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Rethinking OLED Lighting's Future

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This year – 2013 – could prove to be the turning point for OLED lighting. Despite prophesies of doom from an anti-OLED camp, who believe basically that LEDs will conquer all, OLED lighting is not …

This year – 2013 – could prove to be the turning point for OLED lighting. Despite prophesies of doom from an anti-OLED camp, who believe basically that LEDs will conquer all, OLED lighting is not dead yet. There were new products in 2012, for example. But such announcements were nowhere near sufficient to support the view that OLED lighting is going to be a force to be reckoned with in the general illumination market in a few years.

NanoMarkets remains a proponent of OLED lighting’s eventual success. We note especially that OLED does not have to capture a large share of the general illumination market to be a profitable business and that some of the important technical evolution for OLED lighting (most notably in the area of efficacy) is proceeding quite impressively. Also, OLED lighting is quite different to any other kind of mainstream lighting technology because it takes the form of a flat panel, which, NanoMarkets believes, will give it a strong appeal in certain markets such as office and automotive lighting.

That said, NanoMarkets, believes that the original vision of OLED lighting in which it takes off in 2015 now looks unrealistic. If there is a takeoff point now, it looks more like it will have to wait until 2017 and beyond. Partly this is a technology issue; fairly large OLED lighting panels will have to be produced with good yields, for example, which isn’t happening yet.

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  • 1. Rethinking OLED LightingThis year – 2013 – could prove to be the turning point for OLED lighting. Despite prophesies ofdoom from an anti-OLED camp, who believe basically that LEDs will conquer all, OLED lightingis not dead yet. There were new products in 2012, for example. But such announcements werenowhere near sufficient to support the view that OLED lighting is going to be a force to bereckoned with in the general illumination market in a few years.NanoMarkets remains a proponent of OLED lighting’s eventual success. We note especiallythat OLED does not have to capture a large share of the general illumination market to be aprofitable business and that some of the important technical evolution for OLED lighting (mostnotably in the area of efficacy) is proceeding quite impressively. Also, OLED lighting is quitedifferent to any other kind of mainstream lighting technology because it takes the form of a flatpanel, which, NanoMarkets believes, will give it a strong appeal in certain markets such asoffice and automotive lighting.That said, NanoMarkets, believes that the original vision of OLED lighting in which it takes off in2015 now looks unrealistic. If there is a takeoff point now, it looks more like it will have to waituntil 2017 and beyond. Partly this is a technology issue; fairly large OLED lighting panels willhave to be produced with good yields, for example, which isn’t happening yet.Will Anyone Invest in New Capacity?However, NanoMarkets believes that the real issue here is who is going to pay to have thefactories built that will support the mainstreaming of OLED lighting? There is perhaps one full-scale production plant for OLED lighting manufacture in place at the present time, whichcertainly isn’t enough to supply the OLEDs for an OLED lighting take off.Even on the most optimistic scenario (see below) NanoMarkets now doesn’t expect therevenues from OLED lighting to reach more than a few hundred million dollars annually for quitea few more years. What firms would invest in OLED lighting capacity under suchcircumstances? They would have to be quite brave ones, especially given the very low growthexpectations that are now considered normal in the world today. This together with theapparent lack of political will in Europe and the US to do anything to change the situation. Wethink that it would take a very brave, or very government-subsidized, firm to do so.Given all this, NanoMarkets believes that the appropriate methodology for this year’sNanoMarkets OLED lighting forecasts is a version of scenario forecasting and, as discussedbelow, we consider three separate scenarios here.Although we don’t assign specific probabilities to these scenarios, we think that the mostoptimistic scenario still has the highest likelihood. The other two scenarios are those in which(A) OLED lighting continues indefinitely as a niche technology and (B) the OLED lightingindustry gives up the ghost. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-938-0030 | FAX: 804-360-7259
  • 2. Scenario 1: OLED Lighting PrevailsThis is the scenario – somewhat revised – that many forecasts of OLED lighting – including ours-- have been based on in the past. In this scenario, there are sufficient technical advancements,reductions of costs, and especially investment to make OLED lighting growth take a suddensurge.As we have already noted the last of these criteria is beginning to look decidedly “iffy.”However, the OLED lighting fan can still point to a few positive developments in the past year.The major OLED lighting makers once again stepped up their development efforts, andprogress, especially on the performance front, was made. New OLED lighting products andquite a few new luminaire designs were launched.But getting from all this to the specific outcome that is represented by Scenario One, will behard to achieve and will take a considerable amount of both technical and businessdevelopment work over the next four to five years. Several challenges remain, including theneeds for even more performance improvements, standardization as well as cost reductionsand capacity expansion.If the industry does meet these challenges, then OLED lighting could yet be the next “big thing”in lighting, or at least the next big thing in OLEDs! In particular, the prospect of using OLEDs foroffice lighting may still become a critical entry point for widespread commercialization, andautomotive and residential lighting also represent major potential mass-markets.Important technical improvements on track: The oft-cited, ultimate goal of OLED lighting isto sell it on the basis of its energy efficiency, which is closely tied to luminous efficacy.Fortunately, the evidence of the past three to four years is that OLED lighting efficiency is on agrowth curve that will take it smoothly to the targeted 100 lm/W necessary to make OLEDlighting achieve is 2015-2015 mass-market goals. This is perhaps the single major fact thatOLED advocates can claim in their favor.Similarly, luminance performance is steadily improving, and most observers – NanoMarketsincluded – believe that it will be sufficient to go mainstream in the 2015-2016 time frame.Improved luminance for OLEDs is expected and will be welcomed by the market, butNanoMarkets does not expect it to be a critical factor in the success or failure of OLED lightinggoing forward.An industry champion to ride to OLED lighting’s rescue: Without such technicalimprovements the OLED lighting game would be over and OLED lighting panels would havebeen consigned to dustbins of semiconductor history where so many of the semiconductorinnovations have gone before.However, NanoMarkets thinks that Scenario 1 can never take place unless an industrychampion emerges that will invest in OLED lighting despite the obvious risks. Such a firm willhave to be not only large, but well plugged into the lighting industry, so that it can capitalize onexisting supply chains to make OLED lighting happen in a mass market sort of way. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-938-0030 | FAX: 804-360-7259
  • 3. NanoMarkets notes, however, that this is a necessary not sufficient condition. Just becauseOLED lighting finds a champion does not mean that OLED lighting will succeed and thatScenario 1 will happen. In fact it will be quite easy for an OLED lighting industry champion tofail quite badly in its mission. We also note while NanoMarkets’ analysis assumes that thechampion will come from the existing ranks of OLED lighting makers, it is also possible thatsome entirely unexpected entrant into the OLED lighting industry will make this happen.For now the potential saviors of OLED lighting are a select bunch of firms that comprise: GE,Osram, Panasonic (in alliance with Mitsubishi), LG, Philips and Samsung. Although GE hascompletely abandoned its early claims that its solution processing approach to making OLEDlights will lead to low enough price points that will give it early victories in the generalillumination market, GE could still propel the OLED lighting market forward at some later stage,if it found a way to make solution processing work.We also think there is a strong possibility that the OLED lighting champion might emerge fromKorea, where both LG and Samsung are very much creatures of the Korean government’sindustrial policy. The rumor is that while Samsung has been designated as the OLED displaychampion, LG has been designated as the OLED lighting champion in Korean industrial policy.This actually seems very plausible to us, but it is important to recognize that just because LG issupposed to exercise a leadership role in the OLED lighting business, it doesn’t mean that it willdo so. Although, substantial government funding means that LG’s risk in this space, we notethat Korean government projects to take Korean industry to world leadership do not alwayssucceed.The two other firms that are candidates for the OLED lighting champion are Philips and Osram.In a sense, both of these firms can already be categorized in this way, since both were earlydeveloping this technology, building pilot plants and introducing early products. They alsoparticipate in various government-funded OLED lighting projects around Europe. This reducesthe risk that these firms face a bit, but European industrial policy is nothing as full-bloodied asKorean industrial policy.Still, both Philips and Osram have robust OLED lighting programs and an apparent enthusiasmfor this topic. The problem is that both companies rely heavily on European consumer marketsthat are just about devastated. It may be that the management of these companies do not havethe stomach to make the substantial investments that will be needed to keep them at the top ofthe heap in the OLED lighting industry,Where else could a substantial commitment and investment towards the future glory of theOLED lighting business come from? One possibility is Japan, which for a while seemed to bethe epicenter of the OLED lighting industry. If it is a Japanese company that turns out to be the“one,” our guess is that it will be Panasonic, or rather the alliance that has developed betweenPanasonic and Mitsubishi.Finally, China’s rush to become a technology powerhouse may impact the story we are tellingnow. There is no real Chinese firm that one can point to at the present as a possible OLEDlighting champion. However, serious OLED lighting firms have appeared in China in the past NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-938-0030 | FAX: 804-360-7259
  • 4. couple of years and if these are backed by the Chinese government backs these firmsfinancially, it could be the solar panel market all over again.Scenario 2: OLED Lighting as a NicheBut without a champion from whichever country, we don’t see there being sufficient capacity tosupport a ramp up of the OLED lighting industry in a few years. Certainly, there is no pent updemand for OLED lighting that will attract investment in the near future.The OLED lighting firms worldwide are hoping that they can create a market from the supplyside; this kind of thing can be very expensive. In addition, a skeptic might point to a number offacts and trends from the past year that tend to make Scenario 1 less believable now: There were no new entrants into the OLED lighting market. One might have expected newcomers if there were real signs that OLED lighting was about to go boom! There were some new luminaire design firms that appeared. Enough to keep hope alive? Maybe, maybe not. There were no new major commitments made to expand manufacturing capacity in preparation for the anticipated market “takeoff.” Again, this is not a good sign and not really consistent with the OLED lighting take off scenario. It is not only industry forecasters who are downgrading their views on the prospects for OLED lighting. Back in 2011, the influential US Department of Energy’s (DOE’s) solid state lighting (SSL) manufacturing report, contained some predictions of the growth of OLED lighting shipments as part of depreciation cost calculations. NanoMarkets criticized these at the time as being too bullish, although it now seems that they were extremely over aggressive. In the DOE manufacturing report from August 2012, DOE essentially repudiated its earlier numbers based on inputs from nearly all of the major OLED lighting players, acknowledging that previous panel shipment forecasts were overly optimistic and unlikely to happen any time soon. Although efficiency and luminance appear to be on track, several other, interrelated factors critical to the successful commercialization of OLED lighting are less certain. These other factors are panel size, panel lifetime, the need for a true industry champion, and, of course, reducing costs.Coping with the cost challenge: NanoMarkets believes that reductions in the cost ofmanufacturing may be the most important challenge facing the OLED lighting industry. Costreductions would allow the industry to reduce prices (without losing profitability) to a level atwhich mass-market products in residential, commercial, and automotive lighting applicationsmake sense. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-938-0030 | FAX: 804-360-7259
  • 5. There are a number of ways in which such a cost reduction could occur. Two important factorsare economies of scale and experience curves. These are both factors that are highlydependent on investment in capacity, which in Scenario 2 does not happen to any large degree.Costs could also be improved process improvements that lead to better manufacturing yields.We note that poor yields – especially for larger panels -- is one very notable reason why theOLED business is not further down its evolutionary path than it currently is.Panel size and other factors: Panel sizes for today’s OLED lighting products are quite small.Certainly, many manufacturers have demonstrated the capability of making larger sizes, but noton a commercial scale with high yields.Today’s small OLED lighting panels are suitable for small decorative lights or table lamps, butthey are not suitable for most general illumination applications, particularly in office settings,which would require excessive tiling of OLED panels at today’s sizes. And because offices are,in fact, where OLED lighting could take off first as a mainstream general illumination technology,the inability to provide the technology in a larger-area format remains a major hurdle.The general problem that OLEDs have with low production yields just get worse as panel sizesincrease. OLEDs are notoriously environmentally sensitive; one small defect can “fail” an entirepanel.In addition, there are other performance issues with larger panels that must be addressed,including the following: non-uniform brightness due to the high resistance of transparentelectrodes and resistive losses. Even for smaller panels, the OLED lighting market is looking formore effective light extraction (outcoupling) and improved drivers that exhibit both low loss andthe capability to provide large currents.Scenario 2 could happen: If the OLED lighting industry cannot find a way to get the total costper OLED panel down dramatically, then OLED lighting may never move beyond the nichelighting status that it currently occupies.In such circumstances, firms would find it hard to set long-term pricing for OLED lighting lowenough to break into new markets. In this Scenario 2, OLED lighting gets purchased only bywealthy individuals or by businesses where aesthetics trumps prices; hotels, restaurants, etc. Itwould be a brave OLED lighting maker indeed that would price OLEDs low enough to createmass market and build the capacity to support that scenario, without some indication of strongdemand pull.Scenario 3: The Death of OLEDsThe hidden assumption in Scenario 2 is that there will continue to be enough wealthy/pioneerpurchasers for OLED lighting to make it a sustainable market. However, this is by no meansassured. The meaning of Scenario 2 is that in the OLED lighting market, things will not changemuch from where they are now.This tacitly assumes that the firms active in the OLED lighting space today are making somemoney, or could do using basically the same the current business model. But this is by nomeans assured. Could OLED lighting designer kits ever be a profit center as such or would the NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-938-0030 | FAX: 804-360-7259
  • 6. firms that offer them now stop doing so if the prospects for OLED lighting becoming a bigbusiness went away. Similarly, will the supply of basic OLED panels dry up if all the suppliers ofthese panels can see going forward is an addressable market consisting of luxury lights in whichmost of the value is captured by a designer or a luminaire builder?If the niche scenario proves unsustainable, then all that is left would be the completeabandonment of the OLED lighting market which would be reduced to zero revenues in a fewyears in a manner similar what happened when Betamax tapes were discontinued.NanoMarkets does not think that this is a very likely scenario, but we have reached the point inthe evolution of OLED lighting where such a possibility must be considered.The contents from this article were drawn from the new NanoMarkets report, “OLED LightingMarket Forecast 2013” Additional details about the report are available on the firm’s website at:www.nanomarkets.net/market_reports/report/oled_lighting_market_forecast_2013 NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-938-0030 | FAX: 804-360-7259