Faultline: Samsung switches to OLED early – sets up challenge to all TV players May 17, 2012 – Rethink Research
To say that competition in the TV market is escalating it a massive understatement. LCD technology is so well ensconced, but it is running out of steam, with the latest generation of LCD technology, the one with variable LED backlighting, having reduced power requirements considerably and added to the quality of contrasts. But it still falls short of OLED which can also lead to thinner and lighter devices, with more pixels. So they are coming next.
This week Samsung said that it planned to introduce a 55 inch OLED TV later this year in Korea and some neighboring countries. It will soon get to the US and Europe as volumes ramp through 2013.
Samsung is set to take its dominance of OLED technology to the next level. It already dominates the market for LCD TVs and has OLEDs made in volume for 4 inch screens on cellphones, and has just ramped to 8 inch devices, which may end up landing it the contract for the next generation of iPad screens. But 55 inch screens is a far cry from there. Usually the screen sizes go up through the gears, starting small and when Sony launched an 11 inch OLED screen, with full HD back in 2007, promising to follow up with a 27 inch version, it soon cancelled the idea, presumably on the back of weak yields and the resulting high costs of manufacture.
An OLED (organic light-emitting diode) is a light-emitting diode (LED) with an organic electroluminescent layer which emits light when tickled with an electric current. The great majority these are Active Matrix OLEDS, which are simply OLEDS where each pixel has its own control. Think of each pixel as a Cathode Ray tube of its own, and think of those where the screen shows black, as simply being turned off, using no power, or where it is dark using less power. There is no generic backlight, as the LED is its own backlight.
So why is Samsung suddenly planning to make this now. DisplaySearch says that such devices will only make up 50,000 units in 2012, and then ramp to 5 million devices by 2015 – still only just over 2% of the TV market then in terms of annual shipments? Perhaps the Samsung announcement will change those predictions.
Well, all technologies of this type are learning curves. The sooner you start learning, the cheaper you can make the devices, ahead of rivals. Of course the money you throw at it helps, but time is of the essence. The aim is usually to intercept the volume appeal in the market with when you are at your highest production levels. You work back, based on how long it took you to perfect prior generations of screens, to when you need to begin the process. Sony thought it could begin in 2007, but it was wrong, and Samsung says that the time is right now. It may also be wrong.
In both cases the two companies had to plan to lose money on the early screens, and that’s without spreading their R&D costs across the devices. But in each case the aims have been different from the normal introduction of technology. For Sony it was all about getting back in the game of owning the dominant technology for TV sets. It had lost ground to Samsung and LG, and in fact was reliant on Samsung for its previous generation of LCD TV screens, and it wanted to leapfrog its Korean rivals.
Samsung now has two reasons to dive early into the technology – it will be making less and less profit on each TV it ships these days, and the LCD TV market has become saturated and cut-throat. It wishes to differentiate itself from Sony, LG, Toshiba and Sharp and it wants to move the market on to a place where Google and Apple cannot compete at the lucrative top end.
The graph below from DisplaySearch comes out of research it produced this quarter about technology dominance in TV screens. We can see from this that the LCD screens using individual LED backlighting, have just come into dominance, being introduced as recently as 2009. This technology suited existing LCD factories, which could be adapted to it, which is why there were no great factory refits needed, and the technology has been rapidly absorbed by the market. Plasma barely survives, CRT barely survives, rear projection TV came and went without taking hold, and in a year or two’s time what was once the mainstream LCD technology using CCFL, will barely survive, and OLED comes in at the top as a sliver.
Well this graph was clearly compiled on forecasts put together before Samsung’s announcement and OLED could well occupy a larger slice by 2014 now that Samsung is committed to the technology.
So this is an early commitment from Samsung not because the technology has come of age – if it was the next step would be 30 inch TVs, then 40 inch – but instead because it sees an opportunity to push a major competitor out of the business and shut-out newbies to the TV market like Vizio in the US, and Apple and Google, who will not be able to get Samsung OLED panels, and will have to work on smaller devices.
This type of move will confuse the market. The top end will have marginally better, physically smaller devices, and until the price drops from the $10,000 level that Samsung expects them to be introduced at, to something closer the $2,500 mark, and until US and European economies straighten themselves out, it will be a huge loss leader for it.
It may have the effect of pushing any prospective TV product which comes out of Apple down towards the low to mid-range end of the market, but as we have said elsewhere in this issue, we suspect that Apple has other fish to fry prior to the introduction of any TV – namely signing sufficient content to its cause on the right terms.
It is also worth reminding yourself of the legal battle which has been raging between Apple and Samsung over intellectual property rights, over smartphone market share and over tablet sales – and here again these two companies are involved.
Right now the ONLY reason for Apple to launch a TV would be to launch it with content leverage – where it also provides ALL the content, and perhaps lets you have a super video iCloud to store it in.
Apple would hope to mop up the market at the low end, under 30 inches, and polarize it into a device which re-invents watching TV. There is a concern that it can never make a 50% margin on a TV, because these companies make tiny margins, so much so that Sony, traditionally the third placed TV maker, is dying a slow death because it has tried to stay in the TV game, on such low margins. But on a combined content-TV eco-system Apple could make such a margin.
To do that it would have to invest genuine intellectual firepower in re-thinking the way people watch TV. But if it did not do this for a 50% margin, then it might be happy to do this just to hurt Samsung. So Apple too may have its own reasons for going into the TV market – simply to knock Samsung off its perch as leading phone maker and TV maker globally.
Samsung unveiled its new devices at its Premium TV Showcase this week, showing the OLED based Samsung ES9500 OLED TV which it says will come with a wide range of Smart Content. Originally the device was shown at CES in January.
Samsung says that the device’s self-emitting sub-pixels can individually reproduce life-like colors that are 20% richer than those found on LED TVs. It also offers faster response times, with less motion blur and life-like 3D experiences with virtually no crosstalk – again due to the faster switching speeds.
The new device lets two people watch different channels in full-screen mode at once, using 3D glasses and 3D sound, so instead of the 3D glasses swapping images between eyes, they can open and close (using LCD shutters) so you watch a different program from someone else, out of phase. Sound is delivered to the LCD glasses, so you hear only your own audio track. It’s a neat trick, if just a gimmick, and Samsung calls it dual smart view.
Above the new ES9500 OLED TV in size Samsung also launched LCD TVs from 60-inches to 75-inches.
Samsung is looking at a two to three years ramp of OLED technology until they are mainstream – for that read 50% of the market, which makes it massively out of kilter with DisplaySearch projections.
Meanwhile Sony and Panasonic are now said to be considering merging their OLED efforts and collaborating on coming to market as soon as possible after Samsung. At the moment the two companies have only held preliminary talks on the subject. It is assumed that LG can go it alone in OLED and will also match the Samsung launch speed.
Both Sony and Panasonic, which leads on plasma panels, are in profit troubles over going it alone in TV markets. However Sony was the world number one manufacturer when in 2003 it agreed to work with Samsung over LCD panels, but ended up losing its dominance to its Korean supplier. It may well be forced back into Samsung’s hands as a supplier once again, in order to compete in OLED, leaving Panasonic high and dry. However Sony recently dismantled its reliance on Samsung and would only do this reluctantly as a last step. But even if Sony and Panasonic are forced into one another’s arms, that would mean that Samsung had taken two suppliers and turned them into a single entity, effectively reducing the competition by one, by its early shift to OLED, which it probably the only way it can drive further TV market share gains.