OLED Encapsulation Markets

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Markets for OLED Encapsulation
Materials—2011
Nano-421

Published October 2011

© NanoMarkets, LC

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on the best information available to us, but accuracy and completeness cannot be
guaranteed. NanoMarkets, LC and its author(s) shall not stand liable for possible errors of fact
or judgment. The information in this report is for the exclusive use of representative
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Table of Contents
Executive Summary: Markets for OLED Encapsulation Technologies ..................................... 1
E.1 Available Opportunities in OLED Encapsulation ........................................................... 1 Page | i
E.1.1 Opportunities for Encapsulation in OLED Lighting .................................................................................... 2
E.1.2 Opportunities for Encapsulation in OLED Displays ................................................................................... 3
E.1.3 What About Flexible OLED Encapsulation? ............................................................................................... 4

E.2 Firms to Watch in the OLED Encapsulation Sector ....................................................... 5
E.3 Investment Opportunities in the OLED Encapsulation Business ................................... 8
E.4 Summary of Eight-Year Forecasts for OLED Encapsulation Technologies 2011-2018 ... 10

Chapter One: Introduction to OLED Encapsulation Technologies ........................................ 15
1.1 Background to This Report: Where Are the Opportunities for OLED Encapsulation
Materials?...................................................................................................................... 15
1.1.1 Preamble ................................................................................................................................................. 15
1.1.2 Finally, A Growing Market for OLEDs Emerges ...................................................................................... 15
1.1.3 OLED Encapsulation Strategies ............................................................................................................... 17

1.2 Objectives and Scope of this Report .......................................................................... 20
1.3 Methodology of this Report ...................................................................................... 20
1.4 Plan of this Report .................................................................................................... 21

Chapter Two: OLED Encapsulation Technologies................................................................ 22
2.1 Conventional Encapsulation Materials ...................................................................... 22
2.1.1 Cover Glass Technologies........................................................................................................................ 23
2.1.2 Multilayer Barrier Films for OLED Encapsulation .................................................................................... 24
2.1.3 Overview of Selected Suppliers of Multilayer Encapsulation Technologies ........................................... 26
2.1.4 Vapor-Deposited Conformal Coatings .................................................................................................... 31
2.1.5 Metal Encapsulation ............................................................................................................................... 32

2.2 Flexible Encapsulation Coatings ................................................................................ 33
2.2.1 Flexible Dyad Films On Plastic Substrates ............................................................................................... 34
2.2.2 Flexible Glass ........................................................................................................................................... 35


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2.3 Key Points Made in this Chapter ............................................................................... 36

Chapter Three: Applications for OLED Encapsulation Technologies .................................... 38
3.1 Likely Opportunities for Encapsulation Technologies by Application Type ................. 38 Page | ii
3.1.1 Small, Rigid Displays ................................................................................................................................ 39
3.1.2 OLED Lighting .......................................................................................................................................... 41
3.1.3 OLED TV Displays—Are They Finally Becoming a Reality? ...................................................................... 43
3.1.4 Flexible Displays—When Will They Become a Factor? ........................................................................... 45

3.2 What Kinds of Advancements in Performance—and in Performance Validation—are
Needed? ........................................................................................................................ 46
3.3 The OLED Encapsulation Supply Chain ...................................................................... 48
3.4 Key Points Made in This Chapter ............................................................................... 52

Chapter Four: Eight-Year Forecasts for OLED Encapsulation Materials ............................... 55
4.1 Forecasting Methodology ......................................................................................... 55
4.1.1 Scope of the Forecast.............................................................................................................................. 56
4.1.2 Pricing Assumptions ................................................................................................................................ 59

4.2 Eight-Year Forecasts for OLED Encapsulation Technologies by Type of OLED Application
...................................................................................................................................... 61
4.2.1 Small, Rigid Displays ................................................................................................................................ 61
4.2.2 Encapsulation in OLED TV Displays ......................................................................................................... 63
4.2.3 OLED Lighting Encapsulation................................................................................................................... 66
4.2.4 Encapsulation of Flexible OLEDs ............................................................................................................. 69

4.3 Eight-Year Forecasts by Encapsulation Technology .................................................... 75
4.4 Summary of OLED Encapsulation Eight Year Market Forecasts .................................. 83
4.5 Alternative Scenarios................................................................................................ 88
Acronyms and Abbreviations Used in This Report ........................................................... 90
About the Author ........................................................................................................... 91


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List of Exhibits

Exhibit E-1: Summary of Total Market Value of OLED Encapsulation by OLED Application, 2011-2018 ................. 12
Exhibit 4-1: OLED Shipments by Application, 2011-2018 (OLED Panel Area, Millions sq m) .................................... 57
Exhibit 4-2: Estimated Average Prices of Different Encapsulation Technologies, 2011 – 2018 ($ per sq m) .......... 60 Page | iii
Exhibit 4-3: Encapsulation of Small, Rigid Displays for Mobile Devices and Other Miscellaneous Applications ..... 62
Exhibit 4-4: Encapsulation of OLED TV Displays by Encapsulation Technology, 2011-2018 .................................... 64
Exhibit 4-5: Encapsulation of OLED Lighting by Encapsulation Technology and By Application, 2011-2018 ........... 66
Exhibit 4-6: Encapsulation of Flexible Displays By Encapsulation Technology, 2011-2018 ...................................... 70
Exhibit 4-7: Encapsulation of Flexible OLED Lighting By Encapsulation Technology, 2011-2018 ............................ 71
Exhibit 4-8: Summary of Encapsulation of Flexible OLEDs By Encapsulation Technology and by Application ......... 73
Exhibit 4-9: Cover Glass Encapsulation by OLED Application, 2011-2018 ................................................................ 76
Exhibit 4-10: Metal Encapsulation (Rigid and Flexible) by OLED Application, 2011-2018 ....................................... 77
Exhibit 4-11: Dyad Film Encapsulation (Rigid and Flexible) by OLED Application, 2011-2018 ................................. 79
Exhibit 4-12: Directly-Deposited Multilayer Barrier Encapsulation (Flexible and Rigid) by OLED Application ......... 80
Exhibit 4-13: Flexible Glass Encapsulation by OLED Application, 2011-2018 ........................................................... 82
Exhibit 4-14: Summary of Total OLED Encapsulation Area by OLED Application, 2011-2018 (Millions sq m)......... 84
Exhibit 4-15: Summary of Total Market Value of OLED Encapsulation by OLED Application, 2011-2018 ............... 85
Exhibit 4-16: Summary of Total OLED Encapsulation Area by Technology, 2011-2018 (Millions sq m) ................... 87
Exhibit 4-17: Summary of Total Market Value of OLED Encapsulation by Technology, 2011-2018 ($ Millions) ..... 88


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Executive Summary: Markets for OLED Encapsulation
Technologies
E.1 Available Opportunities in OLED Encapsulation
NanoMarkets projects that the value of the organic light emitting diode (OLED) encapsulation Page | 1
market will grow from a relatively modest $7.4 million in 2011 to over $850 million by 2018.

Why do we expect so much growth? The OLED market has finally taken off after languishing
for many years without meeting its early expectations. Today, OLEDs have been
mainstreamed with the arrival of widely available smartphones with OLED displays. And since
this market is still quite small when one considers the overall size of the display market, there
is much room for growth.

There is little doubt that OLEDs are here to stay in small displays for smartphones and the like,
but the real question has been whether or not OLEDs will shift beyond these devices toward
larger display panels, specifically for OLED lighting and for television displays. We think the
answer is "yes," contingent upon performance improvements in OLED materials, and for the
purposes of this report, in OLED encapsulation technologies.

OLEDs are notoriously environmentally sensitive, so encapsulation barriers have always been
part of the manufacturing process. Encapsulation of OLEDs today remains heavily dominated
by relatively simple cover glass technologies that use getters to absorb water vapor and
oxygen and epoxies for edge sealing of the devices. But as noted, the OLED device market is
changing, and going forward these conventional strategies will not be sufficient for emerging
OLEDs, which are expected both to be larger-format and to have longer lifetime requirements.

Specifically, as the performance requirements for OLEDs with respect to lifetime are
increasing, new barrier strategies are needed, and thus there are now significant
opportunities for materials firms to make money selling more advanced, better performing
OLED encapsulation technologies.

 Encapsulation is a core enabling technology for the larger-format OLEDs in both TV
displays and lighting that will be entering the market in the near- to mid-term. The
same is also true for flexible OLEDs, which are still further down the road, but
clearly cannot rely on conventional glass encapsulation.

 In fact, better encapsulation is the key to achieving the lifetimes required of these
new, larger-format OLED panels and flexible OLEDs, and thus can unlock entire
market segments.


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We should note that there are plenty of technical hurdles still to be overcome, particularly
with respect to water vapor barrier performance and flexibility. And, even more importantly,
the days in which manufacturers were willing to pay high premiums for good encapsulation
strategies are long gone; OLEDs have now been around long enough that they are demanding
low-cost options for encapsulation. Page | 2

Today, the average cost of encapsulation is too high to support sustained, long-term growth in
both the display and the lighting sectors. In both of these markets, competition is fierce, and
OLEDs have a long way to go to reach cost parity with the incumbent technologies, which are
liquid crystal displays (LCDs) in the display sector, and either fluorescent lights or light
emitting diodes (LEDs) in the lighting sector. To make way for the larger-format OLED panels,
the market must shift toward simpler, better, and less expensive technologies. And major
improvements in performance and manufacturing processes are needed to make this shift
realistic.

The bottom line is that there is plenty of room for suppliers to gain market share by offering
new and better barrier solutions. Not only will the number of OLED units grow significantly
over the next decade, the panels are going to get larger. An OLED TV or lighting panel has an
area that is many times the size of a mobile phone display. This growth in area is very good
news for encapsulation materials firms because it means that there is potential for volumes
large enough to support economies of scale, and to finally get materials costs in line with
expectations.

E.1.1 Opportunities for Encapsulation in OLED Lighting
In the nascent OLED lighting industry, the focus is on efficiency and reducing total cost of
ownership. Just as in other OLED markets, encapsulation is currently dominated by cover
glass/getter/epoxy schemes, which have proven sufficient, if not ideal, for making the rigid
lighting luminaires in production today.

However, the relatively early-stage nature of this market, combined with the knowledge that
high volume—and preferably roll-to-roll (R2R)—manufacturing will be necessary to compete
in the long-term, has meant that OLED panel manufacturers have been quite willing to explore
development of non-glass encapsulation technologies. For this reason, OLED encapsulation
suppliers can distinguish themselves by developing proprietary solutions that will give them
long-term competitive advantages.

In addition, encapsulation strategies that enable partial flexibility, or at least some measure of
bendability or conformability, may be of particular interest. For example, multilayer dyad
laminates that enable conformability may be useful for creating a competitive advantage and


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growing market share. On the other hand, small volume, niche OLED applications with
extremely high performance requirements and fewer cost pressures may preferentially adopt
conformally-deposited dyad layers, such as are possible using ALD methods.

E.1.2 Opportunities for Encapsulation in OLED Displays
Page | 3
NanoMarkets expects the value of the encapsulation market in displays to grow from about
$7.3 million today to over $120 million by 2018. This growth will come from increased sales of
both the small, rigid displays—mostly full-color, active matrix devices—found in various
mobile computing applications (smartphones, tablets, netbooks, etc.) that have already begun
to take off commercially, and of OLED TVs, which are expected to finally be on the market in
2012-2013 and become a significant factor within the next several of years.

Active-matrix OLED displays are largely being marketed in the consumer electronics space on
image quality and vibrancy of color. This approach raises the question of how encapsulation
materials makers can improve their products sufficiently to meaningfully help their customers
sell more OLED displays in both mobile computing and TVs. In NanoMarkets' opinion, this can
be done by developing proprietary encapsulation solutions that preserve the benefits of OLED
displays while keeping manufacturing costs minimized.

TV displays have much higher expectations for performance than small displays, especially
with respect to lifetime, which means that first and foremost the encapsulation barrier
performance must be improved to enable real growth. However, improvements in barrier
performance cannot be so expensive that they hinder OLEDs' ability to be cost competitive.
Cost competition from LCDs will be particularly fierce; the LCD sector has thus far been able to
overcome all of its competitors (plasma, especially), and OLED TVs will not be spared this
challenge.

As previously discussed, for most OLEDs commercialized over the next decade, the
encapsulation strategies of choice will continue to be based on glass because the performance
of glass is simply too far ahead of the others to expect anything else. However, we also firmly
believe that different types of glass encapsulation schemes will become important in different
OLED display sub-sectors.

 There is, for example, no compelling reason to suggest that small, rigid displays like
those currently found in most smartphones will not continue to be dominated by
conventional cover glass, with opportunities for glass firms supplying improved
cover glass technologies to succeed.


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 On the other hand, larger-format panels in applications where cost competition is
very fierce, such as in OLED TVs, may be better served by high
performance/reduced-cost glass options like lightweight, flexible glass.

In summary, despite the challenges, we believe that the opportunities are great in the OLED
Page | 4
encapsulation business for both displays and lighting, as long as one keeps in mind that the
early days of hype and promise have passed. Now, materials suppliers must be able to provide
real solutions that solve both lingering performance issues and the pervasive issue of the high
cost of most currently available encapsulation strategies.

It is one thing to supply materials to an industry whose end product is mostly a type of non-
critical OLED display that shows a clock or date on one side of a mobile phone, where
deterioration of that display is annoying but not catastrophic to the consumer. It is quite
another to supply materials to an industry whose goal is to produce large, high definition video
displays or attractively designed lighting that offers both high-efficiency and improved total
cost of ownership.

E.1.3 What About Flexible OLED Encapsulation?
It has long been the dream of the OLED industry to provide high quality, low cost, flexible
panels manufactured in a R2R process on plastic substrates. These OLEDs would offer a new
value proposition to customers through unique geometries and design possibilities. The
viability of flexible OLEDs built on (relatively) porous plastic substrates relies on the ability to
encapsulate them with adequate environmental barriers.

Yet the performance of flexible encapsulation is still very much unproven. Many prototypes
exist, but the ability to manufacture truly flexible displays on a large scale, with reasonable
manufacturing yields, remains elusive. Thus, flexible encapsulation of OLEDs is too far down
the road to be much of a factor in the OLED encapsulation market today.

NanoMarkets estimates that the flexible encapsulation market will grow from nonexistent
today to about $50 million in 2018. However, upon closer inspection we believe that most of
this growth will come from sales of partially flexible, or bendable displays, rather than from
truly flexible or crushable displays.

However, to achieve partial flexibility—let alone true flexibility—suppliers of encapsulation
materials still have much work to do. Flexible displays will never be possible without
improvements in flexible encapsulation, which is one of the key missing ingredients for
flexible displays today. Clearly, conventional glass/getter/epoxy will not suffice; something
else is needed.


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Thus, there is great potential for encapsulation firms to commercialize better flexible
encapsulation technologies based on, for example, flexible glass, multilayer dyad laminates,
and conformal coating technologies. But these firms should not necessarily aim too high at
this point: partial flexibility, if it can be delivered at low cost and with excellent barrier
performance, may be more than enough to enable growth of OLED lighting and TVs, and thus Page | 5
grow sales for encapsulation suppliers.

E.2 Firms to Watch in the OLED Encapsulation Sector
The OLED Manufacturers: The firms that clearly have the most influence on which
encapsulation firms will succeed, and which will not, are the OLED panel manufacturers. In
other words, there is little doubt that de facto industry standards in OLED encapsulation will
be established largely by the big firms like Samsung (Korea), Sony (Japan), LG (Korea), and
Matsushita (Japan) on the display side and OSRAM (Germany), Philips (The Netherlands), and
GE (U.S.) on the lighting side.

Most of the big OLED panel makers are not traditional materials firms, so their influence on
the encapsulation market will come in the form of their selection of particular encapsulation
strategies and manufacturing processes. In addition, these firms are in the position of
becoming kingmakers by selecting encapsulation technology developers who then move from
marginality to significant size.

Of course, those manufacturers that have a stake in both markets are likely the most
important ones to watch. In this case, we are talking mainly about the giants—the
conglomerates like Samsung and GE, for example—that have both OLED manufacturing
interests and active encapsulation development programs.

 Although they have not been heard from in a while and appear to be struggling
with meeting commercialization deadlines, GE is developing R2R plastic barrier
films in cooperation with DuPont (U.S.).

 Samsung, which is the largest OLED manufacturer active today, effectively acquired
the barrier technologies of Vitex Systems (U.S.) in 2011, announced that it expects
to sell more than one billion OLED displays (for both mobile computing and TVs)
within the next five years, and has invested over $2 billion in a next-generation
plant set to come online in 2012.

The glass firms: NanoMarkets projects that for the timeframe of this report, glass-based
encapsulation will continue to dominate. For this reason, opportunities for glass firms will be


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abundant, especially for those that can provide significant improvements in getter/epoxy
configurations, reduce weight and cost and improve manufacturing processes.

The big glass firms like Nippon Electric Glass (Japan), Asahi Glass Company (Japan), Corning
(U.S.), and Schott (Germany) clearly have the advantage in this sector, although we believe
Page | 6
that DuPont—not a traditional glass company—is also one to watch. DuPont is promising a
lower-cost cover glass system that uses a printable getter to enable air-gap free
encapsulation, and if they can partner with the right OLED manufacturer, they could take
some market share from the others.

Flexible glass: The promise of flexible glass is that it could eliminate the need for flexible dyad
encapsulation layers, which have thus far proven insufficient to meet the encapsulation needs
of the OLED market. The idea here is that the benefits of glass—higher conversion efficiency,
heat tolerance, pinhole-free surfaces, and better barrier properties—might be preserved as
the glass is made thin enough to be reasonably flexible. Corning, NEG, AGC, and Schott all
have lines of thin, flexible glass products with an eye toward R2R processing.

Thus far, the focus of the glass companies with respect to flexible glass has been directed
toward the touch-screen and PV markets instead of OLEDs, and there is additional
development work required to get the performance of flexible glass where it needs to be for
flexible OLEDs. However, the possibilities are great:

 Cost in glass manufacturing is directly related to the cost of the energy required to
melt the glass, so the material cost is proportional to the volume of glass produced.
Although first-generation flexible glass products are today very expensive, since
flexible glass aims to greatly reduce the thickness of glass used for OLED
encapsulation, the cost of flexible glass encapsulation has the potential to go much
lower than one might expect.

 Although they are currently behind other glass companies, notably the major
Japanese firms, the deep expertise within Corning especially with respect to optical
glass fiber production and handling gives it an advantage in the effort to develop
flexible glass capable of meeting the needs of the OLED industry.

 What is clear is that since plastic-based flexible encapsulation systems with high
barrier performance are still not commercially available at a large enough scale to
offer tangible cost benefits, flexible glass technologies may win out in the end. As
already noted, especially in OLED lighting applications, true flexibility is probably


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not really required, so simpler bendable displays with very long lifetimes enabled
by the use of glass may be just the thing that is needed.

The multilayer barrier firms: Despite the apparent lack of progress in multilayer dyads over
the last five years or so, their great promise for reducing costs has meant that many firms
Page | 7
have continued to pursue them. The firms to watch are those that are focusing on reducing
costs without sacrificing performance, such as by reducing the number of dyads (or layers)
required to hit the barrier performance targets of the OLED industry.

In addition to GE, which as noted above has apparently delayed launch of its OLED lighting
products manufactured using its own (flexible) multilayer barrier encapsulation, the key firms
to watch in this space are 3M (U.S.), Tera-Barrier Films (Singapore), and Universal Display
Corporation (UDC, U.S.).

 3M is pursuing bendable OLED device encapsulation films suitable for R2R
manufacturing. Currently commercially available 3M films have insufficient barrier
performance for most OLEDs, but efforts are underway to supply better films for
small, rigid displays, where the replacement of glass with a plastic material would
bring great savings to customers via reduced thickness. The firm's focus on small,
simple, rigid displays instead of emerging displays is not particularly exciting, but
this market is clearly accessible, and 3M has existing supply channels into the
display market. This strategy focuses on the here and now; existing revenue
streams can be invested back into technology development so that 3M is ready to
serve the market when larger and/or flexible OLEDs materialize.

 Tera-Barrier Films has also been developing multilayer dyad films with a
development focus on R2R barrier coatings for flexible displays. At this point in
time, Tera's films have not been scaled commercially, but the company reports that
it is working with partners and customers in both Asia and Europe and hopes to see
its films in commercial products within the next year. The key differentiator of
Tera's technology is that it can achieve high barrier performance with only a few
layers, which keeps the anticipated costs low. Of course, this performance is
currently achieved using slow-speed sputtering, and it remains to be seen whether
Tera can translate its small-scale, pilot successes into faster, larger-scale, truly low-
cost production, which it hopes to be able to do using electron-beam technology.

 UDC announced in 2011 the development of its own barrier film that it describes as
a "single layer" hybrid organic/inorganic system suitable for both rigid and flexible
OLEDs. We note that this development, if proven, is significant, because a single


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layer system with adequate performance should go a long way toward reducing the
cost of encapsulation and make growth in the OLED industry all the more certain.
In addition, UDC is in a very good position to get its technology into the
marketplace, since it is one of only a few suppliers that already has seen their
emissive products appear in commercialized consumer goods. Page | 8

E.3 Investment Opportunities in the OLED Encapsulation Business
This report is not intended as a guide for venture capital (VC) or strategic investors, but it is
possible to identify some market needs in the OLED encapsulation sector that may be of
potential interest. The key factors that lead us to believe that there are some real
opportunities for investment are the following:

 After many years of languishing, OLEDs have finally emerged as a real market, and
the opportunities for growth are great, especially for firms that can offer
encapsulation technologies with tangible performance and cost benefits over the
market-dominant cover glass strategies in use today.

 The biggest growth sectors for OLEDs are in larger-format panels, both in OLED TV
displays and, even more importantly, in OLED lighting. Therefore, the total
addressable area for OLED encapsulation is set to expand greatly as these markets
grow, which will lead to higher volumes for materials suppliers.

 In the highest growth markets—OLED TVs and OLED lighting—requirements for
encapsulation barrier performance are greater than found in the smaller displays
on the market today. As a result, the opportunities are greater for firms to
differentiate themselves and gain market share based on encapsulation that
enables better lifetime performance.

Given the above factors, NanoMarkets believes that there are some potential areas where
new or additional investment might be justified:

 Multilayer, or better yet, single layer, laminates that actually deliver on the promise
of low cost manufacturing using polymers and polymeric substrates without
sacrificing barrier performance.

 Truly flexible OLEDs, which would require truly flexible encapsulation, are still far in
the future, but there is real opportunity to expand the capabilities of OLED devices
by offering partially bendable or conformable encapsulation options. If partial
flexibility is all that is really required, then there are probably already several dyad


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and similar technologies available today that just need a slight nudge to get them
into the market.

 Flexible glass should not be ignored. The performance benefits of glass are simply
too great to overlook. And since glass manufacturing costs are closely linked to
Page | 9
weight, thin flexible glass may be able to reduce costs even more that might be
expected at first glance. Furthermore, since truly flexible OLEDs seem to be
perpetually several years away from commercialization, the partial, yet real,
flexibility of thin, flexible glass may be just what is needed for larger format, high
volume OLED manufacturing of OLED TVs and OLED lighting.

From where will the investment originate? We do not anticipate any new outside investment
in cover glass encapsulation. Instead, we expect that the major glass companies—Asahi Glass,
NEG, Corning, etc.—will continue to dominate cover glass technology improvements through
offerings like air-gap free or frit-sealed covers. There is just no compelling reason for any new
firms to enter. The expertise within the glass industry is extensive, the competition among
them is already fierce, and all the major firms have broad, active R&D programs aimed at new
sectors like OLEDs.

However, there may be significant opportunities for productive outside investment in non-
glass encapsulation. There are several factors that will positively impact investment in non-
traditional technologies:

 Clearly, investors will only act if they believe that the OLED market will grow well
beyond its size today. Fortunately, the indications are that it will. OLEDs in
smartphones are taking off, with Samsung leading the way; OLED TVs are expected
to finally be widely available in the very near term; and OLED lighting is poised to
grow to be the largest addressable market of all. And all of these markets could
benefit from encapsulation technologies that improve barrier performance while
also reducing costs associated with heavy, batch process cover glass.

 Although investors are attracted to companies with demonstrated sales, which are
hard to come by at this point, they may also be attracted to technologies that
demonstrate big performance advantages with the promise of large investment
gains down the road. As we have already noted, non-glass encapsulation strategies
based on low-cost, R2R-compatible barrier laminates could gain significant market
share in the mid- to long-term. The growth sectors for OLEDs in TV displays and in
lighting will both rely on high volume manufacturing to realize economies of scale


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sufficient to bring costs down to levels that support truly widespread consumer
adoption, and R2R production would clearly be a step in this direction.

 Since the barrier performance requirements in OLED encapsulation are stricter
than in almost any other sector, the addressable market is even larger than it
Page | 10
seems at first glance. Of particular interest is the photovoltaics industry, which is
itself in an upward growth trajectory, and which significantly expands the market
for encapsulation. Investors can capitalize on this expanding market as way to
leverage their specific technology across two industries—one which is "easier"
(photovoltaics) and the other which is perhaps more of a stretch initially (OLEDs).

But what kind of investors are we really talking about? Are these venture capital
opportunities, or something else? In NanoMarkets' opinion, we think that additional or new
VC investment is unlikely, if for no other reason than that the OLED industry has already been
around long enough for VC firms to get in (and get back out, in some cases); the time for high
risk/high return investing has probably passed. Investment from angel investors is more likely
than VC investment, but again here we think their time has largely passed.

In contrast, investment in the form of takeovers by large industrial firms, especially big
consolidated firms in the display or lighting device or materials industries, is far more likely.

 Large and mid-size firms already in the display or lighting markets can more readily
be pulled into strategic deals based on synergies that lead to larger cash flows than
pure equity investors would realize.

 In addition, NanoMarkets believes that it will continue to be important for
encapsulation firms to be sufficiently linked into the OLED supply chain, and that it
will be increasingly important for all existing and new encapsulation suppliers to
partner closely with end-users.

 In fact, we have already seen OLED manufacturers acquire encapsulation firms with
Samsung's de facto takeover of the Vitex Barix technology, and we expect this
trend to continue with other encapsulation firms.

E.4 Summary of Eight-Year Forecasts for OLED Encapsulation Technologies 2011-2018
Overview of market segmentation by encapsulation technology: Today, OLED encapsulation
is almost entirely achieved with cover glass/getter/epoxy technologies. Although efforts are
underway to develop alternative thin film and/or R2R encapsulation approaches, at present
the alternatives invariably cost more than glass covers.


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In order for an alternative technology—whether in the form of a laminated barrier film, a
directly deposited coating, or a flexible glass film—to displace cover glass encapsulation in a
large segment of the OLED device industry, the cost of the alternatives must come down
substantially. NanoMarkets does not anticipate that prices for non-glass and flexible glass
encapsulation will come down much in the near term, but we are hearing from the industry Page | 11
that there are reasons to believe that costs can and will decline over time.

This expectation is not breaking news; most encapsulation materials are already in a pattern
of declining prices. It is a generally accepted necessity that the costs of OLED materials must
drop for OLEDs to meet their market potential and compete with other display and lighting
technologies. In general, encapsulation materials are currently produced in limited quantities
at relatively high prices.

The hope, of course, is that as OLED demand increases, production volumes will increase and
manufacturers will realize economies of scale and faster recovery of initial development costs.
Such changes may also attract more competition among producers of encapsulation products,
which could help lower prices even further. Additionally, there may be technical
breakthroughs that lead to very much lower prices.

Overview of encapsulation market segmentation by OLED application: In Exhibit E-1 we
present a summary of the eight-year revenue forecasts for the OLED encapsulation market.
This forecast separates the OLED encapsulation market in two ways. First, the market is
separated into two broad categories, displays and lighting, each of which is further divided by
OLED application. Second, the market is divided into rigid vs. flexible displays.

These summaries highlight two major trends, each of which is discussed in more detail
throughout the report:

 Although the OLED lighting sector is quite small today, growth in OLED lighting is
expected to outpace other sectors so that revenues from encapsulation of OLED
lighting panels will dominate starting in about 2016.

 Rigid OLEDs, both in displays and lighting, will be the major factor in OLED
encapsulation throughout the forecast period.


NanoMarkets
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Summary: Value of Encapsulation by OLED Application 2011-2018
($ Millions)
900

800 Page | 13
700

600
Flexible Lighting
500
Rigid Lighting
400
Flexible Displays
300 OLED TVs
Small, Rigid Displays
200

100

0
2011 2012 2013 2014 2015 2016 2017 2018
© NanoMarkets 2011 Year

Total OLED Encapsulation Market

900
800
700
600
$ Millions

500
400
300
200
100
0
2011 2012 2013 2014 2015 2016 2017 2018
© NanoMarkets, LC


NanoMarkets
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Chapter One: Introduction to OLED Encapsulation Technologies

1.1 Background to this Report: Where Are the Opportunities for OLED Encapsulation
Materials?
1.1.1 Preamble Page | 15
OLEDs are highly vulnerable to oxygen and water vapor, so they present an encapsulation
issue; developments to improve barrier performance have been discussed in the OLED
industry since its earliest days. Until recently, however, OLED encapsulation materials
represented a relatively small market for chemical companies and a few start-ups. For many
years there were few signs that OLEDs were going to break out of their niche market pattern,
with almost all of the OLED market being accounted for by passive matrix displays for MP3
payers, cell-phone sub-displays, etc.

The situation was further complicated by the popular notion among OLED manufacturers that
encapsulation was the least of their worries, since most OLEDs could be successfully
encapsulated in a stack that often also included desiccant under glass using epoxy adhesives
for edge sealing. The simple glass and epoxy encapsulation approach was not only all that was
required for small displays, it was all that display makers were willing to pay for, and it
continues to be the principal encapsulation strategy in place today.

Even as the size of the passive matrix OLED business grew, true opportunities for OLED
encapsulation were highly limited, and few materials firms were able to sustain a business
based on encapsulation materials alone. And although materials suppliers were initially happy
to supply these applications, they did so with the expectation that markets large enough to
justify their efforts would eventually emerge.

1.1.2 Finally, A Growing Market for OLEDs Emerges
Fortunately (at least for encapsulation systems makers), the opportunities have grown in
recent years in important ways:

 OLED displays have at last been "mainstreamed" with the arrival of mass-market
cell phones containing active-matrix OLEDs as primary displays; NanoMarkets has
estimated that the size of the total OLED materials market exceeded $300 million in
2011.
 Meanwhile, OLED lighting is now on the market in the form of "designer"
chandeliers and table lamps, and larger segments of the lighting market are likely
to be penetrated by OLED lighting in the next few years.


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 And while the first attempts to introduce OLED TVs stumbled, it seems that 2012 or
2013 will see the introduction of OLED TVs on the market with much greater
chances of market success than the products that preceded them.

These trends mean that the addressable market for OLED encapsulation materials is rapidly
Page | 16
growing and should continue to do so. Importantly, the fastest-growing applications for
OLEDs involve larger-area panels that by definition consume relatively larger amounts of
materials. NanoMarkets predicts that the OLED materials market will reach over $5 billion in
sales by 2018, and at least 10 percent, or about $500 million, of this revenue will come from
encapsulation materials and technologies. But the success of the market is not a foregone
conclusion; better encapsulation technologies at reasonable costs are required if larger-format
OLEDs are going to meet their potential.

Why? The glass and epoxy strategy may have worked for small format OLEDs—cell phones,
smartphones, MP3 players, etc. But:

 The consensus is that these materials will not be sufficient for the larger-format
OLEDs that are now growing in market share;

 Nor are these materials compatible with flexible and/or conformable OLEDs; and

 Although it has been relatively easy to achieve the barrier performance goals for
small devices, it has been very difficult to scale up the technology for high-volume
commercial production of larger panels for OLED lighting and TV displays. It is not
just the fact that OLED TV displays and lighting panels are large, but that such
products are expected to last longer than cell phones and MP3 players.

The new OLED markets have much higher product lifetime expectations, hence more
sophisticated encapsulation technologies with better performance are required to enable real
growth.

As a result of the trend toward large panels, NanoMarkets believes that:

 We are now looking at some real opportunities for the firms that have been
working on the encapsulation issue, many of whom have poured resources into this
area for several years.

 Furthermore, the opportunity space for these firms will only get better when
conformable and flexible OLEDs start to make it to the market, which we expect to
happen in perhaps four to five years. Truly flexible displays have yet to take off,


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and the lack of cost-effective encapsulation technologies capable of meeting the
strict water and oxygen permeation barrier requirements is at least partially to
blame. Firms in the lighting and display industry are therefore beginning to see
encapsulation as an area of strategic importance and are looking increasingly at
specialized value-added encapsulation materials to meet their needs. Page | 17

Currently, displays that can be flexed in one or two dimensions are a huge challenge to the
encapsulation business, but one that potentially will generate a lot of revenues to those
encapsulation providers that can bring stable encapsulation solutions to this performance
dimension. NanoMarkets believes that even conformable OLEDs, which are closer to market
than truly flexible ones, present an opportunity for encapsulation firms.

1.1.3 OLED Encapsulation Strategies
Cover glass for rigid OLED devices: As noted above, glass encapsulation strategies are the
most prevalent today, and the dominant suppliers are Corning and DuPont.

The majority of current OLEDs, especially bottom-emitting structures, are encapsulated using
a cover glass, desiccant (or getter), and an edge-sealing epoxy in a batch process strategy that
works especially well for small displays like those used in cell phones, etc. First, in these
smaller devices, the high barrier properties required are not so difficult to achieve, and the
product lifetimes of many of these smaller OLEDs are relatively short anyway. NanoMarkets
believes that even for larger, non-flexible OLEDs, glass/getter/epoxy encapsulation is likely to
continue to be a leading choice for OLEDs.

 This approach will benefit from its "tried and true" status, and without the need for
flexibility or conformability, there are few compelling reasons to consider other
options, especially if the glass/getter/epoxy suppliers can demonstrate reduction in
processing costs and complexity.

 While these arguments may be difficult to uphold for very large size panels and
high-throughput manufacturing, this situation will not be the case for
manufacturing of smaller and mid-sized panels used in smartphones, netbooks,
tablets, etc.

Flexible glass? For bottom-emission OLEDs, the emergence of viable flexible glass substrates
that are compatible with R2R processing cannot be ignored. Both Asahi Glass and Corning
have announced the development of 0.1-mm thick flexible glass rolls.


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If the firms can also demonstrate ways to include adhesive and desiccant for top-emission
structures, they could successfully overcome the biggest impediment to using glass for
encapsulation, namely the cost.

Multilayer barrier films: The most common non-glass approach to OLED encapsulation is the
Page | 18
use of a multilayer barrier film of alternating polymer and oxide layers deposited by physical
or chemical vapor deposition (PVD or CVD):

 Multilayer barriers—whether in the form of pre-formed film laminates or
monolithic thin films deposited directly onto the OLED devices—have been touted
as having the potential to greatly reduce costs compared to rigid cover glass
designs through use of cheaper materials, thinner layers, and easier processing.

 Monolithic encapsulation has been more prevalent than laminates, since
monolithic encapsulation of the OLED devices minimizes (but does not always
eliminate) the need for adhesives and getters to improve edge imperviousness.
Unfortunately, in reality the cost advantages have been elusive, often because so
many layers are needed to achieve the required barrier performance that any
processing cost benefits are lost.

The fundamental problem with multilayer barriers is that defects such as pinholes, cracks and
grain boundaries are common in the thin oxide films used, especially when fabricated onto
plastic substrates.

To solve this problem, multilayer barrier technologies have focused on using alternating
organic and inorganic multilayers, or dyads, which stagger the defects in adjacent layers. This
creates a "torturous path" for water and oxygen molecules; the idea is to make the pathway
long enough so that water and oxygen simply will not be able to make it to the sensitive OLED
stack.

Unfortunately, the more layers that are employed, the less flexible is the finished product, so
although multilayers are promising candidates for encapsulation based on their excellent
barrier performance, they have struggled to meet the needs of flexible, R2R-manufactured
OLEDs on plastic substrates.

Today, 3M dominates the market, small though it is. Other firms with multilayer dyad films
are Dow, GE, Alcan Packaging, and Fujifilm. An early developer of technology in this area was
Vitex Systems, which made a strategic deal in 2010 with Samsung and now appears to have


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been largely absorbed by Samsung Mobile Displays and Samsung Cheil, which continue to
work on barrier systems.

A second, and perhaps even more important, major problem for most dyad films on the
market today is cost, which can be as high as $70 to $100 per square meter. Efforts are thus
Page | 19
ongoing to reduce the number of layers required to achieve the desired barrier properties. An
added benefit from reduction of the number of layers is that flexibility could also conceivably
be improved.

Multilayer barriers based on ALD: Atomic layer deposition (ALD) strategies for multilayer
barrier films have also garnered much interest in recent years. ALD is considered to give
better film qualities than CVD or PVD methods; the number of film defects is reduced, so both
layer thicknesses and the number of layers can, at least in theory, be reduced.

We note, however, that these advantages are meaningful only if there is a concurrent
reduction in the cost of the layers. NanoMarkets believes that there is promise in this area,
but remains skeptical about the ability of ALD manufacturing to handle high throughputs or
R2R processing—especially for flexible OLEDs. Instead, ALD encapsulation strategies may be
practically limited to higher-end and/or batch process OLED lighting markets.

Beneq Oy, an ALD equipment maker and technology developer, is the clear leader in this sub-
market of the OLED encapsulation industry, but other firms including SunDew Technologies
and ALD NanoSolutions have also entered the fray.

Other kinds of barrier strategies: To meet cost and flexibility goals, the development of a
"single layer" barrier has been something of a "holy grail" in the encapsulation industry. To
the best of NanoMarkets' knowledge, this objective has not yet been achieved, but several
firms appear to be getting closer:

 Tera-Barrier Films is commercializing an innovative barrier film that is purported to
solve the defect problem of traditional dyad films by literally plugging the defects in
the barrier oxide films using nanoparticles, thereby reducing the number of barrier
layers needed in the construction of the barrier film down to just two layers—an
oxide and a nanoparticulate sealing layer.

 In addition, Universal Display Corporation, a longtime advocate of Vitex's Barix, is
now also advertising its own "single layer" system, which, if real and cost-effective,
could revolutionize the industry.


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1.2 Objectives and Scope of this Report
In this new report from NanoMarkets, we analyze and quantify the opportunities for
encapsulation materials and technologies in the fast-growing OLED market. The report covers
the commercial implications of technical developments in both materials and deposition
equipment, and we identify the key factors for success for encapsulation materials suppliers in Page | 20
this space. This report is entirely international in scope. The forecasts are worldwide forecasts
and we have not been geographically selective in the firms that we have covered in the report
or interviewed in order to collect information.

The report also contains detailed, eight-year forecasts of the materials used for OLED
encapsulation broken out by product type and application wherever possible. Finally, we
examine the product development and marketing strategies of the major players in the OLED
encapsulation materials sector from large to specialty firms, and we attempt to indicate which
are the "companies to watch" and which will be the likely winners and losers in the
encapsulation materials space.

1.3 Methodology of this Report
NanoMarkets has been covering the OLED materials markets for several years and is widely
regarded as having reliable reports on this topic. To determine where the opportunities are,
we have based this report on both primary and secondary research:

 Primary information is gathered largely through NanoMarkets' analysis of relevant
applications markets and market trends based on ongoing discussions with key
players in the OLED materials community, including entrepreneurs, business
development and marketing managers, and technologists involved with OLED
materials and emerging display products of all kinds.

 Secondary research is drawn from the technical literature, relevant company Web
sites, trade journals and press articles, and various collateral items from trade
shows and conferences.

Some of the applications-related market information in this report comes from our most
recent reports on the covered applications areas. Reports from which some data have been
taken include "OLED Lighting Materials Market Trends and Impact" of June 2011, "Markets for
OLED Materials" also from June 2011, "OLED Lighting Global Market Forecasts" from May
2011, "OLED Lighting in Asia" from April 2011, "OLED Lighting in Europe" from May 2011, and
"Encapsulation and Flexible Substrates for Organic and Dye-Sensitized Photovoltaics" from
January 2011. Where information has been used from another report, it has been


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reinvestigated, reanalyzed, and reconsidered in light of current information and updated
accordingly.

The forecasting approach used in this report is explained in more detail in Chapter Four, but
the basic approach is to identify and quantify the underlying OLED application markets, the
Page | 21
barrier requirements for those applications, and the technological and market pressures that
affect the ability of different encapsulation and barrier technologies to penetrate those
markets.

We consider both the specific performance needs of the various OLED applications and the
broader economic developments that impact the size and rate of growth of the OLED markets
for each application area. Activities and developments at key firms are of course of special
interest, although NanoMarkets critically considers these claims in light of all available data.

1.4 Plan of this Report
In Chapter Two, we provide an analysis of the different materials sets and deposition
technologies for OLED encapsulation. As part of this analysis, we briefly examine the focus
and strategies of the principal manufacturers and suppliers, and we pay particular attention to
innovations and strategies being followed to reduce costs, increase performance, and
customize products for particular markets and applications.

Chapter Three of this report provides a more in-depth analysis of the major applications
where OLEDs are being used now or will be used in the future, from mobile-phone displays to
flat-panel televisions and solid-state lighting. The idea here is not to provide a comprehensive
analysis of OLED markets, but rather to offer a survey of the addressable markets for OLED
encapsulation suppliers.

In Chapter Four, we provide detailed, eight-year forecasts of the OLED encapsulation markets
with breakouts by technology type and by application type wherever possible.


OLED Encapsulation Markets

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