Even though TV panel makers increased the production shares of large-size panels and ultra HD panels during 2017, panel shipments grew by just 1.3 percent.
The global LCD TV panel shipments increased quarter-by-quarter in 2017, with the first half showing less momentum for holiday sales due to the high prices, but with shipments rebounding in the second half as prices declined and TV makers prepared for the year-end sales, according to research firm WitsView.
In the global TV panel shipments ranking for 2017, LG Display (LGD) came at the first place with a shipment of around 50.85 million pieces last year, a decrease of 3.9 percent. LGD expanded its production capacity in the Guangzhou fab for 50K sheets, but in terms of panels size, increasing the production capacity share of 65-inch and greater panels has been the trend. Particularly, LGD shipments of 65-inch and 75-inch panels have increased significantly by 38.5 percent and 132.7 percent respectively, indicating that LGD has been making efforts to retain its market share in the large-size TV panels sector before BOE’s Gen 10.5 fab enters mass production.
BOE deliberately slowed down its 32-inch TV panels production growth in 2017, so the shipments of this size increased by only 0.4 percent, totaling 43.81 million pieces. But its total shipments climbed to second place for the first time as Samsung Display (SDC)’s closure of the L7-1 fab influenced its production. As BOE’s Gen 8.5 fab in Fuqing entered mass production in 2Q17, BOE’s shipments of 43-inch TV panels grew remarkably by 247.6 percent last year.
Innolux’s Gen 8.6 fab entered mass production in early 2017, but the yield rate and output were less than expected in the first half of 2017. In the second half, high pricing of panels led to shrinking demand, resulting in Innolux’s slow-moving and excess stocks. In addition, Innolux announced to enter the TV assembly market, which made its clients more conservative in making orders. Fortunately Innolux figured out the solutions of pricing and stock problems, and ended up with shipments of 41.8 million pieces, an increase of 0.2 percent, ranking the third.
SDC’s shipments saw a substantial decline of 15.4 percent last year since the closure of its L7-1 fab. Its overall TV panel shipments turned out to be 39.6 million pieces, the highest decline among the six major panels makers. Although its shipments have dropped out of top 3, SDC has improved capacity utilization by simplifying its product mix, and has invested in production equipment of UHD and large-size panels to increase the value of its products.
As for product portfolio, SDC took initiatives to develop UHD panels, whose proportion came to 54.6 percent among all of SDC’s products, and also remained a major supplier of large-size panels (55-inch, 65-inch, and 75-inch). Particularly, its market share of the 65-inch sector was as high as 36.3 percent, showing definite advantages over its competitors.
China Star Optoelectronics Technology (CSOT) kept increasing the shipments after the capacity of the second phase of its second Gen 8.5 fab was expanded to 140,000 sheets. CSOT’s final shipments recorded 38.64 million pieces, an increase of 16.8 percent compared with the previous year. Particularly, 55-inch panels recorded a 19.4 percent shipment growth, as CSOT’s capacity expansion came mainly from this size. As for the growth by shipment area, CSOT recorded a 19.6 percent YoY increase, the highest among the six major panel makers.
TV panel shipments for AU Optronics (AUO) in 2017 came to around 27.21 million pieces, 0.1 percent down from the previous year. AUO continued to optimize its product portfolio and increased the proportion of large-size panels, so it finally recorded a 5.1 percent growth of shipment area. In addition, AUO also put its focus on increasing the proportion of UHD products, reaching 44 percent of all its products, the third highest number following LGD and SDC.
Looking at prospects for 2018, Iris Hu, research manager of WitsView, noted that panel makers will continue to increase the production shares of large-size panels and Ultra HD panels to boost the revenue and profit. “The penetration rate of ultra HD panels is expected to reach 42 percent this year, an increase of 7.4 percentage points compared with 2017,” she said.
“Regarding the new production capacity, BOE’s Gen 10.5 fab produces mainly large-size TV panels (65-inch and 75-inch), but CEC’s two fabs still put their priorities at middle-size ones (32-inch and 50-inch). Meanwhile, replacement of CRT TV sets with 32-inch and 23.6-inch LCD ones is still ongoing in emerging markets, making the average panel size grow slower to 45.8-inch, only 1.3-inch up from 2017. Overall speaking, global TV panel shipments this year will have chance to hit a second highest number in history, reaching 269.49 million pieces, an annual increase of 2.2 percent.”
India to Foray into Panel Manufacturing
In 2016, Sterlite Technologies had announced its plans set up India’s first LCD manufacturing facility in Maharashtra, at an investment of `67,000 crore (USD 10 billion) in five phases through its company, Twinstar Display Technologies. Panel FAB is expected to begin production by 2018, with full production over next 10 years. The firm would try to make India a significant export hub of display units with the setting up of Panel FAB.
China Set to Gain Lead in Flat-Panel Production
China is expected to replace South Korea as the world’s largest flat-panel display producer in 2019. The nation has invested USD 120.6 billion in flat-panel display production lines, with investment in LCD panels production exceeding USD 79.33 billion. Revenue from the country’s display industry topped USD 31.73 billion last year, and shipments of display panels reached around 57 million square meters in the first half of 2017, accounting for one-third of global shipments, second only to South Korea.
With production lines reaching mass output in the fourth quarter, the shipment of display panels will continue to grow. The prices and shipments of traditional LCD panels will rise this year. China will dominate flat panel display (FPD) manufacturing by 2018, taking up 35 percent of the global market.
Downward Trend in South Korean and Taiwanese LCD Market
South Korea that has long been the world’s largest LCD TV panels producer is ready to yield its rank this year to China, resulting in decreased LCD panels capacity share. The region’s share is projected to slide down to third place in the 2017 capacity share ranking with 28.8 percent (losing 5.3 percentage points), which is a significant drop from its leading share of 34.1 percent in 2016.
Major display producers are either closing LCD fabs or lowering the capacity. SDC closed its Gen 7 fab L7 1 and both SDC and LGD have lowered their Gen 5 capacity. With South Korean panel-makers lowering their production capacity, the global production capacity in area for large-size panels is estimated to reach 246.6 million square meters, representing an annual increase of just 1.3 percent. It adds that right now, 2017’s capacity area growth rate is also the lowest within the recent 2–3-year period. Over the next 3 years, however, it expects six new Gen 10.5 fabs to come into operation, and that capacity area growth will again take off. However, China has aggressively increased its investment in the LCD TV industry for years so the turnabout has been anticipated. Thus, the gap between South Korea and China would widen.
The title change also comes as South Korean display makers have shifted development and production focus to the more lucrative organic light-emitting diodes (OLEDs) and next-generation display technologies, such as ultra high definitioin (UHD) and 55-inch and larger products, to gracefully pull out of from the overcompetitive LCD market.
The large-size LCD panels market has reached maturity, and no significant growth is expected for Taiwan’s makers in 2017. Taiwanese LCD panel makers face growing headwinds from declining prices and growing competition, with players Innolux and AU Optronics suffering major slowdowns in 2017.
Flat Panels Demand to Grow by Area in 2018
Global demand for FPDs by area is forecast to grow 7.2 percent to 210 million square meters in 2018 compared to 2017, according to IHS Markit. That will be the biggest annual growth since 2014. Growth in demand will be mainly driven by migration to large displays, declining panel prices, and high expectations for a recovery in the global economy.
As Gen 10.5 fabs are due to start operation in the first half of 2018, supply of super large TV panels, including 65- and 75-inch products, is projected to grow.
The flat panel TV market is also expected to see a significant rise in replacement demand, following the transition to digital broadcasting from analogue signal that started in late 2000s. The global flat panels market will also get a boost from higher demand for new and larger TVs ahead of the 2018 PyeongChang Winter Olympics scheduled in February and the 2018 FIFA World Cup in Russia in June. In addition, the ongoing recovery in the global economy bodes well for the panels demand. Global gross domestic product (GDP) is forecast to grow 3.2 percent in 2018, following 3.1 percent in 2017 and 2.5 percent in 2016, according to IHS Markit. In particular, the economic recovery in North America and emerging markets, such as India, Brazil, and Russia, is expected to be stronger than the previous year. A rise in nonferrous metal prices, often a precursor to an economic recovery, is another positive sign.
Unlike the strong gain in demand by area, the growth in the global flat panels market in value was however, restrained by the fall in the panels price in the second half of 2017. The panel demand by value is forecast to rise 1 percent to USD 126 billion in 2018 from 2017.
Gen 10 and Larger Fabs to Account for 26 Percent of Large-Area Capacity
With BOE, China Star, LGD, and Foxconn expected to build seven new-generation 10.5 factories by 2020, Gen 10 and larger fab flat panel displays (FPD) capacity is expected to grow at a CAGR of 59 percent between 2017 and 2022. The majority of all new incremental capacities for producing FPD televisions and other large area applications will be added at Gen 10.5 in the future, according to IHS Markit. The new Gen 10.5 fabs will install 735,000 substrates per month of capacity by the end of 2022. This is enough capacity to produce more than 60 million 65-inch televisions a year.
Gen 8 and 8.6 fabs that currently account for the bulk of large-area dedicated supply were designed to produce 55-inch and
58-inch panels, respectively, but suffer from inefficiency at bigger sizes. Now with premium televisions rapidly moving to larger sizes as prices fall, FPD makers are racing to build Gen 10.5 factories that are highly optimized for 65-inch and 75-inch panels. Based on panel makers’ public announcements, total project costs of a Gen 10.5 LCD fab with a monthly capacity of 60,000 substrates will range between USD 3.4 billion and USD 6 billion, varying by maker and process to be adopted. To help finance such expensive factories panel makers in most cases are turning to regional governments for support.
Outfitting these fabs is creating unprecedented opportunities for the supply chain that supports them, particularly for equipment makers. FPD equipment spending will reach a record high of more than USD 20 billion in 2018, of which new Gen 10.5 factories are a major contributing factor. As the many new Gen 10.5 factories begin to ramp-up, 65-inch and larger panels prices will fall continuously, about 5 percent annually. Subsequently, demand for this high-end segment of the FPD market is forecast to expand 2.5 times to approximately 40 million units in 2022.
65-inch and larger panels are predicted to be one of the fastest growing segments of the FPD market over the next 5 years. Even so, with so many new Gen 10.5 factories being built, capacity is forecast to surge ahead of demand. After 2020, smaller than Gen 10 capacity is expected to start to decline as legacy factories are shuttered. The 735,000 substrates per month of Gen 10.5 capacity in the pipeline will not only dramatically increase FPD capacity, but will also shift industry leadership toward to the four companies that are building them.
2018 Will See Uses of 8K Resolution Display
As the demand for super-large TV displays grow, the need for higher resolution is set to increase, seeing the first uses of 8K display in 2018. While UHD panels are estimated to account for more than 98 percent of the 60-inch and larger display market in 2017, most TV panel suppliers are planning to mass produce 8K displays in 2018. The 7680×4320 pixel resolution display is expected to make up about 1 percent of the 60-inch and larger displays market this year and 9 percent in 2020. As UHD has rapidly replaced full HD in the super large-size TV displays market, panel makers are willing to supply differentiated products with higher resolution and improve profit margin with premium products.
Innolux started developing 8K panels in 2017 and produced its first ever 8K LCD TV display (60 Hz, 65-inch) in the fourth quarter of 2017. The displays will be supplied to Sharp TV and Chinese brands in the beginning. Meanwhile, Sharp has also
mass produced its first 8K LCD TV displays at 70-inch in the last quarter of 2017 to support the Sharp TV brand in China.
Looking at the 8K display roadmap in 2018, it appears that Samsung Electronics and Sony are driving the market at this time. They plan to release their flagship 8K TV models in 2018. Samsung and Sony will consume almost all 120 Hz 8K panels from Innolux, AUO, and SDC, with sizes varying from 65-inch to 75-inch and 85-inch. BOE and CEC-Panda are now planning to develop 8K LCD TV panels in the second half of 2018 and taking on a differentiation strategy, LGD will likely focus on developing OLED 8K panels in the future.
Based on current plans, panel makers in the early stages of development will mostly develop 60 Hz 8K displays based on a-Si technology, and those in the next stages are also likely to develop 120 Hz 8K displays based on oxide technology. The latter has advantages, such as a better aperture ratio and lower power consumption.
Correction in LCD TV Panels Demand in Q1, 2018
Demand for LCD panels from South Korean and Chinese TV makers was strong in the fourth quarter of 2017, but implementation of their panels purchasing strategies for the first quarter of 2018 may result in a correction as demand expectations change. While some TV brands are expected to maintain their panels purchasing plans, others are forecast to reduce demand in the first quarter as it is a traditionally slow season and some demand was pulled into the last quarter.
South Korean TV makers are expected to reduce LCD panels purchasing volumes by 3 percent in the first quarter of 2018 compared to the previous quarter, or to increase by 1 percent compared to the same period last year. There is risk of a correction in demand as their panel purchasing plans get underway given that a sufficient supply chain buffer is already factored in for the first quarter. These manufacturers will likely continue to use their plans as a negotiating tactic for more competitive prices. This has been one of the most critical swing factors for the LCD panels supply and demand. China’s top TV makers are forecast to cut their LCD panel purchasing volumes by 30 percent in the first quarter of 2018 over quarter, and 5 percent over a year.
Due to a coming slow season, the bargaining power seems to be with TV makers. However, uncertainties about a stable supply of feature-rich premium and larger panels will have the top-tier TV brands concerned. Chinese panel makers have yet to prove that they will actually start mass-producing
65-inch LCD panels from the world’s first Gen 10.5 fabs in the first quarter.
The top-tier TV brands will want to make sure that they can secure sufficient panel supplies of 65-inch and larger panels. At the same time, they also seek to attain better bargains on large and ultra-large panels in 2018 and beyond. Panel makers, however, have not agreed to offer more price concessions. Some panel makers are scheduled to remodel fabs in the first quarter and this will eventually cause an unstable supply of LCD TV panels, particularly for larger sizes. All this points to the likelihood that the TV panel market will see chaotic swings in demand in the first quarter of 2018.
Based on market research conducted by TV Veopar Journal in February 2018.