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OLED revolution brings brighter earnings for equipment makers

TOKYO -- Japanese companies making production equipment for organic light-emitting diode panels are seeing the black ink swell in those operations amid a larger shift toward the next-generation display material.

OLED panels use organic compounds that emit light in response to electric signals. Those panels produce clearer images than liquid crystal displays but do not require backlights, which paves the way for thinner and lighter devices.

Apple will adopt that technology for its new iPhones next year, and panel makers worldwide are pouring investment into mass production of OLED panels.

LCD and OLED have parts that share the same production processes. Nikon makes photolithography equipment used to create circuits on OLED and LCD substrates. The Japanese company commands the top global share in systems for display applications. Unit sales are expected to roughly double for the fiscal year ending in March as Chinese firms actively invest in LCD panels. At Nikon's business segment that includes photolithography equipment, the operating profit is projected to soar 320% to 40 billion yen ($389 million), a gain that also will drive group earnings.

Tokyo Electron is strong in etching equipment for creating circuits on panels. The company also is capturing demand for OLED panels. Tokyo Electron aims to boost operating profit at its display production equipment business to at least 12 billion yen in fiscal 2019, a 160% increase from fiscal 2015.

But the spotlight is shining brightest on manufacturers of equipment used in wholly new production processes specific to OLED panels. Canon subsidiary Canon Tokki holds the biggest global share in vacuum deposition equipment, which evaporates and applies organic material to substrates.

For the fiscal year ending in December, Canon Tokki plans to double production of those systems, putting its operating profit in the black. Canon expects operating profit of 7 billion yen in the segment that includes Canon Tokki, an improvement from the 13 billion yen operating loss in fiscal 2015.

Ulvac also makes vacuum deposition equipment, and OLED-related orders for the fiscal year ending in June 2017 are seen roughly tripling to about 35 billion yen. Ferrotec, which makes the vacuum seals for this type of deposition equipment, forecasts sales to roughly double in the company's OLED business for the fiscal year ending in March.

Deliveries of OLED smartphone panels likely will surpass those for LCD smartphone panels in 2018, estimates from British research firm IHS Technology show. Choosy investors are snaring stocks tied to OLED technology. Shares have climbed 150% since the end of March for Hirata, which makes vacuum chambers for deposition systems. Ferrotec's stock also rose over 10%. Those shares may get a further bump once Apple unveils its new product lineup in September.

(Nikkei)

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