2010 or early 2011, but both companies are not shipping any significant quantities at this time, says iSuppli.
No big deal, one might say, but Android phones have traditionally plumped for AMOLED owing to its significantly higher quality, lack of backlighting which offers power-savings and the possibility of slimmer phone designs as well as superior performance, with better fast motion display and a richer color gamut compared to AMLCDs.
“Starting with the Nexus One introduced in January, Android-based smart phones have aggressively adopted high-quality AMOLED displays as a competitive differentiator against the advanced-technology AMLCD screen used in the iPhone,” said Vinita Jakhanwal, principal analyst for small and medium displays at iSuppli. “However, rising demand—combined with a limited supply base—has led to the constrained availability of AMOLEDs.”
One would think that with such a high demand, suppliers would be bending over backwards to ramp production, but iSuppli says there is a good reason this is not happening.
First, says the firm, AMOLED is a newer technology compared to the well-established AMLCD, whose fabs are mature and mostly depreciated in full. “This currently gives AMLCD fixed-cost advantages compared to AMOLED fabs that have been around only for the last few years.”
Second, says iSuppli, newer technology means that establishing manufacturing processes could be prone to yield losses, leading to slower production ramp-ups.
Third, AMLCD appears to be upping its game, “improving its performance and simultaneously exerting pressure on display prices, competing with the moving performance as well as price target of LCDs.”
iSuppli, however, still believes handset makers will continue to push manufacturers to ramp up the production of AMOLED, noting that in “a market that is becoming highly competitive with a perceptible emphasis on distinctive features and improved performance, AMOLED may offer manufacturers crucial and much needed choices with which they can achieve product differentiation.”