CLSA says that as OLED displays are too expensive for many smartphone makers and lack enough differentiation to LCDs, the company is lowering its OLED adoption forecasts. CLSA now expects China's OLED smartphone shipments to total 116 million in 2018, 143 million in 2019 and 168 million in 2020. CLSA lowered its forecasts by 12-21%. In terms of penetration into the total Chinese smartphone market, CLSA sees 14% in 2018, 18% in 2019 and 21% in 2020.
Looking at the OLED makers, side, CLSA sees ample OLED supply in coming years, which means that expansion is likely to slow. CLSA assumed that OLED makers will achieve 70% yields and a utilization rate of 90%, which will bring all OLED makers to have a combined production capacity of around 288 million 6" panels in 2020. As demand will be only 168 million by Chinese phone makers (and remember there's also Samsung and LGD of course), this will create quite an oversupply situation in China. CLSA cuts its China OLED production forecasts by BOE, Tianma, Visionox, CSoT and Everdisplay by 23% to 26% in coming years.
In Q3 2018, CSA says that around 112 million smartphones with OLED displays were shipped globally (penetration rate is 32%, up from 28% in Q2 2018). Penetration in China was stable at 15% - but in the first nine months of 2018 Chinese OLED smartphone shipments actually declined by 5% from the comparable period in 2017. During the last quarter only Xiaomi accelerated its OLED adoption (to 12%) - while Vivo's penetration was stable and Huawei's and Oppo's actually declined.
Looking specifically ito BOE, CLSA estimates that its current utilization rate in its B7 Chengdu fab is only about 10% (assuming BOE is indeed at around 70% yield as it claims). CLSA says that BOE will go ahead with its B11 production line in Miangyang plan to start mass production in 2019, but now believes it will delay its plans to build the B12 fab in Chongqing due to the market situation. CLSA assumes BOE will start mass production in the B12 line in 2021 (BOE's original plan was for 2020).