Last June, it was reported that Samsung is planning to build a “super OLED factory” in South Korea. The plan was to build a new production facility named A5 as part of company’s new huge OLED production complex in Asan, South Chungcheong Province, South Korea. The plant was supposed to have 30% more production capacity than its A3 plant in China. Samsung Display planned to invest 1 trillion won (US$925 million) in this new OLED plant.
Now, according to a news report in The Bell, Samsung has reportedly decided to reconsider its decision. The company is now reviewing its investment plan for the A5 plant from scratch. It seems no progress has been made in the plant construction so far with the report quoting an unnamed source saying, “Construction work has not started on the plant site and they just keep digging the land.”
Demand uncertainties influenced the decision
Demand uncertainty in the global smartphone market is predicted as the key reason behind Samsung’s decision to backtrack on investments in the A5 plant. So far, only Samsung and Apple were the key customers for the OLED panels from Samsung’s Display unit. Samsung wanted to expand the production capacity and focus on demand from the Chinese smartphone manufacturers as well. However, Samsung now seems to be unsure about the sustained demand in the smartphone market.
Less than expected demand for Apple iPhone X also seems to have influenced Samsung’s decision. Unlike the previous iPhones with LCD displays, iPhone X uses an OLED panel from Samsung. Samsung is expected to make around $22 billion in revenue from supplying OLED panels to Apple in 2018.
There were also reports about Apple trying to reduce its reliance on Samsung for OLED panels. As part of the strategy, Apple has reportedly invested in LG Display business to make high-quality OLED panels in scale for the upcoming iPhone models. If that turns out to be true, both Samsung and LG will supply OLED panels to Apple this year.
