Is Samsung Taking Bids on LCD Fabs?
The last year has been both a difficult one and a good one for Samsung Display’s (pvt) large panel LCD business. A radical decision to end all large panel LCD production by the end of last year, made during a period of falling LCD panel prices, was postponed as panel prices began to rise after 1Q last year. Samsung Display did however sell its Suzhou, China fab to TCL(000100.CH)/Chinastar (pvt) for $1.08b US, and took a 12.3% stake in Chinastar to ensure access to production volumes, but kept its remaining large panel fabs in South Korea in operation as panel prices continued to rise.
It seems however, that Samsung Display is sticking to its original plans with Samsung Electronics affiliate Samsung C&T (012260.KS) representing SDC in the sale of two additional Samsung Display large panel fabs. The two fabs that are said to be on the block are SDC’s Gen 7.5 fab known as L7-2 and L8-2-1, part of SDC’s Gen 8.5 line in Asan. The lines have been in mass production mode since 2008 and 2010 respectively and while currently running much smaller amounts, had peak production in their prime of 90,000 and 100,000 sheets/month. If both fabs are sold it would end SDC’s large panel production, leaving only fabs dedicated to small panel and QD/OLED production.
As both lines are relatively old, we expect it might be rather difficult for SDC to find a buyer that was willing to ship the fab to another location and upgrade the equipment, but the price will likely be the determining factor. As both lines are used for panel production between 20” and 86”, but perform more efficiently at sizes more suited to IT displays and TV displays in the 55” category, a buyer would likely be purchasing same to enhance their IT panel production capabilities, which is currently a market that faces a capacity shortage, which makes this an ideal time for such a sale. That said, it will also leave SDC more at risk to the success of its QD/OLED panel project and it small panel flexible OLED business, where it dominates the industry.
While the sale will include all production equipment, all production information will be removed and no IP will be involved in the sale, which should be of little concern for any LCD producing entity, but might lessen the value to provincial or local Chinese governments, who see the purchase of an already producing fab as an easy and quick way to enter the display market, which looks far more attractive to outside entities than it did a year ago. The Chinese government however has instituted policies over the last year to afford itself more control over the purchase of what would be 2nd hand LCD production fabs. This additional control gives the central government a larger call in the supply/demand balance that is currently working in the Chinese display industry’s favor and is justified by the government bailouts of a number of Chinese LCD production fabs over the last few years, particularly when panel prices are in decline.
It seems however, that Samsung Display is sticking to its original plans with Samsung Electronics affiliate Samsung C&T (012260.KS) representing SDC in the sale of two additional Samsung Display large panel fabs. The two fabs that are said to be on the block are SDC’s Gen 7.5 fab known as L7-2 and L8-2-1, part of SDC’s Gen 8.5 line in Asan. The lines have been in mass production mode since 2008 and 2010 respectively and while currently running much smaller amounts, had peak production in their prime of 90,000 and 100,000 sheets/month. If both fabs are sold it would end SDC’s large panel production, leaving only fabs dedicated to small panel and QD/OLED production.
As both lines are relatively old, we expect it might be rather difficult for SDC to find a buyer that was willing to ship the fab to another location and upgrade the equipment, but the price will likely be the determining factor. As both lines are used for panel production between 20” and 86”, but perform more efficiently at sizes more suited to IT displays and TV displays in the 55” category, a buyer would likely be purchasing same to enhance their IT panel production capabilities, which is currently a market that faces a capacity shortage, which makes this an ideal time for such a sale. That said, it will also leave SDC more at risk to the success of its QD/OLED panel project and it small panel flexible OLED business, where it dominates the industry.
While the sale will include all production equipment, all production information will be removed and no IP will be involved in the sale, which should be of little concern for any LCD producing entity, but might lessen the value to provincial or local Chinese governments, who see the purchase of an already producing fab as an easy and quick way to enter the display market, which looks far more attractive to outside entities than it did a year ago. The Chinese government however has instituted policies over the last year to afford itself more control over the purchase of what would be 2nd hand LCD production fabs. This additional control gives the central government a larger call in the supply/demand balance that is currently working in the Chinese display industry’s favor and is justified by the government bailouts of a number of Chinese LCD production fabs over the last few years, particularly when panel prices are in decline.
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