OLED Lighting: The Differentiation Challenge
In order for OLED lighting to catch up to LED lighting, cost and performance gaps will have to narrow. In the interim, successful lighting companies will capitalize on OLED lighting’s unique design attributes.
by Khasha Ghaffarzadeh
OLED DISPLAYS are growing commercially and beginning to take market share away from LCDs, particularly in the area of mobile devices. By contrast, OLED lighting is not doing nearly as well. OLED lighting trails inorganic LEDs in almost every market segment, and therefore has to play catch-up. OLED displays are likely to lose this battle in the short and medium term, given that OLED displays are both under-performing and over-priced.
Narrowing the Performance Gap
The endgame, however, is promising because customers will buy OLED devices if the cost and performance gap substantially narrows. Lighting companies have little choice but to hedge their bets and stay the course with OLEDs or else risk losing out in the decades to come. In the meantime, these companies need to create stepping stones that generate at least limited cash flow and allow them to accumulate production/marketing experience. In fact, substantial innovation and pressure are building up in the value chain, which will ultimately enable a cost reduction in OLED lighting.
OLED materials will be the first layer in the OLED stack that will experience a rapid cost reduction, and this is based on successes in the OLED-display industry. Even though OLED lighting and display materials have different requirements and operate in different conditions, essential and fundamental similarities exist in material design, chemistry, and production, and OLED-lighting technology can take advantage of these.
This is not to say that OLED-lighting material development lacks challenges. Trade-offs between lifetime and color quality persist, particularly for deep blues (the deeper the blue, the shorter the lifetime). The material optimization cycle remains expensive and lengthy, despite some major developers having internalized the device prototyping step to shorten the design cycle. OLED lighting materials are also high-tech fine structures incurring high R&D expenditures that inevitably contribute to the final cost.
In the short term, the largest potential for saving material costs is to be found in improving material utilization (currently 10–15%) during deposition. Encapsulation and integrated substrates, which include substrate, transparent conductor, and out-coupling layer, are other major cost drivers. The transparent conductive layer must be highly smooth and conductive. However, most suppliers are unwilling to switch capacity to the required indium tin oxide (ITO) grade given the lack of volume and the strength of demand for other ITO grades in, for example, the touch-screen market.
There is, however, substantial activity taking place in the field of transparent conductive films. Here, we will witness a multitude of new technologies competing with ITO on the basis of lower sheet resistance, lower cost, and improved mechanical flexibility. The threat of substitutes and overall high buyer power will ensure that prices fall in the transparent conductive film business, despite the fast rising demand on a global basis. In terms of OLED lighting, the above factors may cause the cost of integrated substrates to fall as well (Table 1).
The same condition occurs when it comes to cavity glass (a glass with a small cavity sandblasted out), which is an excellent encapsulation barrier. Cavity glass works well and meets the technical challenges, but it is expensive. This is partially because the glass industry is reluctant to increase capacity in the absence of clear demand. Flexible versions are also not yet commercially available at the right price or performance point. It should be noted that substantial pressure, mostly from large corporations, is building up within the value chain toward enabling flexible barriers. The strong pull from the OLED-display industry is strongly incentivizing developers in this field (Table 2).
The Differentiation Challenge
In the prolonged interim before price parity is approached, OLED lighting will have to capitalize on attributes beyond standard industry figures of merit (i.e., efficacy, cost per km square, and lifetime). Its backers must highlight and exploit the intangible and less concrete “design” or “feel good” parameters. These include color warmth, cold emission, thinness, surface emission, and mechanical flexibility (when flexible barriers become available) (Fig. 1).
Fig. 1: A “most likely” scenario for cost reduction of the bill of materials for a typical OLED stack shows that the cost of materials will decline more rapidly than the costs for encapsulation and integrated substrates. Source: IDTechEx.
It should be noted that LEDs can also create effective surface emission through the use of waveguides. This means that, for example, surface emission is not unique to OLED devices, but that the price and performance gap substantially narrows with OLED versions.
OLED lighting panels can be thought of as luminaires or significant parts of luminaires. This implies that OLED panels will not compete with LED modules, but will do so with LED luminaires, which fetch higher prices. These designations create room, and thus commercial opportunity, for differentiation via custom-designed products at the luminaire level. This custom-design strategy, however, does not sit comfortably with many suppliers who seek to sell high-volume standardized OLED panels (Fig. 2).
Fig. 2: LEDs win on standard industry figures of merit such as cost, lifetime, and efficiency, but OLEDs have room for differentiation on the basis of design factors. Source: IDTechEx.
Strategic Challenges
A lack of clear differentiation has created a strategic conundrum for large lighting companies who wish to be competitive in both OLED and LED lighting. On the one hand, they are investing in OLED lighting out of the fear that this technology might ultimately win out and undermine their growing LED business. On the other hand, they cannot give it whole-hearted commercial backing because they cannot sufficiently differentiate it from their existing business lines based on LEDs, and thus fear that it might create an unhealthy and zero-sum internal competition. This strategic confusion is likely to persist as long as clear differentiation is lacking. The lack of differentiation is less of a strategic challenge for companies that are leveraging their OLED-display business to participate in the lighting industry. These companies have every incentive to push their technology hard onto all lighting market segments.
The Long View
OLED-lighting companies will have to take the long view in order to avoid the commoditization that is sure to overtake LED lighting in the near future, as Asian and particularly Chinese manufacturers put pressure on margins across every level of LED-lighting systems, including lighting module, drivers, etc. For OLED lighting, the cost and performance gaps will of course need to narrow, but the key to longer-term success will be capitalizing on OLED’s design attributes while closing that gap. OLED-lighting companies will need to ensure technology leadership, in part by maintaining and investing in strong IP. If these criteria can be met, OLED lighting is an attractive long-term proposition, given the size of the global lighting market and the healthy trends sustaining its growth. In the interim, OLED-lighting companies will have to be more than technology leaders; they will have to be good designers too. •