Huaan Securities: The penetration of large and medium-sized displays accelerates the rise of domestic alternatives

The Zhitong Finance App learned that Huaan Securities released a research report saying that the core growth logic of OLED is replacing traditional LCD technology+accelerating global localization+expanding downstream demand. First, looking at the development of the display industry, technological iterations are not uncommon, and OLEDs have entered a golden period of replacing LCDs with their performance advantages. Second, OLED terminal materials and equipment have long been limited by overseas patent barriers. In recent years, domestic companies have continuously achieved “stuck neck” breakthroughs in terminal materials and evaporation source equipment. It can be seen that overseas restrictions are expected to be gradually broken through in the future, and global localization will accelerate. Third, new scenarios such as flexible displays and large in-vehicle screens are repeated. Downstream diversification drives OLEDs to penetrate horizontally and vertically in both directions, spreading from small horizontal to medium to large sizes, and penetrating from the high end to the low end. Furthermore, the cost reduction space brought about by the 8.6 generation line cannot be ignored. Domestic seizing the 8.6 generation line will inevitably drive the upgrading of the entire industry chain. Behind the production capacity advantage, it may be accompanied by a shift in industry voice to the domestic market. In the future, the global status of domestic OLEDs is expected to improve, and domestic enterprises will also benefit from a broad alternative space.

The main views of Huaan Securities are as follows:

1. Display technology continues to be iterated, and OLED technology is becoming more mainstream, leading the upgrading of the industry

Against the backdrop of folding screens becoming a new growth point for displays, the volume of automotive screens and wearable devices, and the expansion of display screen sizes, OLED performance and cost advantages are prominent, and are expected to become mainstream in display technology and usher in a market explosion. According to GMI statistics, the global OLED market value in 2023 is US$50.8 billion, and the CAGR is expected to be 13.7% from 2024 to 2032. According to DSCC forecasts, demand for ITOLEDs is expected to reach 60 million units between 2023 and 2028, with a CAGR of 46%. In the annual display equipment investment, OLED's share will reach 54% in 2024, and is expected to exceed 80% in 2025. In the future, increased OLED investment, capacity expansion, and diversification of downstream application scenarios will bring higher technical requirements. Domestic enterprises will also continue to break through technical bottlenecks, strengthen their competitiveness, and promote the rapid development of the OLED industry in increasingly fierce competition.

2. The time is right for the overall localization of the OLED industry chain, and there is plenty of room for upstream domestic alternatives

Overall, midstream panel manufacturers are actively expanding high-generation production lines, commercialization of new technologies such as laminated OLEDs is accelerating, and diversification of downstream applications will accelerate the localization of upstream materials and equipment, providing increased demand. Taking light-emitting materials as an example, their market size continues to expand. According to QYresearch, the global OLED light-emitting layer main material market sales reached 1.53 billion US dollars in 2023, and is expected to reach 3.303 billion US dollars in 2030, with a compound annual growth rate (CAGR) of 11.6% (2024-2030). OLED terminal materials are currently a key difficulty in domestic substitution. The core patented technology was once monopolized by overseas companies. According to Qunzhi Consulting's estimates, the overall domestic material market share of OLED organic materials (including OLED terminal materials and front-end materials) will be about 38% in 2023; front-end materials account for a relatively large 58%, and the localization rate of terminal materials is low. Among them, general-purpose layer materials in terminal materials are about 17%, and light-emitting layer materials are less than 6%. There is broad space for domestic replacement.

3. The penetration of OLEDs in medium to large sizes is accelerating, and the downstream demand side is improving for a long time

Domestic OLED panel production capacity continues to be released, and the 8.6 generation line has become a new hot topic. According to DSCC data, the 8th generation line already accounts for 52% of OLED equipment investment in 2024. In the overall display equipment investment forecast for 2025-2027, OLEDs, including IT 8th generation OLEDs, account for about 70% in 2025, 70% in 2026, and 100% in 2027. The 8.6 generation line improves cutting efficiency and reduces unit costs by expanding the substrate, which is significant for medium to large sizes with high costs. Compared with the current mainstream 6 generation line, the cutting efficiency of the 8.6 generation line is outstanding. According to data from the China Electronic Information Industry Development Research Institute, taking a 14-inch laptop as an example, the number of display panel cutting pieces will increase by 106%, and the unit product cost will be reduced by 36.9%. In addition, among small-sized screens, where the penetration rate is close to 60%, OLED will continue to penetrate mid-range and low-end products. The 8.6 generation line expansion was concentrated in China and South Korea. Samsung and LGD took the lead in expanding production. Domestic BOE and Visinault later took the lead with a monthly production expansion plan of 32,000 pieces. Against the backdrop of increasing demand for medium to large 8.6 generation substrates in the future, the production capacity advantage of domestic companies may enhance the competitiveness of the domestic OLED industry.

4. Domestic enterprises are breaking through overseas monopolies at an accelerated pace, and the production of terminal materials has become a key point of breakthroughs

Materials account for a relatively large share of OLED production costs, about 23%, but they have been monopolized by overseas for a long time, and domestic companies have continued to make breakthroughs in recent years. The production of OLED intermediates and materials before sublimation has been initially localized. Some Chinese enterprises have entered the global OLED material supply chain. Currently, Wright Optoelectronics, Olaide, Wanrun Co., Ltd. all have terminal material production capacity, and there are broad prospects for future development of domestic enterprises.

Risk Alerts

Downstream panel factory production expansion progress falls short of expectations; technology iteration falls short of expectations; domestic breakthroughs in raw materials fall short of expectations, depending on the risk of “stuck neck” brought about by overseas; risk caused by high customer dependency.