Omdia: Rising oil prices could add cost pressure to display optical films

The display optical film market is facing growing cost pressure as rising crude oil prices ripple through the petrochemical value chain. Optical films used in displays depend heavily on petrochemical-based polymers, and increasing energy supply risks in the Middle East could push input costs higher. This blog explores how higher oil prices may affect optical film materials, manufacturing costs, and ultimately display panel pricing.

Petrochemical dependence of display optical films

Polarizers and backlights for displays consist of various functional films, and most of these films use petrochemical-based polymers as raw materials. For example, major films used in the display industry, such as PET, PMMA, COP, and PC, are all produced from basic petrochemical feedstocks derived from naphtha.

Recently, as military tensions in the Middle East have escalated and conflict between the US and Iran has intensified, concerns regarding the Middle East energy supply chain are growing. In particular, international crude oil prices are rising due to the risks surrounding crude oil transportation around the Strait of Hormuz. Rising crude oil prices affect not only energy prices but also the cost structure of the entire petrochemical industry. This is because the prices of most major polymers move in tandem with crude oil prices.

Crude oil is separated into naphtha, gasoline, diesel, and others through the refining process. Among these products, naphtha is a key feedstock for the petrochemical industry. Naphtha undergoes cracking processes and is converted into basic petrochemicals, such as ethylene, propylene, para-xylene (PX), and benzene. These basic chemicals are ultimately processed into films through various intermediate chemical products and polymers. Therefore, rising crude oil prices can drive price increases across the entire petrochemical industry and, in the long term, affect the cost of display optical films.

Optical films widely used in displays include PET, PMMA, COP, PVA, PC, and PI, and their supply chain structures are shown in Figure 1.

Note: PX (Para-Xylene), BPA (Bisphenol A), PMDA (Pyromellitic Dianhydride), ODA (4,4′-Oxydianiline), VAM (Vinyl Acetate Monomer), MMA (Methyl Methacrylate), PTA (Purified Terephthalic Acid), and DMT (Dimethyl Terephthalate). Polymers include PET (Polyethylene Terephthalate), PC (Polycarbonate), PI (Polyimide), PMMA (Polymethyl Methacrylate), PVA (Polyvinyl Alcohol), and COP (Cyclic Olefin Polymer).

Source: Omdia

The following list details the types of films and how crude oil products are used in their manufacturing and production:

• PET film: Para-Xylene (PX) is converted into DMT (Dimethyl Terephthalate) or PTA (Purified Terephthalic Acid). These intermediates are polymerized into PET (Polyethylene Terephthalate). The PET polymer is then processed into PET film.
• Acrylic film: Propylene is converted into MMA (Methyl Methacrylate). MMA is polymerized into PMMA (Polymethyl Methacrylate). PMMA is then used to produce acrylic films.
• COP film: Ethylene-based monomers are polymerized with cyclo-olefin monomers to produce COP (Cyclic Olefin Polymer), which is then processed into film.
• PVA film: Ethylene is converted into VAM (Vinyl Acetate Monomer). VAM is polymerized into PVA (Polyvinyl Alcohol), which is widely used in polarizers.
• PC film: Benzene-derived chemicals are converted into BPA (Bisphenol A), which is polymerized to produce polycarbonate (PC) used for PC films.
• PI film: Benzene-derived chemicals produce diamine and dianhydride monomers. These monomers are polymerized to form polyimide (PI), which is then processed into a PI film.

Potential cost pressure on display panels

As such, because the major polymer materials used in optical films largely originate from naphtha-based basic petrochemical feedstocks, it is difficult to avoid being affected by rising international oil prices. 

Furthermore, because most organic solvents used in the process, such as acetone, xylene, IPA, and toluene, are also produced through naphtha-based petrochemical processes, rising crude oil prices can affect not only material costs but also process costs.

That said, because petrochemicals and materials generally maintain a one-month inventory, rising crude oil prices are not immediately reflected in film prices. There is a margin of about one to two months.

Nevertheless, given the possibility of further increases in crude oil prices and the potential for a prolonged conflict, attention must be paid to the timing of the direct impact of rising crude oil prices on film costs. In particular, given that petrochemical materials (polymers, organic solvents, etc.) account for more than 50% of film manufacturing costs, and that material costs constitute a significant share of total film costs in the general film industry, it is evident that petrochemical raw materials determine a substantial share of film costs.

Given the current situation, where rising semiconductor prices are increasing the cost burden on the entire display industry, if the prices of petrochemical-based materials also rise, especially if tensions in the Middle East persist, the increase in crude oil prices will place a significant burden on the cost structure of panel manufacturing.