Korea's next hit product?

By John Burton

The electronics industry moves at a dizzy pace. Look at how Samsung Electronics was the undisputed king of smartphones at the beginning of the year, but is now seen under renewed threat by Apple at the upper end with the iPhone 6 and iPhone 6 plus and Chinese makers such as Xiaomi at the lower end with their cheaper models.

Less attention has been paid to what is happening this year in the display sector, one of three key pillars of the Korean electronics industry along with smartphones and semiconductors. That may seem surprising since we are staring at displays probably more than half of our waking hours, whether it is computers, smartphones, TVs or tablets.

Korea already dominates the display industry with Samsung and LG accounting for half of global production, mainly with liquid crystal displays (LCDs). But interest has shifted in recent years toward the Organic Light-Emitting Diode (OLED) screen, which is seen as the third generation of displays after LCDs and the old bulky cathode ray tubes TVs.

Videophiles have raved about the picture quality of OLED screens in which Korea has a head start over competitors in Japan and China. OLED displays are also thin and light, allowing the screens to bend. It has far better power efficiency compared to LCD. It's the holy grail of display technology.

OLED’s picture sharpness and color quality has been compared with earlier plasma TVs but only better. And there lies the rub. Plasma TVs were always the favor of video tech heads over LCDs, but the latter became the dominant player because they were cheaper to produce. Samsung and LG recently announced that they were ending plasma TV production because of falling demand.

Earlier this year, there were widespread predictions that OLED would follow the fate of plasma even before it really got off the ground. The few OLED TVs coming off the assembly line carried price tags of more than $10,000 for the cheapest models and the belief was that OLED would be unable to ever reach mass market status.

Six months ago Samsung delayed plans to build a new OLED production facility, citing weak consumer demand, although it now says it may go ahead early next year. Panasonic and Sharp also said they were suspending manufacturing plans for OLED because they lacked the capital to invest. But obituaries about OLED’s demise look premature.

Bucking the trend, LG Display has decided to double down on OLED production. It is preparing to open a new expanded production line soon to make OLED TVs.

Why the different approaches by Korea’s two crosstown electronics rivals? It comes down to production processes. LG appears to have found a manufacturing method that works, while Samsung is still struggling. OLED TVs have been fiendishly difficult to make, which is why they have been so expensive.

But LG appears to have solved the problem. Industry experts say at least 70 percent of the OLED TVs that LG now produces can be sold instead of landing up in the scrap heap, while the reverse is the case for Samsung, which is dependent on a more complicated production technology.

As a result, LG’s OLED display output is rapidly increasing, with the result that prices are starting to fall. The price of OLED TVs that LG is selling in the U.S. has fallen in the past year from $15,000 to $3,500, which is close to that of high-end models of LCD TVs.

There are expectations that if prices continue to drop, OLED TVs may be able to achieve mass market status within the next decade, although a breakthrough also depends on the availability of higher quality video content by broadcast or movie companies. In addition, LG will probably start supplying OLED panels to Chinese and Japanese TV makers in the near future, creating a competitive environment that should push down prices further.

OLED have also scored another impressive advance this year with LG developing the world’s first transparent displays as well as one that can be rolled up like a newspaper. Those who have seen the first prototypes say they are reminded of the futuristic screens shown in the science fiction film "Minority Report.’’ The latest OLED technology has all the hallmarks of being a game changer.

The progress in the development of OLED spells good news for the Korean electronics industry since it has a head start in the sector. It comes at a time when Chinese, Taiwanese and Japanese display producers have successfully challenged Korea in the LCD display industry, where prices have fallen dramatically and profit margins are thin. OLED TVs could also give a boost to the sluggish global TV set market.

But you can bet if Korea starts making money from OLED, its rivals will be doubling their efforts to get involved. Watch this space.

John Burton, a former Korea correspondent for the Financial Times, is now a Seoul-based independent journalist and media consultant. He can be reached at john. burton@insightcomms.com.