Rethinking OLED Lighting This year 2013 could prove to be the turning point for OLED lighting.

g. 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 lightings 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 isnt happening yet. Will Anyone Invest in New Capacity? However, NanoMarkets believes that the real issue here is who is going to pay to have the factories built that will support the mainstreaming of OLED lighting? There is perhaps one fullscale production plant for OLED lighting manufacture in place at the present time, which certainly isnt enough to supply the OLEDs for an OLED lighting take off. Even on the most optimistic scenario (see below) NanoMarkets now doesnt expect the revenues from OLED lighting to reach more than a few hundred million dollars annually for quite a few more years. What firms would invest in OLED lighting capacity under such circumstances? They would have to be quite brave ones, especially given the very low growth expectations that are now considered normal in the world today. This together with the apparent lack of political will in Europe and the US to do anything to change the situation. We think 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 years NanoMarkets OLED lighting forecasts is a version of scenario forecasting and, as discussed below, we consider three separate scenarios here. Although we dont assign specific probabilities to these scenarios, we think that the most optimistic 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 lighting industry gives up the ghost.

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Scenario 1: OLED Lighting Prevails This 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 sudden surge. 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, and progress, especially on the performance front, was made. New OLED lighting products and quite a few new luminaire designs were launched. But getting from all this to the specific outcome that is represented by Scenario One, will be hard to achieve and will take a considerable amount of both technical and business development work over the next four to five years. Several challenges remain, including the needs for even more performance improvements, standardization as well as cost reductions and 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 for office lighting may still become a critical entry point for widespread commercialization, and automotive and residential lighting also represent major potential mass-markets. Important technical improvements on track: The oft-cited, ultimate goal of OLED lighting is to 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 a growth curve that will take it smoothly to the targeted 100 lm/W necessary to make OLED lighting achieve is 2015-2015 mass-market goals. This is perhaps the single major fact that OLED advocates can claim in their favor. Similarly, luminance performance is steadily improving, and most observers NanoMarkets included 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, but NanoMarkets does not expect it to be a critical factor in the success or failure of OLED lighting going forward. An industry champion to ride to OLED lightings rescue: Without such technical improvements the OLED lighting game would be over and OLED lighting panels would have been consigned to dustbins of semiconductor history where so many of the semiconductor innovations have gone before. However, NanoMarkets thinks that Scenario 1 can never take place unless an industry champion emerges that will invest in OLED lighting despite the obvious risks. Such a firm will have to be not only large, but well plugged into the lighting industry, so that it can capitalize on existing supply chains to make OLED lighting happen in a mass market sort of way.

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NanoMarkets notes, however, that this is a necessary not sufficient condition. Just because OLED lighting finds a champion does not mean that OLED lighting will succeed and that Scenario 1 will happen. In fact it will be quite easy for an OLED lighting industry champion to fail quite badly in its mission. We also note while NanoMarkets analysis assumes that the champion will come from the existing ranks of OLED lighting makers, it is also possible that some 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 has completely abandoned its early claims that its solution processing approach to making OLED lights will lead to low enough price points that will give it early victories in the general illumination 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 from Korea, where both LG and Samsung are very much creatures of the Korean governments industrial policy. The rumor is that while Samsung has been designated as the OLED display champion, 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 is supposed to exercise a leadership role in the OLED lighting business, it doesnt mean that it will do so. Although, substantial government funding means that LGs risk in this space, we note that Korean government projects to take Korean industry to world leadership do not always succeed. 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 early developing this technology, building pilot plants and introducing early products. They also participate in various government-funded OLED lighting projects around Europe. This reduces the risk that these firms face a bit, but European industrial policy is nothing as full-bloodied as Korean industrial policy. Still, both Philips and Osram have robust OLED lighting programs and an apparent enthusiasm for this topic. The problem is that both companies rely heavily on European consumer markets that are just about devastated. It may be that the management of these companies do not have the stomach to make the substantial investments that will be needed to keep them at the top of the heap in the OLED lighting industry, Where else could a substantial commitment and investment towards the future glory of the OLED lighting business come from? One possibility is Japan, which for a while seemed to be the 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 between Panasonic and Mitsubishi. Finally, Chinas rush to become a technology powerhouse may impact the story we are telling now. There is no real Chinese firm that one can point to at the present as a possible OLED lighting champion. However, serious OLED lighting firms have appeared in China in the past
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couple of years and if these are backed by the Chinese government backs these firms financially, it could be the solar panel market all over again. Scenario 2: OLED Lighting as a Niche But without a champion from whichever country, we dont see there being sufficient capacity to support a ramp up of the OLED lighting industry in a few years. Certainly, there is no pent up demand 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 supply side; this kind of thing can be very expensive. In addition, a skeptic might point to a number of facts 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 Energys (DOEs) 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 of manufacturing may be the most important challenge facing the OLED lighting industry. Cost reductions would allow the industry to reduce prices (without losing profitability) to a level at which mass-market products in residential, commercial, and automotive lighting applications make sense.

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There are a number of ways in which such a cost reduction could occur. Two important factors are economies of scale and experience curves. These are both factors that are highly dependent 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 the OLED business is not further down its evolutionary path than it currently is. Panel size and other factors: Panel sizes for todays OLED lighting products are quite small. Certainly, many manufacturers have demonstrated the capability of making larger sizes, but not on a commercial scale with high yields. Todays small OLED lighting panels are suitable for small decorative lights or table lamps, but they are not suitable for most general illumination applications, particularly in office settings, which would require excessive tiling of OLED panels at todays 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 sizes increase. OLEDs are notoriously environmentally sensitive; one small defect can fail an entire panel. 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 transparent electrodes and resistive losses. Even for smaller panels, the OLED lighting market is looking for more effective light extraction (outcoupling) and improved drivers that exhibit both low loss and the capability to provide large currents. Scenario 2 could happen: If the OLED lighting industry cannot find a way to get the total cost per OLED panel down dramatically, then OLED lighting may never move beyond the niche lighting status that it currently occupies. In such circumstances, firms would find it hard to set long-term pricing for OLED lighting low enough to break into new markets. In this Scenario 2, OLED lighting gets purchased only by wealthy individuals or by businesses where aesthetics trumps prices; hotels, restaurants, etc. It would be a brave OLED lighting maker indeed that would price OLEDs low enough to create mass market and build the capacity to support that scenario, without some indication of strong demand pull. Scenario 3: The Death of OLEDs The hidden assumption in Scenario 2 is that there will continue to be enough wealthy/pioneer purchasers for OLED lighting to make it a sustainable market. However, this is by no means assured. The meaning of Scenario 2 is that in the OLED lighting market, things will not change much from where they are now. This tacitly assumes that the firms active in the OLED lighting space today are making some money, or could do using basically the same the current business model. But this is by no means assured. Could OLED lighting designer kits ever be a profit center as such or would the
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firms that offer them now stop doing so if the prospects for OLED lighting becoming a big business went away. Similarly, will the supply of basic OLED panels dry up if all the suppliers of these panels can see going forward is an addressable market consisting of luxury lights in which most 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 complete abandonment of the OLED lighting market which would be reduced to zero revenues in a few years 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 in the evolution of OLED lighting where such a possibility must be considered.

The contents from this article were drawn from the new NanoMarkets report, OLED Lighting Market Forecast 2013 Additional details about the report are available on the firms website at: www.nanomarkets.net/market_reports/report/oled_lighting_market_forecast_2013

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