Fully digital screens are replacing speedometers and dials in vehicles, making industry leader Japan Display Inc. optimistic about boosting sales to global carmakers.
While most new models usually have a center information panel for maps, entertainment and other functions, manufacturers are also increasingly replacing the dashboard facing the driver with a flat screen. Look inside the latest BMW or Mercedes-Benz, chances are Japan Display made the panel.
Replacing instrument clusters with screens is challenging, because they need to be more reliable and withstand swings in temperature, while providing critical information for the driver. That also makes them more expensive and lets display suppliers demand higher margins, making them an attractive enterprise. Japan Display, the world's biggest supplier of panels in cars, is betting that the shift to electric vehicles will make screens the key selling point for any car as drivers pay more attention to the interior aesthetics of automobiles than what's under the hood.
"It used to be all about the engine -- how many cylinders, how much horse power, the sound of it -- but with electric vehicles that's all gone," Holder Gerkens, who heads JDI's automotive business, said in an interview. "How do you create attraction? You can do a lot with displays."
Digital dashboard also offer advantages for drivers, for example changing the style and amount of information for different driving modes, making maps more prominent when needed. For now, they are mostly used in high-end cars made by Audi, Mercedes-Benz and some supercar manufacturers.
JDI's automotive operations generated 100 billion yen ($900 million) in revenue in the last fiscal year, about 14 percent of its total. The company forecasts sales will grow 40 percent by March 2020. JDI, which already supplies about 30 percent of the European car market, is expanding in the U.S., Japan and China, Gerkens said. That could be welcome news for investors, who saw the company's shares decline 32 percent last year.
The Japanese company controlled 19 percent of the $6.7 billion global market for automotive displays last year, according to IHS Markit. LG Display was second with 14 percent.
"It's a combination of high variety and low volume, but the automotive business could potentially offer higher margins," said Damian Thong, an analyst at Macquarie Group Ltd. "The ability to do this cost effectively will be a crucial test."
Sluggish global smartphone sales, which make up about 80 percent of revenue, are also behind JDI's bid to increase automotive sales. In addition, Apple Inc., the company's biggest customer, is shifting to next-generation organic light-emitting diode displays, which JDI doesn't produce in mass quantities. Samsung Electronics Co. and LG Display Co. supply most of the world's OLED screens.
Adoption of OLEDs in cars will probably take longer. Unlike liquid-crystal displays, OLED pixels can glow on their own and do not require a backlight, which makes them thinner and more energy efficient. These are significant advantages when it comes to smartphones, but automakers are likely to be more concerned with OLED's limited lifetime and considerably higher price, Gerkens said.
Japanese companies were the first in the world to commercialize flat-panel technology, but couldn't keep up with South Korean and Taiwanese rivals in capital investment and price competition. JDI was created in 2012 in a merger of the troubled screen-making units of Toshiba Corp., Sony Corp., and Hitachi Ltd. JDI embraced a strategy of focusing on higher-quality, smaller-sized screens, which has helped it to gain a key foothold in the car industry.
"We are moving away from flat rectangular shaped displays," Gerkens said. "The future will be more and more design driven."