Hannstar to Add LCD Capacity
The Board of Directors has approved a plan to add 30,000 sheets/month of capacity to Hannstar’s (6116.TT) Gen 5.5 fab in Tainan, Taiwan. The fab, which currently has capacity for 140,000 sheets/month is Hannstar’s only fab, which produces primarily small to medium panels for smartphones, tablets, automotive, and industrial applications. While this is a relative small project considering the global scope of small panel LCD production, it is the first time Hannstar has added capacity since they began LCD production in 2005 and represents a 23.1% increase in capacity when completed.
The project is expected to cost a bit over $600m and will be self-funded, with construction beginning this month. While no specific completion date has been given we expect the fab to be open in 1Q 2023 and given that the current lines are what could be classified as Gen 5.3 (a bit smaller than typical Gen 5.5), rather than the more typical Gen 6 that is used for most small panel OLED production. Hannstar will likely see less competition for TFT tools than might be the case if competing directly with OLED TFT expansion demand.
Hannstar is primarily a small panel producer with an emphasis on displays 10” or below, but over the last 18 months the company has been able to increase its production of larger panels, with some falling out of the small panel category into what would be large panel production. Hannstar has been increasing the number of products between 10” and 19”, although most are 15.6” or less, with automotive and industrial displays being the biggest application for such panels. Hannstar is looking to increase its production of larger panels to reduce its dependence on smartphone applications, which have seen less growth than IT (10”+) applications over the last 18 months. While Hannstar’s large panel revenue has varied from ~$33m/month to $17m/month this year, likely driven by specific order flow, the company believes it has the ability to expand its IT panel customer base and generate more revenue through this capacity expansion.
While we understand Hannstar’s desire to reduce its dependence on smartphones and feature phones, the overarching question remains as to whether the expansion in IT products seen as a result of COVID-19 will remain as robust as it has been, and given that the new capacity will not come on line until 2023, will Hannstar be able to fill the new fab at that timeHannstar be able to fill the new capacity at that time? OLED has been a growing part of the small panel display market and while much of OLED’s impact has been with smartphones, the penetration of OLED into IT products has been increasing rapidly, with Samsung and Apple as the drivers. There will always be a market for LCD displays below 25”, as industrial displays do not always need the higher specifications that OLED displays would bring, but there are some very viable small/medium sized competitors and as can be seen by examining Japan Display, a former leader in the small panel display field, that is struggling to remain viable after its primary customer, Apple, shifted iPhone displays from LCD to OLED. After 15 years of facing the ups and downs of the small panel space, Hannstar is taking on a higher risk profile than in the past.
The project is expected to cost a bit over $600m and will be self-funded, with construction beginning this month. While no specific completion date has been given we expect the fab to be open in 1Q 2023 and given that the current lines are what could be classified as Gen 5.3 (a bit smaller than typical Gen 5.5), rather than the more typical Gen 6 that is used for most small panel OLED production. Hannstar will likely see less competition for TFT tools than might be the case if competing directly with OLED TFT expansion demand.
Hannstar is primarily a small panel producer with an emphasis on displays 10” or below, but over the last 18 months the company has been able to increase its production of larger panels, with some falling out of the small panel category into what would be large panel production. Hannstar has been increasing the number of products between 10” and 19”, although most are 15.6” or less, with automotive and industrial displays being the biggest application for such panels. Hannstar is looking to increase its production of larger panels to reduce its dependence on smartphone applications, which have seen less growth than IT (10”+) applications over the last 18 months. While Hannstar’s large panel revenue has varied from ~$33m/month to $17m/month this year, likely driven by specific order flow, the company believes it has the ability to expand its IT panel customer base and generate more revenue through this capacity expansion.
While we understand Hannstar’s desire to reduce its dependence on smartphones and feature phones, the overarching question remains as to whether the expansion in IT products seen as a result of COVID-19 will remain as robust as it has been, and given that the new capacity will not come on line until 2023, will Hannstar be able to fill the new fab at that timeHannstar be able to fill the new capacity at that time? OLED has been a growing part of the small panel display market and while much of OLED’s impact has been with smartphones, the penetration of OLED into IT products has been increasing rapidly, with Samsung and Apple as the drivers. There will always be a market for LCD displays below 25”, as industrial displays do not always need the higher specifications that OLED displays would bring, but there are some very viable small/medium sized competitors and as can be seen by examining Japan Display, a former leader in the small panel display field, that is struggling to remain viable after its primary customer, Apple, shifted iPhone displays from LCD to OLED. After 15 years of facing the ups and downs of the small panel space, Hannstar is taking on a higher risk profile than in the past.
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