LG P10 – What’s going on?
Last September we noted that LG Display (LPL) had yet to make a decision concerning the format of the new P10 fab complex it was building in Paju, South Korea. The original $1.67b construction project was to house a new fab, although there was a great deal of speculation as to what substrate size the new fab would use. We heard Gen 9, Gen 10.5 and even Gen 11 at various times, and further speculation on whether it would be exclusively OLED or both OLED and LCD, and whether it would be for TV panels only. By February of this year, the Korean press had indicated that all the final decisions had been made and the new fab would be a Gen 10 format for OLED production, with oxide backplanes, although we reserved endorsing final fab configuration until we received final confirmation from LGD. Later in February, Taiwanese press indicated that the fab was to be a Gen 10.5 LCD line originally and will add an OLED line at a later date. We indicated that we believed that information was incorrect and while we had built a number of potential fab configurations into our OLED industry model to see the effect on both LG and the industry, we indicated that we did not believe LG had made final decisions concerning the fab.
Fast forward to today, where Korean press now indicates that the new fab, which now has a $3.56b price tag, is going to be a Gen 6 flexible OLED line, with the original thinking having moved from the OLED TV perspective to small panel OLED production, perhaps to focus on retaining some of Apple’s (AAPL) potential OLED smartphone business. This speculation is based on LGD sharing plans with equipment suppliers, who will be receiving orders for the new fab’s tools in the near-term. Now the fab is expected to be able to produce an initial 30,000 sheets/month at Gen 6 in 2018, rather than the 7,500 sheets at Gen 9 that was last estimated. Should this be the case, and again we have not confirmed either the ‘old’ or ‘new’ plans, it would represent an initial increase in m2 of 29,202 m2/month or 54% for the initial build-out, although that capacity is likely going to be for both rigid and flexible OLED lines.
Timing of initial production still remains at September 2018, which we believe should be the case unless LGD has difficulties with deposition tool scheduling, which has been an issue for producers in the past. Primary OLED deposition tool supplier Canon-Tokki (7751.JP) has been expanding capacity to meet significant demand, but has not been able to commit to all customer requests, with Sunic (pvt), SNU (080000.KS), SFA (056190.KS), and Applied Materials (AMAT), looking to pick up the slack. Equipment deliveries should begin in March 2018 for the phase 1 build-out and phase 2 equipment deliveries are expected to begin in late 2018 or early 2019 for phase 2, which we expect will be completed in the summer of 2019. Along with investments in two additional OLED fabs that LGD is building, this change, should it prove true, would give LGD a 30% share of total OLED capacity by the end of 2019, vs. Samsung Display’s (pvt) 57.1% in the same time period.
We do believe that the risk involved in a Gen 6 OLED fab is far less than that of a Gen 9 or 10.5 OLED fab, given the more developed state of the small panel OLED market relative to the OLED TV market, and while even without the specter of Apple’s entry into the small panel OLED space, LG Display would likely be better served as a secondary small panel rigid OLED supplier and potentially a primary small panel flexible OLED supplier, with the ability to expand their Gen 8 OLED TV capabilities, either at P10 or their existing E3 or E4 OLED TV fabs, based on the growth of that market. Again however, LG Display’s company representative’s comment was, “Although we are looking at many ways regarding investments for P10, we have not finalized on anything yet.”
Fast forward to today, where Korean press now indicates that the new fab, which now has a $3.56b price tag, is going to be a Gen 6 flexible OLED line, with the original thinking having moved from the OLED TV perspective to small panel OLED production, perhaps to focus on retaining some of Apple’s (AAPL) potential OLED smartphone business. This speculation is based on LGD sharing plans with equipment suppliers, who will be receiving orders for the new fab’s tools in the near-term. Now the fab is expected to be able to produce an initial 30,000 sheets/month at Gen 6 in 2018, rather than the 7,500 sheets at Gen 9 that was last estimated. Should this be the case, and again we have not confirmed either the ‘old’ or ‘new’ plans, it would represent an initial increase in m2 of 29,202 m2/month or 54% for the initial build-out, although that capacity is likely going to be for both rigid and flexible OLED lines.
Timing of initial production still remains at September 2018, which we believe should be the case unless LGD has difficulties with deposition tool scheduling, which has been an issue for producers in the past. Primary OLED deposition tool supplier Canon-Tokki (7751.JP) has been expanding capacity to meet significant demand, but has not been able to commit to all customer requests, with Sunic (pvt), SNU (080000.KS), SFA (056190.KS), and Applied Materials (AMAT), looking to pick up the slack. Equipment deliveries should begin in March 2018 for the phase 1 build-out and phase 2 equipment deliveries are expected to begin in late 2018 or early 2019 for phase 2, which we expect will be completed in the summer of 2019. Along with investments in two additional OLED fabs that LGD is building, this change, should it prove true, would give LGD a 30% share of total OLED capacity by the end of 2019, vs. Samsung Display’s (pvt) 57.1% in the same time period.
We do believe that the risk involved in a Gen 6 OLED fab is far less than that of a Gen 9 or 10.5 OLED fab, given the more developed state of the small panel OLED market relative to the OLED TV market, and while even without the specter of Apple’s entry into the small panel OLED space, LG Display would likely be better served as a secondary small panel rigid OLED supplier and potentially a primary small panel flexible OLED supplier, with the ability to expand their Gen 8 OLED TV capabilities, either at P10 or their existing E3 or E4 OLED TV fabs, based on the growth of that market. Again however, LG Display’s company representative’s comment was, “Although we are looking at many ways regarding investments for P10, we have not finalized on anything yet.”
Fab P10 under construction at LG DIsplay in Paju - Source: etnews.com
LG Display Raw OLED Capacity (adjusted) - Source: SCMR LLC, OLED-A
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