Former Innolux chairman Jyh-chau Wang, with nearly 30 years of experience in the flat panel industry, has recently been appointed by Foxconn Electronics chairman Terry Gou to head the company’s display business, dubbed “K Group,” to steer the development of the display business of the entire Foxconn Group.
Wang’s work is understandably immense. The Foxconn Group is currently second in the global flat panel industry in terms of production capacity and is still expanding its capacity including the construction of a 10.5G line in Guangzhou and the ongoing USD 300 billion (USD 9.7 billion) investment projects in Wisconsin. Wang revealed his insights into the prospects of the flat panel industry, the global deployments of the Foxconn Group and the development of new LCD technologies.
Q: What is your feeling now that you have stepped down from the position as chairman of Innolux?
A: I have been in the flat panel industry for 28 years. I stepped into the display industry in 1990 when I joined UniPac Optoelectronics, which was merged with Acer Display Technology to form AU Optronics (AUO) in 2001. However, I switched my career to Chi Mei Optoelectronics (CMO) and stayed there even after it was merged and renamed Innolux in 2009.
Indeed, there are lots of mixed feelings, as I have witnessed the rise and fall of the TFT LCD industry in Japan, Korea, Taiwan and now China. I think that the display industry are harder to operate than other industries because it is a capital- and technology-intensive industry, but the rewards are not high.
Frankly speaking, the gains from the advancement of the flat panel industry during the past years have been distributed to end-device users through continuous price reductions of end-market devices including notebooks, monitors and LCD TVs.
But the earnings posted by upstream supply chain suppliers, flat panel makers and system integrators have not been as high compared to those earned by semiconductor firms or other manufacturing industries.
Before the entry of China-based competitors in the panel industry, makers, particularly those in Korea and Taiwan, had been keen to made investments into advancing the industry. Nevertheless, the pace of expansions was too fast, resulting in sharp reductions of panel prices, as well as end-market devices.
The industry is set for a new round of competition now that China’s makers have begun to ramp up their capacities. I think only those who have strong competitiveness will survive, and the rest will be marginalized.
Q: But do you agree with BOE Technology chairman Wang Dongsheng’s prediction that most of sub-7G fabs would be retired by the end of current round of competition?
A: You have to look at this issue from different levels. Generally, the older-generation LCD fabs are being utilized to produce small- to medium-size panels, while the advance-generation ones are for producing large-size panels. With the average size of TVs becoming larger and larger, flat panel makers tend to build 10.5/11G lines to roll out large-size panels for cost advantages.
The unit cost of handset panels made at advance-generation fabs will be also more competitive than that produced at smaller or older-generation lines, thanks to their high production volumes. But not every client needs panels in large quantities. You have to deal with smaller orders differently, such as running production for small orders from one client simultaneously with products from other clients to avoid wasting glass substrates, which are very expensive.
In the 5G and IoT era, devices serving input functions will not be confined to keyboards but will also include touch or voice-controlled devices for the display. I believe that display products will be the best human-machine interface and the style of display devices will become more diverse along with ever expanding applications.
Under such circumstances, the older-generation fabs will be able to survive if they can find product segments suitable for their production. For example, Innolux’s 3.5G lines are still operating at full capacity. We are utilizing one of our older fabs to roll out the world’s first flexible fingerprint sensors. There is still room for further development of smaller, older fabs.
Q: You are now leading Foxconn’s entire display business, the K Group. Can you reveal what is the direction of its future development?
A: We are still continuing to invest in expanding our flat panel capacity with the ongoing efforts including the construction of a 10.5G fab in Guangzhou, China and an advanced 6G IGZO fab in Wisconsin.
Each display business unit under the Foxconn Group is operating independently and each one has its own strength. Sharp is strong in R&D and boasts a number of innovative technologies. But the production cost at Sharp is higher because its production facilities are a bit older. Even so, we still can generate profits if we can utilize Sharp’s technologies with high-efficiency production support.
The task of leading the K Group is to enable each business unit to show their full strengths and advantages. But in my previous position as chairman of Innolux, I could not be in contact with every business unit due to anti-trust concerns. That’s why I had to leave my Innolux post in order to lead the whole group and to do the job within the legal limits. While we are still not allowed to talk about matters concerning individual clients and prices, individual companies of the group can sign cross-licensing and cooperation agreements so as to optimize the technology and manufacturing advantages of each company to enhance the competitiveness of the whole group.
For this purpose, we are still making efforts to lower production costs to further enhance our competitiveness. This is the basic work of our first-phase project and we are still at this stage. As for the second stage, we will look at how to improve product mix and create added value for products. For the third stage, we will aim to help raise the price/earnings (P/E) ratios the stocks of related companies and the return on equity (ROE) for shareholders.
Q: What is the progress of the construction of your 10.5G line in Guangzhou and the plant in Wisconsin?
A: The Guangzhou 10.5G fab is slated for volume production in September 2019 targeting production of TV panels in 43-, 65- and 75-inch sizes. We believe that prices of TVs in the end market will become even cheaper as more 10.5G lines come online later.
So I think it is a critical task for flat panel makers to increase the value of TVs, not only through the improvement of screens but also the adoption of more functionalities and values such as AI and voice-control.
Since Sharp is proficient in IGZO technology, we have invited a team from the company to help build the 6G plant in Wisconsin. This plant is designed to focus on production of niche-market products and also display devices for military, automotive, aerospace and medical applications. The first-phase construction of the plant is to have a monthly production capacity of 30,000 substrates with volume production to kick off in 2020. The plant will be further expanded in accordance with our roadmap and market conditions.
Our original plan was to build a 10.5G fab in Wisconsin but we decided to scale back to a 6G line on concerns of production costs and also product mix because it is not cost-effective to produce niche-market products from a 10.5G line. The 6G IGZO plant will enable us to develop more advanced display products, such as Advanced Technology on Panel (AToP) products.
Q: Does Foxconn have plans to build new LCD fabs in other places, apart from the 10.5G fab in Guangzhou and the 6G line in Wisconsin?
A: India could be the next one. I have been there to evaluate the possibility, but I think India not yet ready for the establishment of LCD plants. With a total population of over 1.3 billion, India boasts a vast domestic market. Should the trade protectionism arises in India, we might have to build LCD plants there.
Q: How do you assess the competition among various display technologies including a-Si, OLED, LTPS, IGZO, mini LED and micro LED?
A: A majority part of OLED panels currently produced in China – mostly small- to medium-size LTPS TFT-driven OLED panels – are being used for handset applications. Since large-size OLED panels have to be driven by IGZO TFT, flat panel makers in China have to build up their IGZO technology if they want to venture into the large-size OLED panel sector.
The heat of using OLED panels for handset applications has cooled down a bit recently because not all of the new iPhone devices launched in 2018 come with OLED technology, and instead the LCD-based model, the iPhone XR, will account for a significant portion. This indicates that LCD and OLED are likely to be defined as two parallel technologies.
OLED panels were eagerly sought after by China’s handset vendors previously, but now they mostly adopt OLED panels for their flagship models only and use a-Si and LTPS panels for the rest.
I think OLED is likely to be a transitional technology and there is no way for it to replace LCD. This trend is quite obvious in the TV sector, with OLED TVs likely to stay only at the top-end segment. The OLED technology will face more challenges when the advantages of mini LED technology come to full play.
With respect to mini LED and micro LED, I think the application of mini LED will start with large-size displays such as public information display (PID) products, while the micro LED technology will be utilized for small- to medium-size panels at the beginning. However, production cost will be a crucial factor to decide which one will have more opportunities.
We are paying considerable attention to the development of new technologies, with Innolux currently working to advance mini LED technology, and eLux and Foxconn Electronics focusing on micro LED.— DigiTimes