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Japan Display, a fading iPhone LCD screen-maker, pivots to virtual reality

Jaleel M. by Jaleel M.
June 16, 2021
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Japan Display, a fading iPhone LCD screen-maker, pivots to virtual reality
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The Tokyo-based LCD specialist expects its favored display technology to become the standard for VR because it can achieve higher resolution than OLED while keeping costs reasonable. That advantage is imperceptible in mobile devices but becomes critical in the more demanding VR scenario.

To date, VR headsets have largely been a disappointment, promising to open a whole new content platform and ecosystem yet never quite achieving it. But VR game producers said the situation started to improve with Facebook Inc.’s Oculus Quest 2 release last year, which saw adoption tick up with many people stuck at home during the pandemic.

Many of the first wave of headsets released five years ago used OLED screens — or organic light-emitting diodes, the same as used across most flagship phones today — for their responsiveness to fast-moving action, a common feature of gaming experiences. But major players such as HTC Corp. and Facebook have moved to LCDs for their latest products, betting on the more economical standard to improve the user experience and immersion. Industry researchers at Omdia saw LCD adoption rise in 2020 and forecast the technology will dominate the category over the next five years.

​“It’s hard to find a VR headset maker who doesn’t have a relationship with us,” JDI’s VR chief Takeshi Harayama said in an interview. At the company’s last earnings call in May, Chief Executive Officer Scott Callon said he expects revenue from gaming-oriented VR headsets to pick up from the second half of next fiscal year.

Part of the reason is that OLED makers just aren’t that interested in competing for a small market. Even popular headsets struggle to break past a few million sales, paling in comparison to smartphones where hundreds of millions of units are sold each year.

One important holdout remains: Sony Group Corp. plans to use Samsung Display Co. OLED panels in its next-generation PlayStation VR goggles, according to people with knowledge of the matter. The Japanese console giant sold more than 5 million units of the original PS VR, launched in 2016, and is aiming to release the successor in the holiday period next year, the people said, asking not to be named discussing internal plans.

A Sony spokesperson and a Samsung Display representative declined to comment.

To grab a bigger share of the market, JDI is working to convince VR companies it can solve two of their biggest hurdles: display quality and cost. Because VR goggles place the screen so much closer to the human eye, they require higher resolution and clarity than mobile screens, achieved by packing pixels closer together. JDI is capable of producing displays with 1,200 pixels per inch, more than double the typical density of top-tier phone panels, according to its chief VR headset engineer, Yoshihiro Watanabe.

The threshold for a high-quality VR experience is to have a display with at least 1,000 pixels per inch, Watanabe said, adding that JDI is one of the few display makers — if not the only — that can mass-produce such panels at a reasonable production yield.

“I’m confident our technology on LCDs is at least two years ahead of others in the category,” he said.

JDI was created in 2012 by the combination of the display-making units of Sony, Hitachi Ltd. and Toshiba Corp., with much of its revenue since then coming from mobile handsets, especially iPhones. More than half of its total sales used to come from the Apple business, but the iPhone maker’s adoption of OLED technology left the company reeling.

Unable to develop its own OLED panels to a competitive level with leader Samsung Display, JDI has seen its revenue from phones drop from 838 billion yen ($7.7 billion) in the year ended March 2016 to an expected 81 billion yen this fiscal year. The firm sold the factory it had used mainly to produce panels for Apple to Sharp Corp. last year.

Major smartphone makers universally adopted OLED for their premium models in part because of the broader set of design options it offered. Flexible OLED panels could be curved, as with the banana-like LG G Flex, rolled or folded, as with the Samsung Galaxy Fold and Huawei Mate X.

“When it comes to VR, the quality of picture the panel produces will be the most important because the headset doesn’t really need other features such as flexibility and energy efficiency,” said Omdia research manager Hiroshi Hayase.

It’s difficult to say that LCD is in all cases superior to OLED for VR, Hayase said, because OLED offers better contrast in addition to faster response times. The key for JDI will be to establish a solid footing in the industry by addressing customer needs that other suppliers would turn down owing to the small market size, he added. JDI has experience of doing that from its business supplying display panels for digital cameras.

While JDI doesn’t disclose particular customers, the company expects revenue from non-mobile businesses, which includes VR headsets, to grow 25% to 70 billion yen in the current fiscal year.

“I wouldn’t say the market will be rosy in two to three years, but the growth rate is good enough for us to call it a big business for us,” JDI’s Watanabe said. “Other makers may try to come in when the market is finally big enough, but by that time we expect to have built strong ties with customers and accumulated the technological know-how to hold our position.”

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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