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2020, a gloomy year with slim prospects of cheer ahead

The interplay between global supply and demand will result in a double-digit glut ratio of TV panel shipment versus TV set sell-in in 2021 compared to 2020, indicating the market’s shortage situation is expected to persist.

While COVID-19 has almost killed several industries, some have experienced a boost because of the pandemic. Global TV shipments, for example, reached a historical high in 3Q20, according to TrendForce. A total of 62.05 million units were shipped over the third quarter of 2020. That marks a 38.8 percent jump over the previous quarter, and a 12.9 percent increase compared to the same period a year earlier.

A number of TV shipments were delayed in 1H20 because of the pandemic, leading to an increase in shipments in 3Q20. Despite the rise, overall, yearly global television shipments will be down slightly compared to 2019 – this year’s 216.09 million units represent a decrease of 0.8 percent from last year.

Historical high for large area TFT display in 2Q20
The industry was worried about large area TFT display shipments decline in 2Q20 based on negative expectation on large area TFT display shipments because of COVID-19 pandemic. However, the result was beyond expectation.

Large area TFT display unit shipment in 2Q20 reached historical record high at 219.6 million with 26 percent QoQ and 17 percent YoY, which is 12 percent higher than previous forecast 196 million in 2Q20, according to Omdia.

Strong IT panel shipments are leading the growth; however, TV display unit shipment growth was not so positive with 1 percent QoQ, –8 percent YoY, because TV brands reduced display procurements and set productions along with each countries’ lockdown policies and big worries about the end-market demand. It brought LCD TV display price erosion in 2Q20.

TV brands and retailers worldwide are suffering from low TV set inventories toward year-end shopping season while the demand looks concrete. It caused LCD TV display price increase in 3Q20.

LCD panel prices keep rallying in September
LCD panel prices continued to move up in September, driven by a ramp-up in demand for TVs, notebooks, and PC monitors, and also by shortages of some key components.

While China-based panel makers have ramped up their capacities recently, their supplies of panels reportedly have been affected by a shortage of glass substrates. According to Sigmaintell Consulting, quotes for 32-inch TV panels went up USD 3 in September; those for 39.5- to 43-inch models edged up USD 5; 50- and 55-inch ones moved up USD 6-7; and those for 65- and 75-inch panels rose USD 5.

However, panel prices will close this year on a decline, expecting LCD panel prices to slip from the start of the holiday shopping season in November. China’s LCD industry appears to now be entering its heyday. Going forward, Chinese panel makers are likely to offer low panel prices to set makers as it is essential to establish an entry barrier as they enter the oligopoly stage. LCD panel price rise is expected to slow toward 4Q20, turning downward thereafter.

In 3Q20, LCD panel prices rose as set makers increased their panel purchases in preparation for end-year holiday shopping (Black Friday in the US, the Gwanggun Festival in China, etc). Major TV set makers’ panel purchases climbed 34 percent QoQ during the quarter, exceeding 50 million units. On an area basis, LCD demand expanded around 10 percent QoQ, exceeding supply growth of about 8 percent QoQ.

However, with low seasonality to be in play on both the supply side and the demand side, the uptrend in LCD panel prices is unlikely to sustain in 4Q20. Although it is difficult to predict the exact timing of the decline in panel prices, they are highly likely to begin falling from the start of the holiday shopping season in November. Expecting the likely 4Q20 drop in LCD demand to surpass the decrease in supply, LCD demand will fall around 5 percent QoQ, with supply growth to narrow 2 percent QoQ.

The global LCD industry appears to have entered an oligopolistic phase centered upon China. This oligopoly is being accompanied by a decrease in the number of LCD makers. In fact, CSOT acquired Samsung Display’s Suzhou LCD facility in August 2020, and BOE acquired CEC Panda in September 2020. Moreover, Chinese players are known to be planning to continue expanding capacity and making new investments with the aim of increasing their M/Ss. Of particular note, the combined global market share (by production capacity) of CSOT and BOE is projected to climb from 34 percent this year to 40 percent in 2021.

In addition, Chinese makers are expected to lower their LCD panel prices, in turn leading to set makers’ appetite for Chinese-made LCDs. Such price cuts are viewed as being essential for Chinese makers if they are to build high entry barriers now that they have reached the oligopoly stage.

OLED sales to rise by 107 percent in 2H20
OLED display panels are expected to face a major bump in sales in the second half of this year. The display technology will see a rise in sales of 107 percent in the latter half. According to TheElec report, a UBI Research analysis, has revealed that the OLED panel shipments will reach 383 million units and sales worth USD 28 billion in 2H20. This marks a significant rise of 66 percent and 107 percent, respectively, when compared to 1H20. It is also indicative of the growing OLED market, which has already surpassed the LCD panels.

In 1H20, OLED shipments arrived at just 231 million units, which marked a drop of 29 percent when compared to the shipments from 2H19. The sales during this period also fell by 36 percent in comparison to 2019, with the overall sales value coming in at just USD 13.53 billion.

China’s market share of OLED panel may surpass that of South Korea in the next 5–10 years. Over the years, Korean enterprises have been developing OLED technology, which highlights a technical gap between Chinese and Korean enterprises. Hence, Korean brands have an absolute advantage in the delivery of OLED panels. At present, the production capacity of OLED panel in midstream is basically controlled by Samsung, LG, Sharp, and JDI.

However, the investment and growth rate of Chinese panel manufacturers are quite considerable. BOE, Shenzhen Tianma, and 3D curved glass lens technology of flexible screen have all deployed OLEDs production line, BOE and other enterprises have started mass production of OLED panel. Industry insiders predict that domestic OLED panel will form a certain scale of mass production in the next 3 years.

There is indeed a technical gap between Chinese enterprises and Korean companies in the R&D of OLED panels. Enterprises such as Hehui optoelectronics and Tianma, which started earlier, are just a little ahead in R&D and have not achieved real mass production. BOE started mass production of OLED screens in 2017; in 2018, Tianma, CSOT, and other enterprises led by BOE expanded investment in Gen 6 of OLED equipment, greatly improving the production capacity of OLED display panel.

It is worth noting that with the continuous innovation and iteration of OLED technology by China’s panel enterprises, China has already led South Korea in the number of new OLED related patents. According to the analysis of relevant industry insiders, at present, China has achieved a leap from 0 to 1 in the field of OLED from basic materials to landing applications.

China’s display industry turns from large to strong
In the electronic information industry, the display industry occupies an important position and is a national strategic pillar industry. It is also one of the few industries in China that has a relatively leading position in the world. Especially in the production of TFT-LCD display panels, China’s production capacity scale is already the world’s largest. There is no doubt that in the future life cycle of the TFT-LCD industry, the number one position will not be shaken.

Ouyang Zhongcan, Academician of the Chinese Academy of Sciences/Director of the Strategic Development Committee of the Institute of Theoretical Physics, stated in his speech that in 2020, the area of ​​TFT-LCD panel shipments in mainland China will account for 53 percent of the world’s total, and it will account for 66 percent of the world by 2023. With domestic panel companies investing heavily in the construction of AMOLED production lines, the current planned production line construction will exceed Samsung’s production capacity.

Although the production capacity of China’s display panels has been increasing year after year, and its share is gradually surpassing the world, it has only achieved the large scale, and there is still a long way to go from the strong. Professor Zhang Baizhe of Tsinghua University pointed out that the scale of China’s display industry is already very large, but it is not very strong. It is strongly reflected in economic benefits. The localization or localization of upstream materials is also an important part of improving efficiency. The biggest profit in the industry chain is raw materials and equipment, but the technical threshold is high and requires a longer-term accumulation. Although the profit margin of the whole machine is also large, there are many sharers (foundries, brand owners, and distributors), especially it is because of severe price competition in China’s terminal products.

At present, only a few display devices companies have truly become leading companies with global competitiveness. The imbalance problem in the development of upstream materials and equipment is relatively prominent, and the ability to resist external uncertain risks is relatively weak, and the industry chain is safe. Insufficient sense of autonomy has not yet formed the competitiveness of the entire industry chain.

Shipments of large-size display devices picking up in Taiwan
Shipments of large-size TVs in the Taiwan market in 2020 are likely to be 10–15 percent higher than the projection of 850,000–900,000 units made earlier this year. TV sales were slow in 1H20, but have rebounded recently as increasing stay-at-home activities have helped spur demand for large-size display products like TVs and projectors for entertainment, video services, remote conferencing, and digital gaming applications.

Brand vendors’ efforts to promote sales by lowering their product prices have also helped ramp up shipments of 55-inch and above TV models. Thanks to the pandemic, AOC expects its TV shipments in the local market to reach 50,000–60,000 units in 2020, with those sized in 55- to 65-inch being mainstream models. Demand for 70-inch models is also picking up. Having launched its new Bravia products in Taiwan recently, Sony also expects its TV shipments to increase significantly in 2020 from the 2019 level. Meanwhile, Epson has teamed up with its uDesign with plans to launch new large-size projectors through a crowdfunding project. It has raised over NTD 8 million (USD 275,560) from 160 investors in its first hour of the fundraising plan.

South Korean manufacturers face increasing difficulties
South Korean display manufacturers’ business conditions are deteriorating on account of price competitive LCD and OLED products from China and the Huawei risk. At present, the South Korean display market is shrinking, the Chinese market is expanding at a rapid pace, and Huawei’s next-generation foldable phones are unlikely to be released within this year due to US restrictions, which will adversely affect the South Korean suppliers.

Even before the Huawei risk, the South Korean suppliers had to struggle due to the massive supply of the cheap LCD panels. They are currently withdrawing from the market and the same is expected to occur in the global OLED panels market.

Chinese display panel suppliers are boosting their investment in the market with their government backing. Even Samsung Electronics and LG Electronics opted for Chinese LCD panels for some of their non-high-end products with the prices of the panels more than 30 percent lower than those of the same products from Samsung Display and LG Display.

BOE dominates large-size LCD panel production capacity
BOE Technology will lead CSOT by more than 10pp in capacity share for large-size LCD panels after outbid the rival to take over the control of two fabs – one Gen 8.5 and another Gen 8.6 – from CEC-Panda LCD Technology.

The capacity gap comes even though CSOT has also managed to sign a deal to take over the control of Samsung Display’s Gen 8.5 line in Suzhou, China. CEC-Panda was forced to sell the two plants due to heavy losses incurred by the two fabs.

With newly added capacities, the two Chinese panel makers are expected to take up the top-two spots for the supply of large-size LCD panels in 2021, after becoming the only two out of the world’s top-six panel suppliers that experienced revenue growth in 1H20.

CSOT will have two Gen 11 LCD fabs in 2021 giving it sufficient capacity for LCD TV panels, while Samsung Display’s Suzhou Gen 8.5 line will enable it to roll out monitor panels for Samsung Electronics and other clients.

In another recent development, BOE has announced its plan to acquire 80.831 percent share in CEC Panda’s Nanjing-based Gen 8.5 fab and 51 percent share in CEC Panda’s Chengdu-based Gen 8.6+ fab. After BOE’s Gen 10.5 fab began operating in 2020, the company now possesses about 21.1 percent of the global large-sized panel capacity.

CEC Panda’s Nanjing-based Gen 8.5 fab and Chengdu-based Gen 8.6 fab accounts for about 4.7 percent of the global total. As such, if the acquisition takes place successfully, BOE will possess more than a quarter of the global large-sized panel capacity, and this share is expected to further increase to 28 percent in 2021.

With the acquisition of CEC Panda, BOE’s market share in large area LCD will be over 25 percent to be a total dominant display maker. BOE will also get the access to the VA (vertical alignment) LCD technology, Oxide TFT technology and strengthen its leadership in LCD TV, Notebook PC, and LCD Monitor market, according to Omdia.

Once CEC Panda’s Nanjing-based Gen 8.5 fab and Chengdu-based Gen 8.6 fab start contributing to BOE’s panel shipment, BOE is expect to raise its market share in the TV panel market from 18.5 percent to 23.3 percent.

Given BOE’s IPS R&D and CEC Panda’s focus on VA panels for TV, the acquisition is expected to both provide a complementary product portfolio for BOE and deepen its partnership with Tier-I brands. In addition, CEC Panda’s Gen 8.6 fab will likely shore up BOE’s lack of 50-inch and 70-inch capacities, expanding its TV panel offerings for those display sizes.

BOE’s acquisition of CEC Panda will cause ripples throughout the display supply chain, since the latter has been operating in close partnership with TPV, which is the largest monitor OEM globally under the parent company CEC.

LGD pushes back planned closure of Gen 7.5 LCD fab
LG Display (LGD) reportedly has decided to push back the date of closing its Gen 7.5 LCD fab to probably the end of 2021 instead of September 2020 as planned, due to a recent upsurge in demand for LCD TV panels. LGD announced previously that it would also stop producing LCD TV panels at its Gen 8.5 line and shift its capacity to making IT applications.

Prices of LCD TV panels have rebounded sharply in recent months, rising as much as 30 percent sequentially in 3Q20 with prospects to go up another 10 percent in 4Q.

The plant closure postponement will little affect supply and demand of TV panels in 2021, as LGD is shifting production focus of the Gen 7.5 fab to 43- and 86-inch sizes instead of 75-inch ones previously. LGD’s LCD TV panel shipments are likely to reach 23-24 million units in 2020, with the volumes likely to fall slightly in 2021 as a result of adjustments to the product lineup at the Gen 7.5 line.

The current tight supply of TV panels is likely to continue into 2021 as Samsung Display is still on track to withdraw from the LCD panel market by year-end 2020 and some panel makers, notably those in China, have slowed down the pace for capacity ramps in the wake of the pandemic.

On the other hand, LGD is looking to become the first in the industry to ship 1 million OLED TV panels in single quarter as it has officially started operating its Gen 8.5 OLED panel fab in Guangzhou on normal scale and it is seeing increased demands for large TVs. It is predicted that the company is looking to ship 2 million panels in 4Q.

According to Omdia, LGD’s OLED TV panel shipments in 3Q20 is estimated to be around 1.43 million units. This number almost doubles the number of LG Display’s shipments in 2Q20 at 652,500 units when the market quickly became stagnant due to the spread of COVID-19. As LGD’s Guangzhou fab, which had struggled to secure proper production yield, started to operate normally since July, it is creating synergy with the company’s Paju fab. The third quarter is an inflection point for LGD’s large OLED panel business.

The company is planning to operate the Guangzhou fab on full scale starting at the earliest. The company is looking to actively target the global large OLED panel market that has started to rebound recently by manufacturing 130,000 panels from both plants. Considering the fact that it is planning to increase the production capacity of the Guangzhou fab to the maximum of 90,000 panels, it will be able to manufacture up to 160,000 panels monthly.

It is expected that LGD’s OLED TV panel shipments will increase even more in 4Q20 as TV manufacturers around the world will look to secure large OLED panels in order to prepare for the end of the year spending season. LG Display’s shipments in the fourth quarter is expected to be 2.01 million units, which is more than 60 percent of the company’s entire shipments in 2019 at 3.29 million units.

Samsung hits a snag in China
Samsung Electronics reportedly plans to close its TV assembly plant in Tianjin, China by November 2020 and will probably sell it, with Amtran Technology showing interest in buying it. The plant produces LCD and QLED TVs. Acquiring the plant would allow the buyer to step into production of QLED TVs for the high-end market.

Samsung’s TV sales have hit a snag in the China market recently as its share in the high-end segment has been cannibalized by local competitors, while the overall TV market in China is also shrinking. Samsung shipped about one million TVs in China in 2019, accounting for a 2 percent share, according to AVC data.

Meanwhile, the company shipped 410,000 TVs in China in 1H20, decreasing 8.33 percent from a year earlier, China Market Monitor has found. Samsung has in recent years been outsourcing the production of entry-level TVs to a number of ODMs, including Amtran, KTC Technology, and BOE VT.

It is now preparing the launch of mini LED backlit TVs in 2021 and the increasing demands of mini LED chips will be supplied by Taiwan and China companies. By quitting the production of LCD display, the company plans to boost its high-end TV products shipment based on diverse display technologies, aiming to exit the low-price competition.

The company has been in discussion with chip makers including Epistar, Lextar, Sanan, and HC Semitek to support the surging demands of mini LED chips. These companies were said to provide samples for Samsung by September this year. In addition to the demand of mini LED chips, Samsung also needs to tackle the issue of transferring yield to achieve its goal of launching mini LED backlit TV next year. Samsung might use COB (chip on board) technology with passive matrix driver plan.

Strong sales for Innolux and AUO in September
Innolux has reported revenues of NTD 26.4 billion (USD 924 million) for September, up 7.8 percent sequentially and 21.4 percent on year. Third-quarter revenues totaled NTD 74.6 billion, up 11.5 percent on quarter and 17.8 percent on year.

Its shipments of large-size panel reached 12.5 million units in September, similar to those shipped a month earlier. For the third quarter of 2020, large-size panel shipments amounted to 37.75 million units, up 12.2 percent on quarter.

AU Optronics (AUO) has registered its consolidated revenue of NTD 26.08 billion (USD 911.9 million) in September, up 7.5 percent on month and 9.2 percent on year. Consolidated revenues in the third quarter of 2020 came to NTD 73.23 billion, up by 15.3 percent sequentially and 4.5 percent annually.

Shipments of large-sized panels were around 11.19 million units in September, down by 2.4 percent from the previous month. In the third quarter of 2020, large-sized panel shipments exceeded 33.83 million units, up by 10.2 percent on quarter and 18 percent on year.

Sharp divests display business into a separate entity
Sharp Corp., is planning to divest its display business and focus on the development of microLED technology. The newly formed subsidiary will become Sharp Display Technology (SDTC). It will be based in Kameyama, a city in northern Mie Prefecture of Japan. Sharp will use the unused areas of the factory to develop and produce microLED display panels.

It will free up some space in the factory by sending LCD equipment at Kameyama to its Hakusan plant. Previously, Sharp acquired the display manufacturing plant of Japan Display Incorporation at Hakusan. The deal, valued at USD 390 million, is said to have helped JDI to pay-off its debts to Apple.

Yearly global TV panel shipment for 2020 is projected to reach 267.53 million units, a 6.2 decrease YoY, while shipment by area is projected to increase by 0.7 percent YoY, coming to 169.6 million square meters, according to TrendForce. The decrease can mostly be attributed to three factors: first, the trend of gradual increases in TV sizes; second, the slowdown in capacity expansions for panel fabs; and finally, the continued high demand for IT panels, the manufacturing of which crowded out fab capacities for TV panels. Furthermore, due to the decreases in TV panel capacity and TV panel shipment, the glut ratio of TV panel shipment versus TV set sell-in this year is projected to reach 24 percent, which is lower than the 2019 figure of 31 percent, thereby generating an upward momentum for TV panel prices.

Although LG Display has deferred the closure of its South Korea-based TV panel fab, LGD’s total TV panel capacity in Korea accounts for only 3 percent of the global total from all panel makers. As such, output from LGD is unlikely to change the present shortage situation in the TV panel market. Furthermore, the lower-than-expected pace at which certain panel makers have been increasing their production capacities in 2H20 is expected to result in a mere 1.1 percent HoH growth in overall TV panel capacity by area compared to 1H20.

On the other hand, the cyclical upturn in TV sets has ramped up the demand for large-sized display products, gradually pushing the average TV panel size towards 48.7-inch. However, given the manufacturers’ limited capacity expansion, the supply of TV panels has remained tight, and the glut ratio of TV panel shipment versus TV set sell-in is projected to decrease to about 9 percent in 2H20. That means TV panel prices can rise by up to 30 percent and 10 percent QoQ on average in 3Q20 and 4Q20, respectively.

Although CSOT and HKC are expected to expand their panel capacities with the addition of the T7 fab for the former and the Changsha-based H5 fab for the latter in 2021, TV panel supply is still projected to undergo a 4.1 percent decrease YoY next year, reaching 256.64 million units, due to the closure of SDC’s Korea-based production lines this December and due to the fact that most panel makers have realigned their panel output to primarily IT products and ultra large-sized TV panels by now.

In terms of TV panel shipment by area, total shipment is projected to increase by 3.5 percent YoY in 2021, reaching 175.5 million square meters. On the other hand, the average size of TV panels will likely further increase to 50-inch, while the interplay between supply and demand is expected to result in a 20 percent glut ratio of TV panel shipment versus TV set sell-in in 2021 compared to 24 percent in 2020, meaning the market’s shortage situation is expected to persist. TVJ Bureau

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