Asia LED sector:Micro LED,not ready to shine

Mass production schedule keeps getting pushing out. A year ago, manycommentators expected wide adoption of Micro LED: this has proven overlyoptimistic. At the 2017 Micro LED forum, most speakers indicated no massproduction of Micro LED in 2017 or 2018. One equipment vendor we spoke to fairlysummarised our view, saying that he hoped that by the time of the next forum in twoyears, Micro LED would be a viable technology for commercialisation.

    Production bottlenecks not resolved and cost is too high. We were surprised tolearn there are still no concrete solutions to key obstacles in Micro LED massproduction including the epi-wafer uniformity issue, sharp falling luminance efficacy ina small-current environment, and issues in mass transfer stage, including in thetransfer method, yield rate in chip transfer and processing time. Sorting and repaircosts are further key issues preventing Micro LED effectively replacing existingdisplay technologies. Our proprietary cost analysis suggests the cost of a Micro LEDbased TV is 2x/5x higher than an OLED/LCD TV. Even assuming no technologyissues, the cost could still 20-40% higher than current solutions. In mobile panels, ouranalysis also shows the Micro LED material cost alone could be higher than totalmodule cost of a mobile panel.

    Too early to invest in Micro LED theme. While we agree that Micro LED has manyadvantages, we think it is too early to invest in the theme as there is no convincingevidence indicating it can replace existing technologies. We remain cautious on theLED space as we believe Micro LED is still undergoing development and oversupplyrisk in 2018 will serve as a headwind for sector profits. We have Reduce ratings onEpistar and Seoul Semi and a Buy rating on LG Innotek.