Japanese oil distributor Idemitsu Kosan will build a factory in China that turns out key materials for OLED panels, aiming to tap growing Chinese production of such displays for smartphones.

Idemitsu will establish a wholly owned subsidiary in Chengdu by June, according to Thursday's announcement. The unit will operate a site that produces luminescence materials indispensable to organic light-emitting diode displays. The location will be Idemitsu's third OLED materials plant after ones in Japan and South Korea.

Demand for OLED screens is taking off worldwide, with Apple's newest iPhones one of the biggest drivers. Idemitsu expects output of OLED panels to more than triple between 2017 and 2022. In China, such heavyweights as BOE Technology Group have new production centers in the works.

The Chengdu subsidiary, Idemitsu Electronic Materials (China), will be capitalized at 1.3 billion yen (USD 12.1 million). The production facility will be built on a 15,000-sq.-meter site, with construction expected to wrap up by March 2020. The output capacity and investment amount will be determined later.

With demand shrinking in Idemitsu's core petroleum business, the Tokyo-based company is hoping that production of OLED materials in China, along with the existing sites in Japan and South Korea, can provide an avenue for growth. – Nikkei Asian Review