LCD Oversupply
Beginning next year, Chinese display makers will start the full-fledged operation of large-sized tenth-generation or later liquid crystal display (LCD) panel factories. As a result, some experts say that an increase in global flat panel display production capacity may extend the current LCD oversupply period.
According to market researcher IHS Markit on December 7, China's large display makers such as BOE which is the largest display manufacturer of China, China Star (CSOT) and Foxconn, will put seven 10-generation LCD factories to work one by one from next year to 2020.
As a result, IHS Markit predicts that global LCD panel supply growth will reach 59% per annum on average over the next five years to 2022. The proportion of 10G or later LCD panel production will also climb from 4% this year to 26% in 2020, according to IHS Markit. Purchases of flat panel display production equipment are also expected to exceed US$ 20 billion next year.
It is forecast that the LCD oversupply which began at the end of 2015 is expected to continue for at least five years. The price of a 55-inch LCD panel which rose above US$ 228 in 2015 dropped to US$ 200 in 2016 and then sank to US$ 180 in December of this year, according to market research firm WitsView.
As LCD panel prices have tumbled due to increased supply, the premium TV market is also moving rapidly towards large-screen models. Display panel manufacturers are competing to build a 10.5th-generation plant optimized for 65-inch and 75-inch displays. As 8th-generation and 8.6th-generation plants which account for the majority of large-area LCD production lines are optimized to produce 55-inch and 58-inch panels, respectively, they are less efficient at producing larger LCD panels.
BOE started the full-scale operation of its 8.5th-generation production line this year, and will start running its 10th-generation plant in the first half of next year. China Star (CSOT) and CEC-Panda are also in the process of building large LCD production lines. In the third quarter, BOE of China dethroned LG Display which has been at the top spot for 31 consecutive quarters while ranking first with a market share of 21.7% (based on shipment) in the 9-inch or larger display panel market.
Currently, LG Display is enjoying 90% of its total sales in the LCD sector and making its profit structure centered on the large organic light emitting diode (OLED) business. However, the company already missed investment timing for nearly half a year such as a delay in investment in the establishment of an 8G OLED factory in Guangzhou in China. Thus, a lot of attention is being paid to how LG Display will tackle this matter.
“As 10.5th-generation plants will be put into full operation, prices of 65-inch or larger panels will slide more than 5% each year, while demand will increase 2.5-fold to 40 million units per year,” an industry observer said. “65-inch or larger TVs will become the mainstream in the future.”