[Display Dynamics] JOLED Gets Fundraising and Fab Support in Early 2018

Publication date: 11 May 2018 Author: Linda Lin Principal Analyst, Display Outlook

[Display Dynamics] JOLED gets fundraising and fab support in early 2018

Brought to you by Informa Tech [Display Dynamics] JOLED gets fundraising and 1 fab support in early 2018 Table of Figures: ihs_xuz49775_2018_5_11_16_52_13_capturejpg1...... 3 ihs_xuz49775_2018_5_11_16_53_6_capturejpg2...... 3

Key findings . JOLED receives support from INCJ for using Gen 5.5 fabs in Nomi. The Japanese government supports this kind of subsidy protection strategy used to rescue JDI and JOLED again. . JOLED tried to raise JPY 100 billion from H2 2017 when it realized it might not get more JDI support. . JOLED mass produced 21.6-inch monitor panels in JDI's Gen 4.5 Ishikawa fab at the end of 2017. . JOLED's Atsugi and Kyoto development centers will continue their advanced printed OLED research, such as flexible printed OLED products. . JOLED is studying the possibility of printed OLED for automotive applications. Based on the current schedule, it will design an automotive panel in 2020, ramping up in 2021. . The many JOLED challenges include those from internal management of technology enhancements, improving yield rate and cost reduction, and additional fundraising from the capital market.

JOLED background and shareholder status JOLED was established in January 2015 with Innovation Network Corporation of Japan (INCJ) owning the largest share at 75%. Japan Display (JDI), Sony, and Panasonic also invested in JOLED with 15%, 5%, and 5% share, respectively. Based on OLED printing technology, JOLED targets the 15-inch and larger medium-size display business. Since it has a close investment relationship with INCJ and JDI, JOLED temporarily rents space in JDI’s Ishikawa Gen 4.5 fab for their printed OLED product pilot line. For business efficiency and competitive advantage, JDI announced its plan to merge with JOLED in April 2017; it planned to increase its share gradually from 15% to 51%. After that, the INCJ share in JOLED would have decreased from 75% to 45%. The market expected JDI and JOLED synergy to enable greater independence, avoiding Japanese government support. However, competition in the display market changes very fast. JDI faced weaker-than-expected smartphone demand from major customer Apple from 2017. With financial pressure caused by sluggish demand and low fab utilization, the JDI and JOLED merger was suspended. JDI announced in March 2018 that it would not merge with JOLED due to JDI’s financial problems. JDI sold its Gen 5.5 fab in Nomi to INCJ for JPY 20 billion, slightly relieving the financial stress. JOLED now gets INCJ support for using Gen 5.5 fabs in Nomi. The Japanese government supports this kind of subsidy protection strategy used to rescue JDI and JOLED again via INCJ. JOLED worked to raise JPY 100 billion from H2 2017 when it realized it might not get more support from JDI. In March 2018, it already raised JPY 50 billion in new funds from Denso (JPY 30 billion), Sony (JPY 5 billion), Panasonic (JPY 5 billion), Sumitomo Chemical (JPY 5 billion), and Screen (JPY 5 billion). Its priority is to continue seeking new funds from Japanese companies. If it cannot get enough funds from the Japanese capital market, it will look for investment from overseas companies. JOLED fab and product planning JOLED already mass produced 21.6-inch monitor panels in JDI's Gen 4.5 Ishikawa fab at the end of 2017. With that fab’s 2,000 sheets per month glass input, JOLED used it as a pilot line, and it was ramping up to

produce printed OLED for medical monitors for Sony in 2017. Since INCJ bought the Gen 5.5 fab in Nomi from JDI, that fab will become JOLED’s official production line for rigid printed OLED monitors. ihs_xuz49775_2018_5_11_16_52_13_capturejpg1

JOLED's Atsugi and Kyoto development centers will continue their advanced printed OLED research, such as flexible printed OLED products. Especially in the Kyoto development center, 12.3-inch FHD and 19.3-inch 4K2K panels were studied for the flexible OLED concept. To achieve its roadmap goal to mass-produce flexible automotive panels in H2 2022, JOLED will continue printed OLED research and development. The first OLED printed panel was 21.6-inch from JOLED for Sony’s medical business in Q4 2017. The high- end panel specification had UHD resolution, 1 million contrast ratio, and 350 nits of brightness. The most attractive design will show the OLED advantage over LCD with 1.3 mm panel thickness and only 500 g weight. In Q2 2018, ASUS will be the first consumer brand to launch a 21.6-inch OLED monitor with a high- end design including compatibility with HDR10 and true-10-bit. JOLED’s product roadmap shows that it may focus mainly on 21.6-inch monitor business before 2020. Improving printed OLED production yield rate and cost reductions are more important to JOLED than launching new products. It wants to reach 80% and higher production yield rate in 2019. If they can achieve a high yield rate in the Nomi fab in 2018, it may consider mass producing 27- and 32-inch UHD in 2019, earlier than the originally-planned 2020. JOLED is studying printed OLED for future business in automotive applications. The schedule shows automotive panel design in 2020 and first-stage ramp-up in 2021. We may see rigid and flexible 12.3- and 15.6-inch panels from JOLED in 2022. This is one of the reasons Denso (Japanese automotive component supplier and system provider) invested in JOLED in March 2018 for acquiring automotive panels in the future. Beyond the automotive panel business, JOLED will consider using flexible panels to design automotive products with e-paper in H2 2022. ihs_xuz49775_2018_5_11_16_53_6_capturejpg2

JOLED still faces many challenges After the merge with JDI was terminated, JOLED received fab support from INCJ and JPY 50 billion funds from the Japanese capital market at the end of Q1 2018. The stagnating business has been rescued in the short-term. The printed OLED process is much easier and saves initial-stage investment cost compared to OLED evaporation technology. It especially provides a quick benefit for large display, which is why investors are still paying attention to JOLED’s future. However, printed OLED technology is still in the development stage without a stable production yield rate, and cost is high. There is still the challenge of how to avoid the uneven inkjet process that causes printed OLED’s Mura issue. Also, the material weakness of printed OLED is still a concern for its limited lighting efficiency and short life cycle. Overall, there is much room for technology and cost improvements. The many remaining long-term challenges for JOLED include those from internal management of technology enhancements, improving yield rate and cost-down, and additional fundraising from the capital market. If JOLED does not raise another JPY 50 billion to reach its JPY 100 billion goal, its mass production and product roadmap schedule may be suspended again.

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