Breakthrough in Domestic OLED Material Production

The semiconductor industry has witnessed a cyclical recovery, leading to increased capacity utilization in the display panel sector and expansion in wafer fabricationThis upward trend in production has significantly boosted the demand for organic materials used in the production of semiconductors and display panelsConsequently, companies engaged in the production of photoresists have seen rapid growth in their product offerings, receiving recognition from leading manufacturers in the panel and semiconductor industriesThe expansion of advanced integrated circuit processes, alongside the rising penetration of OLED technologies, is poised to continuously enhance the application of domestically produced OLED materials.

In recent years, personal computer brands have increasingly adopted OLED displays, while tablets have begun to feature OLED screens as well

The market for foldable smartphones has grown significantly, with a sharp rise in shipments reflecting a growing consumer acceptance of this technologyThe overall shipment volume of OLED panels from mainland China has surged, benefiting organic material suppliers as some manufacturers project performance improvements in the first half of 2024.

The global market for photoresists reached a staggering $2.351 billion in 2023; however, the domestic supply rate of high-end photoresists used in panels and semiconductors remains relatively low, indicating an uneven developmental landscapeNotably, the growth rate of ArF photoresist has outpaced that of the overall market, signifying an increased focus on advanced integrated circuit technologies and the consequent rise in both the unit consumption and value per area of these photoresists.

Chinese manufacturers are now equipped with a comprehensive development and production system for photoresist materials, ranging from phenolic resin research to pilot testing, scaling, and formula evaluation

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New products from these manufacturers include high-resolution KrF photoresists, deep ultraviolet negative photoresists, and chemically amplified i-line photoresistsMany companies anticipate continued volume growth in 2024, with several ArF photoresist products having already received certification from downstream clients, now ready for market sales.

The demand for OLED technology has rapidly expanded, with mainland China's total OLED panel shipments in the first quarter of 2024 estimated at around 97.8 million units, representing a remarkable year-on-year increase of 55.7% and capturing a 51.8% market shareIn 2023, global shipments of OLED smartphones reached approximately 595 million units, yielding a penetration rate of 51%. Projections indicate that by 2028, these shipments could reach as high as 750 million units, with penetration climbing to 60%. The market for foldable smartphones is particularly bright, with expected growth of 18% year-on-year in 2024, reaching 20.6 million units, and a compound annual growth rate of 26.8% between 2024 and 2028, potentially escalating to 53 million units.

Currently, major brands like Samsung Galaxy, Lenovo, HP, Dell, Asus, Huawei, BBK, Xiaomi, and LG have integrated OLED panels into their personal computers

Apple is slated to gradually switch from LCD to OLED panels for its iPad and Mac series, where the brand achieved a 40% market share in tablets and 9% in PCs in 2023. This strategic move from Apple is anticipated to propel rapid penetration of OLED technology in the mid-sized display market.

Within the cost structure of OLED panels, equipment depreciation accounts for the largest share at 35%, followed by organic materials at 23%. In 2023, the market for OLED organic materials in China amounted to 4.3 billion yuan, indicating a year-on-year growth of 33%. Projections suggest that by 2030, this market could grow to 9.8 billion yuan, achieving a compound growth rate of 11%. The demand for positive photoresists used in display panels in mainland China was approximately 17,000 tons in 2023, marking an approximate 8% increase from the previous year, and the domestic production rate of OLED organic materials stands at about 38%.

Lite-On Technology anticipates annual revenues between 241 million to 285 million yuan in the first half of 2024, reflecting a growth of 70.32% to 101.29% year-on-year

The surge in performance is primarily attributed to a substantial increase in revenues from OLED terminal materials, along with heightened operational efficiency and improved management practicesThe company has developed an integrated production capability spanning from OLED intermediates to sublimation materials and terminal materials.

In conjunction with the notable growth experienced by upstream material suppliers, the sales of CMP polishing pads from Dinglong Technology have also seen a significant rise, attributed to factors such as the production capacity of core upstream raw materials and reduced fixed costsCMP polishing liquids and cleaning agents achieved total sales of around 77 million yuan in the second quarter of 2024, marking a whopping year-on-year growth of 190.87%. Sales in the semiconductor materials sector showed robust performance, rising significantly as well.

The process of photolithography can be summarized as consisting of coating, exposing, and developing stages, with photoresist supporting agents categorized as wet chemicals used during this process, including adhesion promoters, diluents, edge bead removers, developing solutions, and stripping solutions

The various types of photoresists can be segmented based on their downstream applications, including those for PCB, LCD/OLED panels, and integrated circuits.

The different classifications of photoresists range from dry film photoresists and wet film photoresists to photogenic solder mask inksFor panel applications, photoresists include thin-film transistor (TFT) photoresists, color photoresists, black photoresists, and touch screen photoresistsIntegrated circuit photoresists have progressed through a development cycle moving from ultraviolet light to deep ultraviolet light and ultimately to extreme ultraviolet light.

With the increasing complexity of chemical formulations and the high R&D investments required, coupled with the stringent stability and purity standards, the barriers to entry into the high-end photoresist market remain significant

Moreover, high-quality raw materials such as resins, monomers, and photoinitiators are challenging to procure domestically and often involve substantial expenses and import limitationsThe multitude of photoresist categories exacerbates the lengthy client onboarding and validation periods, establishing formidable industry barriers.

As the supply of advanced processes increases, coupled with an uptick in the number of photolithography cycles, the value of photoresists utilized per unit area is anticipated to rise, invariably leading to an overall increase in price points across the boardThe last few years have remarkably underscored the gradual maturation of the mainland China's panel industry chain, which has fostered unprecedented growth opportunities for upstream electronic chemicals and display materials, swiftly scaling to mass production levels.

For instance, Tongchen New Materials reported revenues of 554 million yuan in 2023 from electronic materials, marking a year-on-year increase of 46.88%, with a gross profit margin of 26.32%. Their subsidiary, Beixu Electronics, which specializes in positive photoresists for display panels, achieved sales revenues of 261 million yuan, a 22.8% increase year-on-year

The product sales volume of panel photoresists grew by 29.8%, with a domestic market share of approximately 22.1%.

Impacting performance is the increasingly active semiconductor and OLED panel industry in China, as seen with Dinglong Technology’s CMP polishing pad revenue jump attributed to efficient production of critical materialsThe sales of CMP polishing liquids and cleaning agents reached around 77 million yuan, marking a year-over-year increase of 190.87%. The semiconductor materials sector has also seen substantial revenue growth.

As of 2023, China’s monthly semiconductor wafer production capacity reached 6.5872 million units, reflecting a 13.8% year-on-year increase, primarily fueled by ArF and KrF photoresistsNotably, the domestic production capacity for 12-inch wafers now accounts for 56.9%, while the shares for 8-inch and 6-inch (and smaller) wafers stand at 24.4% and 18.6% respectively, utilizing primarily g/I-line and KrF resins