Display Week 2022: Smartphone and smartphone display market outlook

At Display Week 2022, San Jose, USA, the smartphone and smartphone display market outlook was presented by Ross A. Young, Founder and CEO, DSCC.

Looking at smartphone shipments by region, it was up 4 percent in 2021, with China as the largest region, and Middle East and Africa growing the fastest. We forecast the market to fall 1 percent in 2022, with Asia Pacific likely to overtake China and Eastern Europe, and China declining the most. There are growing concerns that the market could be down a lot more, say, 10-15 percent, if China shutdowns are extended, and war persists, and inflation continues. LCD volumes are most affected due to weakness in China and Eastern Europe.

In 2021, panel shipments rose 4 percent to 1.52 billion. AMOLED shipments rose 26 percent to 634 million. In 2022, currently showing AMOLEDs rising another 10 percent to 694 million, boosting share from 42 percent to 46 percent, as companies prioritize flagships. Our Q1-22 OLED forecast is for down 6 percent YoY, with growth in H2-2022. We are hearing about possibility for larger declines for 2022 flexible OLED volumes, as much as 14 percent depending on length of China shutdowns, etc. LCDs fell 8 percent in 2021 and are expected to fall another 8 percent in 2022, impacted by China and Eastern Europe. But may be worse with talk about larger order cancellations/delays.

Apple continues to be in the flagship space, as basically, all flagships use flexible OLEDs. Apple had top 6 best-selling models, 7 of the top 10, and 8 of the top 16. 2022 will be downside for flexible OLEDs. We are hearing average of 14 percent or 60 million units lower to 362 million. Xiaomi appears to be lowering volumes the most in OLEDs and LCDs. Oppo is seeing the smallest decline as Realme takes share.

In foldable OLED panel procurement share, Samsung has dominated the foldable market with its Z Flip series dominating. Z Flip 3 has 51 percent share in 2021, and is expected to reach 53 percent by Q1-2022. The Q1-2022 foldable panel procurement was up 264 percent year-on-year, and was 1 percent below forecast. We have good visibility into Q2-2022, showing 27 percent QoQ and 154 percent YoY growth, to 3.3 million panels as Samsung begins its Z Flip / Fold 4 ramp.

Samsung completely dominates rigid panel suppliers. Growing amount of rigid OLEDs are being re-allocated to tablets and notebooks. Samsung is also dominant among flexible panel suppliers, with share never falling below 51 percent. BOE is shown as gaining share for five straight quarters, after recovering from Huawei's situation. LGD is heavily focused on Apple, leading to its highest share yet in Q4-2021.

In foldable panels, SDC has no less than 70 percent share each quarter, with over 90 percent share in H2-2021. BOE has been consistently no. 2, with customer, Huawei, looking to drive significant volumes to date.

Looking at 2020-22 OLED smartphone panel shipments, the market grew 26 percent, with SDC having 70 percent share on 16 percent unit growth. Given BOE's reported challenges at Appe, we see SDC benefiting, enabling them to enjoy 67 percent share. SDC's largest customers remain Samsung and Apple. Xiaomi and Oppo are next two largest customers.

BOE is expected to gain on Apple iPhone 14 design win. Growth is also at Honor, Oppo, Samsung, and Vivo. BOE's reliance on Huawei has declined to less than 10 percent. Apple is expected to be its largest customer in 2022. There is uncertainty regarding shipments to Apple. LGD is almost entirely reliant on Apple. Visionox is seeing growth at Honor and Huawei. China Star and Tianma are looking at Xiaomi for majority of their volumes.

Display tech trends
LTPO penetration continues to trend upward with BOE and Visionox shipping panels from Q1-22. 13 Pro and Pro Max are enjoying strong H1-22 results. LGD is shipping to Apple from mid-year. SDC’s share may fall below 75 percent in Q4-22.

Higher refresh rate displays are becoming increasingly common on flagship models and even mid-range smartphones. 60Hz fell below 50 percent share in Q3-21 and 120Hz is expected to overtake 60Hz in Q1-22. Samsung is the leading high refresh rate brand as also available on its lower priced rigid OLED phones.

Samsung’s U-shaped hinge has been helpful with dust resistance, is IP8 rated and operates well in flex mode, but produces a visible seam. Oppo, Honor and Huawei have recently brought water drop shaped hinges to market which produce a less visible seam and a flatter/thinner device, but may not be as good for dust resistance, water proofing and flex mode. Oppo also changed up the in-folding aspect ratio from Samsung’s 5:4 to 8.4:9, which has proven popular, so you don’t have to turn the phone to watch videos. It also allows for a wider cover display at 18:9 vs. the Fold 3’s 24.5:9.

What's coming?
Apple iPhone 14 brings a new model, big camera improvements, a new look, narrower bezels and higher entry pricing. If we look at Apple's roadmap, all four models in 2023 will have the pill + hole design. In 2024, under panel Face ID for iPhone 16 Pro and iPhone 16 Pro Max, which is easier to incorporate than UPCs. In 2025, we expect all models to have under panel Face ID. In 2026, UPCs are set to arrive on the iPhone Pros. 2027 may be too early to include UPCs on non-Pro models. It will depend on cost.

Initial production forecasts look very promising for this year’s Samsung foldables, starting a month earlier and more than double in July. From June to August, Z Flip 4 is 58 percent higher than the Z Flip 3, and 142 percent higher for the Z Fold 4 vs. Z Fold 3. This likely points to a price decrease for the Z Fold 4. Samsung Display is targeting a 110 percent increase in foldable displays to 18.1 million in 2022 with ~100 percent increase in clamshells, 63 percent increase in in-folding to SEC, and 2 million panels to other brands, mostly. Other foldables expected in 2022-23 are from Motorola, Oppo, TCL, Vivo, Google, and Xiaomi. Rollables are a possibility for H2-23.

If we look at LCD vs OLED, smartphones, 2 percent CAGR from 2021 to 2026 with LCDs declining at 6 percent CAGR, and OLEDs rising at 11 percent CAGR, as OLED costs and performance improve faster than LCDs. However, it will likely be more volatile than we are showing. OLEDs may finally overtake LCDs in 2024.

Looking at OLED smartphone panels by form factor, flexible OLEDs are set to dominate on a growing share of capacity and improving cost position. Rigid volumes have already peaked, as Samsung and EDO look to address IT markets. Foldables will remain a niche, constrained by higher price, cover window capacity. There is Samsung’s supply chain dominance and lack of participation by Apple. Rollables may have the same issues, although they will benefit from lack of cover display. We still need a solution for scratch resistance issue.

We also expect Chinese brands to gain share as they strengthen overseas and enjoy faster growth in China. Apple and Samsung will lose OLED share, but remain dominant, with especially Apple in the flagship space.

Conclusion
2022 has been a challenging year. Smartphone and smartphone panel shipments are currently predicted to fall 1 percent in 2022, but are challenged as the China shutdowns, Russia-Ukraine war, higher inflation, and rising interest rates linger. Q2-22 is expected to be much weaker than previously expected. This will be a volatile year.

OLEDs are set to outperform LCDs due to greater weakness in China and Eastern Europe where LCDs are stronger. In addition, companies tend to be more focused on growing their flagship (i.e., flexible OLED) products. Flexible OLEDs are to gain share every year through 2025. Rigid is suffering from slower capacity growth, allocation shift to IT.

Apple is dominating the OLED smartphone market despite a rigid or foldable offering. It is expected to lose share as the category grows and prices reach lower and lower price points. The iPhone 14 series should boost revenue share by replacing a 5.4” model with a 6.7” model.

Foldables are set to surge in 2022. This should be a good year for foldables with around 100 percent growth to over 20 million panels and over 16 million phone shipments on aggressive plans at Samsung and SDC. More brands are launching products, especially lower priced clamshells.

Smartphones will remain no. 1 category for display revenues. Brands will look to continue to differentiate their devices through advanced technologies to minimize commoditization – LTPO, UPCs, foldables, rollable, CoE, etc.