Between a Rock and a Hard Place
Japan’s recent export curbs on key component and materials are fueling concerns that the South Korean display manufacturers could be overtaken by Chinese companies such as BOE and CSOT.
As Japan continues to impose restrictions on exports to South Korea, the woes of domestic companies, including Samsung Display and LG Display, are deepening. Samsung Display imports polyimide from Japan, while LG Display does etching gas.
Businesses have been racking their brains to secure materials and components, but they are failing to come up with breakthroughs. An LG Display official said, “We are exploring various ways to overcome the situation, including importing etching gas used at our Guangzhou plant in China, but it is not easy to find a solution.” Samsung Display is having more difficulty as Japanese polyimide used for the production of flexible organic light emitting diode (OLED) panels is irreplaceable. Japan accounts for about 90 percent of the global polyimide supply.
Analysts say that domestic companies’ plan to expand the OLED market this year could be thwarted. South Korean firms have already lost their leadership in the liquid crystal display (LCD) market to Chinese companies, and they are being closely chased by Chinese rivals even in the OLED market. Chinese panel producer BOE ranked first in the global large TFT-LCD panel market with a share of 23 percent last year, overtaking LG Display with 20 percent and Samsung Display with 8 percent. Market experts forecast that BOE will be able to surpass Samsung Display’s production capacity of small and medium-sized OLED displays in 2021.
Recently, Chinese companies are rapidly expanding investment in the OLED sector based on the government’s support. The proportion of investments by Chinese firms in the global small and mid-size OLED display sector will reach 53 percent in 2020, exceeding 40 percent of South Korean companies, according to market research firm IHS Markit. Chinese companies are also on hot trail of domestic firms in the OLED technology sector.
If South Korean firms suffer delays in production, they are expected to see knock-on effects in their OLED investment plans. On the other hand, Chinese companies have started introducing new technology to narrow the OLED technological gap with South Korean counterparts. BOE succeeded in developing a 55-inch OLED display in an ink jet printing (IJP) fashion at the end of last year. China’s second largest display firm CSOT will begin operation of its IJP processing-based production plant in 2021.
Cho Kyung-yup, a senior research fellow at the Korea Economic Research Institute (KERI), said, “If the trade dispute between South Korea and Japan expands, South Korea will suffer a 0.6 percent output reduction and Japan 15.5 percent in the electrical and electronics industry which have been led by the two countries. However, China will see its output grow by 2.1 percent. As a result, China will gain the most from the South Korea-Japan conflict.”