China on the fast track

China on the fast track

Tier-III brands are expected to play a big role in digesting the leftover 65- and 75-inch panels that BOE and ChinaStar are unable to offload to their current big-name customers.

In 2019, China’s front-end FPD-production capacity has risen to more than 153 million square meters or 46 percent of the total, compared to 24 percent for both South Korea and Taiwan, according to the AMOLED and LCD Supply Demand & Equipment Intelligence Service by IHS Markit.

With five Gen10.5 factories expected to be in full production by 2023, China will control FPD production, with 62 percent of worldwide capacity, almost four times as much as any other region.

“Chinese companies originally focused on assembling modules and sets, but over time they’ve climbed the display value chain to full LCD production – and now they’re aggressively pursuing OLED manufacturing,” said Charles Annis, senior director at IHS Markit, “BOE, for example, produces high volumes of almost every size and type of LCD, and is shipping millions of flexible AMOLED smartphone panels monthly from its B7 Chengdu factory. On top of that, the company is either producing or has plans to pursue alternative technologies, such as OLED on silicon, electrophoretic displays (EPDs), white OLED (WOLED) and inkjet-printed OLED TVs, and augmented-reality/virtual-reality displays. BOE’s goal is to lead not only in display production, but also in technology.”

BOE becomes world’s largest FPD manufacturer in 2019

BOE in 2019 will surpass South Korea’s LG Display to become the world’s largest FPD supplier. BOE’s share of FPD-production capacity in 2019 is projected to rise to 17.7 percent, edging out LG Display for the first time ever. BOE in 2019 will expand FPD production capacity to more than 59 million square meters as it ramps up production at its B9 Gen 10.5 LCD factory and its B11 Gen 6 flexible AMOLED fab.

With plans to build even more LCD and AMOLED factories, BOE will solidify its leadership position in the coming years, with more than 78 million square meters of capacity and a 21-percent market share in 2023, 30 percent more than any other manufacturer. This represents rapid progress from just a 10-percent market share four years ago, with capacity rising at a compound annual growth rate of 15.7 percent during the period from 2015 through 2023.

BOE’s growth story epitomizes China’s rapid rise toward becoming the world’s top display manufacturing region. Before 2011, China’s front-end FPD-production capacity was negligible, while Korea accounted for almost 50 percent of the global market. However, backed by wide-ranging central government policy support and regional government financial assistance, China rapidly increased its share to 23 percent by 2015.

China’s regional rivals focus on AMOLED

Korean and Taiwanese panel makers are facing challenges trying to compete with the overwhelming capacity advantage that China now possesses and are rearranging their businesses to concentrate on unique and higher-end applications.

For Korean suppliers, this means focusing on AMOLEDs, where they still maintain considerable advantages in both capacity and manufacturing technology.

Samsung still holds a 70-percent share of mobile AMOLED capacity, and is expected to produce almost 90 percent of all non-TV applications in 2019. This compares to BOE’s current 13 percent of capacity and 5 percent of production. Even in 2023, Samsung is forecast to maintain a 43-percent share of AMOLED capacity, while BOE will rise to 21 percent.

LG Display remains the only company that is mass-producing OLED televisions. Even with many demonstrations by other panel makers, none is expected to commercialize their OLED TV technologies before 2021 at the earliest.

“Despite still playing catch up in some advanced FPD technologies, China’s and BOE’s dominant position in the FPD industry is already solidified,” Annis said, “At this point, not even politics and severe trade friction between the US and China are likely to alter this fact.”

BOE and ChinaStar

BOE and ChinaStar, two of China‘s biggest display-panel manufacturers are in the midst of implementing changes that will likely have significant effects on the 65- and 75-inch TV supply chain, while also incurring challenges resulting from those very impacts, as shown by the latest analysis from the IHS Markit TV Display & OEM Intelligence Service.

For BOE, the substantial ramp-up of its Gen 10.5 fab in Q2’18 made the Beijing-based manufacturer the world champion in shipments of 65- and 75-inch TV panels during last year’s final few months. Now with the company’s plans to push Gen 10.5 capacity to 100 percent, shipments of the two large TV panels are expected to expand sizably.

For its part, Shenzhen-based ChinaStar started glass substrate inputs at its Gen 10.5 fab, also known as T6, in January 2019, with commercialized shipments following two months later in March. ChinaStar manufactures 43- and 65-inch TV panels at the T6 fab, with the 75-inch slated for production beginning the middle of 2019.

The compelling numbers from both BOE and ChinaStar cannot be overlooked. For years, hegemony of the 65- and 75-inch was claimed by Korean titans, Samsung Display and LG Display, alongside Taiwanese makers AUO and Innolux, with both Japan’s Sharp and the Gen 10 fab of Hon Hai-Sharp joint venture SDP owning the 60- and 70-inch space. The hefty production of BOE and ChinaStar, however, has now reshaped the television panel-supply chain for the 65- and 75-inch sizes, and their production is also impacting the activity of original equipment manufacturers (OEMs) in those panel sizes.

The sufficient supply and low cost of both large panels are also facilitating the entry of other players into the market for larger screens. These other players now able to penetrate previously inaccessible markets include smaller TV and Tier-III brands, together with their OEMs and original design manufacturers (ODMs). Xiaomi TV is a good example of a rapidly rising brand, with Huawei also projected to join the group in 2019.

This year, BOE is targeting shipments of 5 million units of the 65-inch and 3 million units of the 75-inch, while ChinaStar is aiming to ship 2 million units of the 65-inch and 800,000 units of the 75-inch. Together, both display manufacturers will ship in 2019 a total of 7 million units of the 65-inch and nearly 4 million units of the 75-inch.

But who is the customer? While BOE and ChinaStar have succeeded in expanding capacity and have substantially boosted their manufacturing output, an important consideration remains: the customer – in this case, the TV manufacturers that must firstly qualify for their own use the panels made by BOE and ChinaStar; and following qualification, must then design the panels into their respective TV models – a process known in the OEM and ODM industry as design-in. Despite the large production numbers of BOE and ChinaStar, adoption of their panels was never a given, and the record must be examined to determine the customers of the two Chinese manufacturers.

Who is buying the 65-inch panel from BOE? The answer: Four of the global top 5 brands, including Samsung, LG, Hisense, and Sony. The lone holdout from the top 5: TCL, which is not interested in purchasing the 65-inch from BOE because ChinaStar, a member of the TCL conglomerate, is about to mass-produce the 65-inch with the ramp-up soon of its own Gen 10.5 fab.

Meanwhile, BOE is also shipping a substantial amount of the 65-inch to BOE VT, its own subsidiary, as well as to China New Century (CNC), a China-based white-box TV OEM and ODM, adding to its total client shipments. The chart below shows BOE’s shipments of the 65-inch TV panel to its various customers.

Who, then, is buying BOE’s 75-inch TV panels? The same companies that are customers of BOE’s 65-inch panel. The exceptions: TCL again, as well as Sony. But unlike the 65-inch space, BOE has a tougher job in the 75-inch panel segment, where it will be in competition with ChinaStar as the latter starts production of the 75-inch at its Gen 10.5 fab.

Moreover, panel makers like AUO and the two Korean giants would not be yielding the 75-inch market to BOE easily. At the start of the year in January, BOE started shipping the 75-inch to customers like LG Electronics, Hisense, Samsung VD, Skyworth, and the white-box or Tier-III market.

Given all these factors, price competition on the 75-inch among TV panel manufacturers is likely to be harsh this year, IHS Markit believes.

For all their aggressive shipment targets in 2019, BOE and ChinaStar have not gained enough design-in customers. This means that Tier-III brands – with their more relaxed qualification criteria – will be expected to play a big role in digesting the leftover 65- and 75-inch panels that BOE and ChinaStar are unable to offload to their current big-name customers.

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