Samsung Mobile Display (SMD) is dominating the smartphone industry with their Active Matrix (AM) Organic Light-Emitting Diodes (OLED), which has taken its place as a premium display for smartphones. According to DisplaySearch, a market research company, the OLED market is forecast to grow 4 times from last year's US$ 1.2 billion to US$ 4.1 billion. SMD's market share in this market is close to 100 percent. It is the first time for Korea to beat Japan from the beginning in the components market, including semiconductors and displays, which is an unparalleled feat. The AMOLED industry ecosystem which starts from component parts and goes to equipment and finally to panels will fall apart without Korean companies. This result could only have been achieved by the close networking and collaboration between SMD and its subcontractors.
Starting with SMD's launch of the world's first 5.5 generation line, the AMOLED market is growing explosively. Last year, 43 million cellphones with AMOLED screens were produced, and an estimated 1.1 billion are expected to be produced this year. The number is also expected to steeply increase to 4.6 billion by 2017. SMD also entered the Smartpad (Tablet PC) market, trying to make AMOLED the main display for mobile devices.
Close Collaboration with Lasers
The reason for SMD's success is their strong network and close collaboration with their subcontractors. The most successful example from SMD's win-win collaboration program, Crepas, is the development of Laser Crystallization equipment, which is one of the key parts of AMOLED. Leaders in optical technology such as Japan and Germany were preoccupying the market until a few years ago. The problem was that it was hard to quickly respond to local problems such as maintenance and engineering education, and the leaking of SMD mass production technology of AMOLED. The biggest problem was that prior equipment was based on low temperature polymethod LCD, and was not suitable for production of the 5.5 generation AMOLED, which required a more detailed process.
Crepas is operated in an open innovative way to allow creative cooperation. Subcontractors and even companies with no transactions could suggest a promising idea that could be included in the development list. And in the R&D process, SMD shares their production know-how. If the task succeeds SMD must purchase the product, taking the relationship between major and small companies to another level.
SMD decided to localize laser crystallization equipment and joined hands with 10 year laser optical equipment developers, AP systems. The two companies created a task force made of 20 main engineers and began to localize the laser crystallization equipment in full scale.
They created the Isolator, a powerful device 8 times its predecessor, which softens the vibration from external shock. They also developed equipment operation software that can control the equipment from the design stage to the internal production environment, and a laser oscillator twice better in reliability and lifespan.
The laser crystallization equipment localization project has allowed SMD to enjoy KRW 50 billion (US$ 42.5 million) per year in import substitution effects. AP systems have also created a new business profiting in over several billion won. By the close networking and collaboration of the two companies, they were able to stop technology leakage, and secure an unchallenged mass production competitiveness.
Jung Gi Ro, president of AP systems said, "From the start of 2000 we tried to make our own laser crystallization equipment, but it was difficult due to the unclear market and development directions. Thanks to SMD's test products and great human resource support and cooperation, we were able to develop the world's first 5.5 generation laser crystallization equipment."
Development Funds for All
Not only do they help develop the technology, they also support development funds for small companies. Depending on the idea's nature, SMD supports R&D funds for small companies, in which they do not have to be paid back. They wholeheartedly support highly-advanced national projects and patents. In this way, subcontractors can make their own technology ideas into a new business and find a retailer in the early steps of their business.
Sources say, "The Crepas program has directly contributed in strengthening the competiveness of Korea's display industry, which was already strong after being the world's first AM OLED mass production." As of 2009 an estimated KRW 430 billion (US$ 365.5 million) of profit was made from SMD's 30 Crepas innovation tasks, not including ancillary effects such as patents, and increased equipment competitiveness.
SMD is also proceeding with a Co-Op Fair to localize the components and materials of AMOLED. SMD is cooperating with smaller companies to produce 40 new AMOLED products that need to be localized. If these products all become localized, KRW 1 trillion (US$ 850 million) in import substitution effects are estimated.
Jo Soo In, president SMD, said "Creating trust between subcontractors greatly defines a company's quality and competitiveness. We will continue to examine for more joint operations and innovative items for more creative cooperative relations."
Same Story for Large LCD Industry
LCDs are an equipment business requiring large scale installation investments, and the importance and scale of the rear industry such as materials and processing equipment is greater than any other field. When constructing an 8th generation factory line, which requires billions in investments, 60~70 percent of the money is used to purchase equipment. It is easy to say that production efficiency and quality starts from equipment purchases.
LG Display, the leader in the large-sized LCD market, has also continually improved their collaboration system with their subcontractors. LG Display has a division specifically devoted to collaboration, and they are a model example for making a Model Number 1 ecosystem, which starts from panels to materials and finally equipment. The company cooperates with subcontractors in many ways such as through sharing know-how, co-development and first-in-line purchasing, dispatching technology resources and education, and investments and consulting.
Last, in 2007 LG Display created a division exclusively for collaboration with subcontractors. They were the first in the business to do this. Staff doing work related to collaboration is over 80. LG Display is continually digging for collaboration products, and increasing strategic supplying companies to reinforce their competitive edge in components and equipment.
First they are sharing their core competence with smaller subcontractors and pulling them up. With help of their panel production know-how called Max Capa/Min Loss they are inspecting equipment, changing the inspection system, and increasing the pool of the quality management experts of their subcontractors.
They are also contributing in localizing equipment and increasing exports of subcontractors. Towing with the belief of in order to achieve industry competitiveness they should foster more equipment manufacturing companies, thus leading to equipment localization. Through this equipment subcontractors can localize expensive processing equipment such as PECVDs and sputters. This company had increased the localization rate of LCD equipment from 15 percent to 60 percent through the 8th generation production line.
LG Display also supported outstanding and promising companies with 120 billion won (US$102 million), contributing in stabilizing their subcontractors' financial status. In 2008 they made a fair trade subcontracting agreement with their subcontractors and made the payment in 100 percent cash, practicing practical collaboration activities.
LG Display is also expanding their collaboration to the business management field. By running an online counsel center and providing education and ERP systems they are providing realistic support. Also, a team of experts from LG Display inspects the management and administration for some time and provides feedback.
LG Display was recognized for their results, receiving presidential commendation last year in the large and small business collaboration field.
