China’s lead over Korea in the display industry is likely to expand as 12 Chinese display manufacturers will set up a total of 38 new factories, 19 for large panels and another 19 for small and mid-sized panels, by 2022. LG Display and Samsung Display, the only two Korean display manufacturers, are expected to have fewer than 20 new factories in the same period.
“China’s display market share is expected to reach 58% in 2023," said David Hsieh, a director at IHS Markit during the Korea Display Conference 2018 held at El Tower, Yangjae-dong, Seoul on Nov. 6. “Its market share will be overwhelming number one and more than double that of Korea."
Now China has slightly more display production capacities than Korea, but the gap between the two will widen later. "Some analysis says that China is concentrating only on mid- and low-priced displays, but that is not true," Hsieh said. "Chinese display makers are developing the latest technologies such as OLEDs and penetrating the market quickly."
IHS Markit diagnosed that Chinese display makers were putting pressure on their Korean competitors while rapidly expanding state-of-the-art factories. The 12 manufacturers, including BOE, CSOT, CEC Panda, HKC, CHOT, Tianma, and Ever Display, will secure 19 factories for eighth- and 10.5th-generation large panels and another 19 for 5.5th- and sixth-generation small- and medium-sized panels.
In the display industry, mother glass sizes determine generations and technological levels. Thus, the Chinese display industry will have many technologically advanced factories of large panels which are the eighth generation or later and small and mid-sized panels which are the 5.5th generation or later. On the other hand, it is forecast that LG Display and Samsung Display will have fewer than 20 such factories.
Chinese companies’ plans include many factories for OLEDs, a sector where Korean companies have technological superiority over Chinese companies. This means that Chinese companies began to make a full-scale foray into the OLED market. BOE and China Star are planning to establish large OLED panel factories. Currently there is only one factory for large OLED panels, which is owned by LG Display.
Even in the small to medium-sized display sector, Chinese companies are expected to have 12 OLED factories. "With the help of Chinese government subsidies, bank loans and joint ventures, BOE bore only about 10% of the total investment in its new 10.5th-generation display panel facility," Hsieh said. "This is a typical investment method of Chinese companies and it helped China lay the foundation for fast and stable growth.”
The analyst also said, “Aggressive investment by Taiwanese companies such as Foxconn, Innolux, Sharp and SDP which formed the K Group is also a threat to Korean display companies."
IHS Markit predicted that Chinese and Taiwanese display makers’ aggressive investment would create a chronic glut in the display industry. According to IHS Markit’s analysis, demand and supply grew 7% and 3%, respectively, in the display market last year, but this year, supply grew 10%, faster than 7% growth in demand. This situation is expected to lead to a 6% jump in demand and an 11% jump in supply in 2019, a 4% rise in demand and a 7% rise in supply in 2020 and a 1% increase in demand and a 4% increase in supply in 2021.
"Excess supply will continue to accumulate next year, weighing on display makers. By 2025, demand will continue to record 0% growth and about 4% growth in terms of total sizes and units, respectively, I think," said Park Jin-han, a director of IHS Markit
Some experts said that the display market was showing a cycle more difficult to predict. The panel price cycle has gradually narrowing from the year unit to the quarter unit. In particular, the price rise period has been shortened and the price drop period has elongated. "The display market must be predictable as investment in the display industry requires trillions of won. Korean companies are now facing a lot of difficulties," said Chung Yoon-sik, a director of IHS Markit. "China is waging a price war in the low panel market. But if and when they take control of the display market, they will set panel prices at their discretion. Korean companies should continue to decisively invest in new technologies such as Quantum dot OLEDs and micro LEDs while striving to expand the large OLED market.”