IHS on LGD Gen 10.5
IHS has indicated that they believe LG Display will focus its OLED TV business on a transition from 55” to 65” OLED panels, not dissimilar to what LGD has already indicated when speaking about the popularity of its 65” OLED TVs. LGD had originally focused on 55” OLED panels as these were moving more quickly down the cost curve, while 65” and 77” OLED TV panels were far more costly to produce. With yields relatively low on the 65” and 77” panels, the decision to focus on 55” was obvious. Consumers however, became more interested in 65” OLED TVs than the company had originally expected, and production shifted somewhat to 65” last year, with the company now expecting the combined 65”/77” category to be greater than 55” this year. IHS expects LGD’s capacity to be equal to 372,000 55” (equivalent) panels/month by the end of 2018, while we expect ~6.5% more, or 396,000 55” equivalents.
The problem, according to IHS, is that the Gen 8 fabs where LG Display produces it OLED TV panels are limited physically to 2 or 3 65”/77” panels from a sheet of Gen 8 substrate with an efficiency of between 42% and 64% for the former and 59% for the latter, while 55” panels can be cut at a 91% efficiency ratio. This is an important characteristic to fab owners, as that ratio is key to the overall profitability of the fab. So this leads to the question of what LGD needs to do to increase its production of the 65”/77” OLED TV panel category, without reducing the fab’s efficiency and profitability.
The implication is that a solution would be for LG Display to build a Gen 10.5 fab for its OLED TV production (see note above), where 65” OLED TV panels can be produced at a 94% efficiency ratio, even better than those for 55” OLED TV panels, and while the 77” size would still be at a relatively low efficiency, the demand for that particular size has yet to be determined. As noted above, the risks involved in a Gen 10.5 fab are considerably higher than those for a Gen 8 fab, and OLED adds another layer of complexity to the equation, given that no OLED Gen 10.5 equipment exists in a production setting. Initial yields would be very low, as they were when LGD started up their 1st OLED TV fab, and expectations for bringing those yields up to current levels are measured in years, not months, so the decision for LGD is not a light one, and in fact, could be the most critical in LGD’s history, but if OLED TV demand continues to increase, the necessity to bring the cost of such panels down to more competitive levels might be the final push that LGD needs to make the commitment to such a large format OLED fab despite the significant risk.
The problem, according to IHS, is that the Gen 8 fabs where LG Display produces it OLED TV panels are limited physically to 2 or 3 65”/77” panels from a sheet of Gen 8 substrate with an efficiency of between 42% and 64% for the former and 59% for the latter, while 55” panels can be cut at a 91% efficiency ratio. This is an important characteristic to fab owners, as that ratio is key to the overall profitability of the fab. So this leads to the question of what LGD needs to do to increase its production of the 65”/77” OLED TV panel category, without reducing the fab’s efficiency and profitability.
The implication is that a solution would be for LG Display to build a Gen 10.5 fab for its OLED TV production (see note above), where 65” OLED TV panels can be produced at a 94% efficiency ratio, even better than those for 55” OLED TV panels, and while the 77” size would still be at a relatively low efficiency, the demand for that particular size has yet to be determined. As noted above, the risks involved in a Gen 10.5 fab are considerably higher than those for a Gen 8 fab, and OLED adds another layer of complexity to the equation, given that no OLED Gen 10.5 equipment exists in a production setting. Initial yields would be very low, as they were when LGD started up their 1st OLED TV fab, and expectations for bringing those yields up to current levels are measured in years, not months, so the decision for LGD is not a light one, and in fact, could be the most critical in LGD’s history, but if OLED TV demand continues to increase, the necessity to bring the cost of such panels down to more competitive levels might be the final push that LGD needs to make the commitment to such a large format OLED fab despite the significant risk.
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