Core tips: when it comes to consumer electronics innovation, we should first mention the revolution of display technology. Compared to traditional LCD mobile phone, OLED is much lighter and thinner, with lower power consumption, faster response, higher contrast and color saturation, and has the characteristics of bendability and even transparency that LCD does not have.
    When it comes to consumer electronics innovation, we should first mention the revolution of display technology. Compared to traditional LCD mobile phone, OLED is much lighter and thinner, with lower power consumption, faster response, higher contrast and color saturation, and has the characteristics of bendability and even transparency that LCD does not have.

The joining of Apple Inc., the trend setter of consumer electronics, in OLED industry will dramatically change OLED industry chain, and its great annual sales will also change the pattern of intelligent terminal displays. We are optimistic about rapid increase of penetration rate of AMOLED in next year. From the perspective of price, AMOLED is about to replace LCD soon, according to IHS data. It is expected that the AMOLED screen will be used in some flagship models in 2017, and will be widely applied into middle-end models when the supply is sufficient and stable.
     Direct cause - cost reduction promotes mass application soon
    According to the data of IHS, AMOLED is about to replace LCD soon: in the first quarter of this year, the cost of 5-inch 1080p AMOLED display reduced to about $14.30 (about RMB 93 Yuan), while the cost of LTPS LCD display with same configuration was $14.60 (about RMB 95 Yuan). In the fourth quarter of last year, the costs of AMOLED display and LTPS LCD display were $ 17.10 and $15.70, respectively, it is clear that the price of AMOLED dropped faster.

5: the cost of 5-inch FHD AMOLED (unit: USD) reduced lower than that

 of LCD in the first quarter of 2016

 Source: IHS, Changjiang Securities Research Institute

In recent years, various manufactures have used the AMOLED display as a selling point of high-end flagship models. With the progress of technology and the reduction of cost, the AMOLED will be applied in low-end models and used to produce curved-display screen in the future. Among over 50 new models released at the first half of this year, more than 1/3 of smart phones used the AMOLED screens. More importantly, Apple Inc., trend-setter and innovator of mobile phones, will also use AMOLED display in 2017 or 2018, which will be emulated by more mobile phone manufactures.

 Table 3: the application of AMOLED in smartphones is on the rise, with the proportion of flexible screes on the increase

Source: Changjiang Securities Research Institute

 It is expected that the penetration rate of AMOLED screen in smart phones in the world will reach 36% in 2020, and smart phones equipped with OLED screens will exceed 700 million.

 Figure 6: forecast of the penetration rate of AMOLED in mobile phones (unit: million)

Sources: Sunrise Big Data and Changjiang Securities Research Institute 

  Intelligent terminal takes the lead to use OLED, and the sales of wearable VR doubles for the second time
    Light weight, thinness and low power consumption are the biggest advantages of OLED in the manufacturing of portable products, while the light weight, thinness and curved surface are unique advantages of OLED in producing television and other products. Currently, OLED is mainly applied in smart phones, wearable devices, household appliances and other fields. In 2015, the total output of OLED was 354 million, 70% of which were used in smart phones. Samsung, Vivo, OPPO and other domestic well-known mobile phone manufactures have begun to use OLED.

Figure 7: application fields of  Figure    8: proportions of mobile phone models

                                                           OLED in 2015                          using AMOLED in 2016

Sources: Sunrise Big Data and Changjiang Securities Research Institute 

 72.1 million wearable equipment were sold in 2015 and the sales volume of wearable equipment will double again to reach 155.7 million in 2019, of which the sales volumes of basic wearable devices (wrist accessories, eyewear device, modular wearable device, clothing and ear devices etc.) and smart wearable devices will reach 66.3 million and 89.4 million, respectively, according to the forecast of IDC.
    The rapidly developed industry has brought vast market to upstream parts. As an indispensable component of smart wearable devices, the screen is expected to have great opportunity to develop, and flexible display AMOLED will be the trend of development.

Figure 9: appearance time of new         Figure 10: forecast of global output of

smart wearable products                wearable devices (unit: million)

Source: IDC, Changjiang Securities Research Institute 

 Both Oculus and Valve use short persistence AMOLED display screen, and Sony uses its own OLED display screen. International giants attach great importance to the advantage of AMOLED screen in improving response speed, and OLED technology shortens transmission time of images to display to microseconds, making VR to be the product of virtual reality in the true sense.

Figure 11: VR ecology composed of a number of leading   Figure 12: the helmet of domestic brand Deepoon VR uses 

                                     enterprises has been initially established             1080P AMOLED screen manufactured by Samsung

    Source: Digital Home Appliances, Changjiang          Source: official information of Deepoon, Changjiang

Securities Research Institute                           Securities Research Institute 

  The industry chain seeks a breakthrough and materials are expected to be replaced with those made in China   

 OLED industry chain is divided into upstream market, middle stream market and downstream market, of which upstream and middle stream markets are news markets and thus attracting highest attention of capital market. The materials in upstream market were the first to be supplied locally.

Figure 13:AMOLED industry chain 

Source: Changjiang Securities Research Institute 

  According to OLED supply chains of leading enterprises Samsung and LG, it can be concluded that the manufacturing of high-end materials such as light-emitting materials, transport materials, injection materials have been monopolized by enterprises of the United States, Japan and South Korea. Currently, domestic enterprises can only produce PI films, intermediates, driver IC and other upstream raw materials, so there are huge spaces to replace light-emitting and transport materials.

Table 4: Manufacturers in the supply chain Samsung and LG are dominated by enterprises of the United States, Japan and South Korea

Source: IHS, Changjiang Securities Research Institute

      Targeted panel manufactures will be the biggest winner.
    With the development of OLED industry chain and its transfer to the Chinese market, middle stream panel manufacturers will become the ultimate winners through transformation and upgrading. The production capacities of Chinese panel manufacturers, represented by BOE, Tianma, GVO, EDO and Truly, have improved greatly.

Figure 14: overseas panel manufacturers increase small and     Figure 15: layout ofproduction lines and production capacity of

 mediumOLED production lines (unit: million)                   Chinese panelmanufacturers in the field of OLED

Sources: Sunrise Big Data and Changjiang Securities Research Institute

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