Rainbow To Expand LCD Glass Capacity
Rainbow (600707.CH), aka Caihong Display Devices, aka Irico[1], has announced that its board has approved the construction of a large Gen 8.5+ LCD glass production facility in Xianyang. The project, which is to cost $1.41b US will consist of 8 hot lines and 4 cold lines, ~4 times the size of the company’s existing two Gen 8.5 glass lines in Hefei. While the company is financing the entire project itself (including outside funding), the announcement gave considerable warning that full project funding has not been reached and might not be available when the project is to move into full scale construction, leading to possible delays. The given timeframe for the construction is 36 months, so the earliest completion date would be 4Q 2024. As a new site, we believe the company will build the shell and necessary infrastructure for the facility and then add kilns and processing lines individually, which would slow the in-country share gains that are the goal of the investment.
Rainbow competes with the three major LCD glass producers, Corning (GLW), Asahi (5201.JP), and NEG (5214.JP) and a few small local producers, but is still dealing with improving the quality of its large format glass substrate products and remains a small supplier of Gen 10 LCD glass, especially when compared to Corning, who has a co-located glass plant next to BOE’s (200725.CH) Gen 10.5 glass plant in Hefei. We believe that most of China’s demand for large (Gen 7+) glass is supplied by non-Chinese suppliers, while local producers have a higher share of Gen 6 and smaller glass sizes on the Mainland.
This has been a sticking point for both the Chinese government and the Chinese display industry, who has been under pressure to develop local glass production, but as has been the case with a number of other display technologies, just throwing money at a technology does not mean success is guaranteed. Quality and guaranteed supply are of greatest importance to panel producers when it comes to substrates, as unspotted defects can cause major problems further down the production line and can cause major yield issues, an ongoing problem for Chinese panel producers. This seems to be the type of project that should have been instituted two or three years ago, as the Chinese large panel LCD industry was developing, but we note that China has made a few attempts to ‘dominate’ the local glass market in the past, none of which proved successful, so it might have taken a bit longer to convince the CEC that such a large project might work, and even then we won’t know until late in 2024.
[1] IRICO (Rainbow,etc.) is owned by IRICO Group, which is owned by China Electronics Corp, the state-run entity that manages Chinas electronics industry.
Rainbow competes with the three major LCD glass producers, Corning (GLW), Asahi (5201.JP), and NEG (5214.JP) and a few small local producers, but is still dealing with improving the quality of its large format glass substrate products and remains a small supplier of Gen 10 LCD glass, especially when compared to Corning, who has a co-located glass plant next to BOE’s (200725.CH) Gen 10.5 glass plant in Hefei. We believe that most of China’s demand for large (Gen 7+) glass is supplied by non-Chinese suppliers, while local producers have a higher share of Gen 6 and smaller glass sizes on the Mainland.
This has been a sticking point for both the Chinese government and the Chinese display industry, who has been under pressure to develop local glass production, but as has been the case with a number of other display technologies, just throwing money at a technology does not mean success is guaranteed. Quality and guaranteed supply are of greatest importance to panel producers when it comes to substrates, as unspotted defects can cause major problems further down the production line and can cause major yield issues, an ongoing problem for Chinese panel producers. This seems to be the type of project that should have been instituted two or three years ago, as the Chinese large panel LCD industry was developing, but we note that China has made a few attempts to ‘dominate’ the local glass market in the past, none of which proved successful, so it might have taken a bit longer to convince the CEC that such a large project might work, and even then we won’t know until late in 2024.
[1] IRICO (Rainbow,etc.) is owned by IRICO Group, which is owned by China Electronics Corp, the state-run entity that manages Chinas electronics industry.
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