AU Optronics (AUO) will begin production of 1.6-inch AMOLED panels for use in smart wearable devices in the fourth quarter of 2014, according to Taiwan-based supply chain makers.

AUO has been developing small- to medium-size OLED panels since 2011, and it has supplied 5-inch HD and 5.5-inch Full HD panels used in smartphones for China- and Taiwan-based vendors, the sources indicated.

Addressing demand for small-size OLED applications, Japan government-sponsored Innovation Network Corporation of Japan (INCJ), Sony, Panasonic and Japan Display will jointly invest JPY20 billion (US$196 million) to set up an OLED panel production line in 2015 and kick off volume production in 2018, the sources noted.

Samsung Display currently has 90% of the gloabl market for small- to medium-size OLED panels, but AUO believes the market may take off only when there is competition from more players.

AUO had previously expected the small- to medium-size OLED market to take off in 2012. As demand for smart wearable devices has emerged, there is expected to be considerable demand for small-size OLED panels in 2015, the sources noted.