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The display industry has grown swiftly in recent years, powered by rapid development of television and smartphone makers. During this time, Korea has maintained its position as the largest display manufacturer in the world. Thanks to growing demand from television and its related industries, the world’s display industry also quickly expanded until 2012. The following year, however, it began to contract due to the global economic recession, shrinking an average of 4.5 percent annually from 2012 to 2015. As the Korean display industry is number one in the world, it is highly affected by such changes in the global market.
Contribution of Exports to Korea’s Economic Development
From the 2000s, displays started to emerge as a new export-driven industry, contributing to the country’s economic growth. Exports grew exponentially, recording an average annual rate of 27.7 percent from 2006 to 2010. In 2013, however, the global economic downturn and oversupply pushed export growth down to -2.6 percent, and the figure has remained in the negatives until 2016.
Korea’s Display Exports
LCD (liquid crystal display) panel exports—the main driver of the display industry—reached USD 18.2 billion in 2015, a 14 percent decline from the previous year, and fell further by 24.6 percent in 2016. Exports managed to recover slightly in the first half of 2017, with a 11.7 percent year-on-year increase. In contrast, OLED (organic light-emitting diode) exports increased by 24.1 percent to USD 6.9 billion in 2016. With OLEDs being applied to an increasing number of smartphone screens, the global demand for OLEDs has surged. OLED exports increased by an annual average of 26.3 percent from 2014 to 2016, and continue to grow at about 20 percent this year. Thus, the OLED industry is highly likely to lead the growth in exports for the entire industry.
Current and Future Global Share of Display Production Capacity by Country
Maintaining No. 1 Market Share
Korea first emerged as the world’s largest display manufacturer in 2002, a title formerly held by Japan. By actively responding to the changing environment through technological expertise and bold facility investments, Korea quickly succeeded in taking the No. 1 spot in the global flat panel display market. Despite the recent slowdown in production and exports caused by the global economic recession and oversupply, Korea still holds the largest share of the global display market thanks to its industrial competitiveness.
In an effort to secure production hubs targeting China’s local market and other export destinations, Korean companies have initiated mass production at their LCD panel factories in China (Samsung in Suzhou, LG in Guangzhou) in 2013. But the greatest obstacle for Korean display exports is the rise of China, as the country is producing its own products and relying less on Korean displays. This trend is expected to continue for the foreseeable future. Since China started to focus on expanding its display industry, it is expected to overtake Korea in terms of LCD production capacity in 2017. China’s LCD production capacity was 10.5 percent of the global total in 2013, but is expected to rise to 35.1 percent in 2017, and 40.1 percent in 2018.
A noteworthy change in China is that local companies are actively investing in 10.5th-generation panels, a field Korea has yet to invest in. China’s BOE Technology Group has commenced construction of a 10.5th-generation LCD panel production line in 2015, and expects to gain a competitive edge for ultra-large TV screens. In the second quarter of 2018, the company aims to begin operations at the 10.5th-generation factory, where it plans to make large panels for 65-inch or wider TV screens. China Star Optoelectronics Technology (CSOT), a subsidiary of large home appliances maker TCL Corporation, has also decided to invest in the world’s largest 11th-generation LCD panel production line and begin production in 2019. Other Chinese companies such as HKC Electronics and CEC Panda Crystal Technology have started to invest in 11th-generation facilities and equipment. As such, Korea and China are soon expected to compete on an equal footing in the global LCD industry.
In contrast, for OLEDs, which are currently emerging as a new type of display for the post-LCD era, Korean companies have already secured a dominant 95 percent of the global market. As such, it is very likely that Korea will continue to lead the global display industry for some time. Korean panel companies have started to replace their main LCD products with OLEDs, and have established plans to focus their investments on related technology.
Global Display Market Composition by Year (%)
Source: Korea Display Industry Association (KDIA)
Characteristics of Korea’s Display Industry
First, the scale of Korea’s domestic display market is relatively small, and approximately 84 percent of all its manufactured products are exported. Estimates for 2016 show that exports account for 91 percent of LCD and 70 percent of OLED products made in Korea. As the rapid rise in OLED exports partially offset the poor performance in LCD exports, the emergence of the new product is confirming the strengths of displays as an exports industry.
Second, the fact that the world’s largest and second largest display manufacturers are based in Korea is probably the greatest advantage of the country’s display industry. With the world’s two largest display manufacturers (Samsung Display and LG Display) being based in Korea, the domestic display industry’s highly competitive structure has been driving the development of the domestic display industry. It is also contributing to the establishment of a favorable business environment. The competition between the two companies accelerated investment in new product and technological development, thus contributing to the industry’s continuous growth.
Third, the presence of a strong network of upstream and downstream industries in the country offers companies the stability to carry out production activities and strengthens their competitiveness. Supported by a network of smartphone, television, home appliances, automotive and other highly-developed industries with a demand for displays, as well as the rapid development of key parts and display equipment fueled by the panel industry’s high level of competitiveness, Korea boasts an optimum environment.
Challenges remain, however, including the need to strengthen the country’s technological prowess in display materials and equipment. While the rate of domestically produced materials and equipment has radically improved, the country still struggles to develop technologies for key materials and equipment, relying heavily on imports from Japan and other technologically-advanced countries.
With global display markets projected to witness modest growth until 2020, OLED products are expected to drive growth in the entire industry due to the soaring demand for OLED screens for smartphones. Currently accounting for 95 percent of the newly emerging global OLED market, Korea is expected to enjoy the fruits of the global surge in demand for some time. This is because it will take at least several years for its competitors in countries such as Japan or China to be able to mass produce OLEDs.
In 2015, OLED panels accounted for 10 percent of the global display market, but the figure is projected to reach 25 percent by 2022. Currently, most OLED displays are used as smartphone and TV screens, but the market is expected to expand greatly as technology evolves to enable the production of flexible and transparent OLED displays.
On the other hand, the share of LCDs is expected to continue to decline, as the expansion of China’s LCD output acts as a major obstacle to growth. While China is the world’s biggest market for LCD panels, Chinese companies account for over 70 percent of the local TV market. Therefore, as the country continues to raise its LCD output, it seems there will be increasingly fewer opportunities for Korean companies to supply LCDs to Chinese TV companies.
Korea’s Strong Leadership in OLED and Next-generation Display Markets
In conclusion, although Korea’s display industry is expected to encounter difficulties due to competition with China in LCDs, if OLED panels start becoming a popular option for TV screens and demand for OLEDs rises in the field of new convergence technologies, Korea is expected to enjoy an even greater number of opportunities for growth. As OLED markets continue to expand, rival countries such as China, Japan and Taiwan will also expand their investments. But because Korea has a clear competitive advantage in mass production capacity and product development over its rivals, it is expected to maintain a significant lead over its three key competitors until 2020.
The shift in the global industrial paradigm during the fourth industrial revolution is expected to create new opportunities in the display industry, as the demand for displays increases not only for flexible screens, but also for wearable devices, smart cars and smart homes. Should Korea’s display industry focus on expanding OLED markets and accumulating related technology, it is expected to strengthen its global dominance even in the new markets of the future.
By Seo Dong-Hyuk
Research Fellow, Korea Institute for Industrial Economics & Trade / email@example.com