Chinastar caps new OLED fab
Shenzhen based Chinastar (pvt) has capped the roof of their new Gen 6 flexible OLED fab in Wuhan, China. The construction on the fab began in March 2017, with the entire project expected to cost ~$5.4b, and is expected to be completed in 1H 2019, which is ahead of our forecast of 3Q 2019, although the company expects actual mass production to actually begin in 1H 2020. The capacity of the fab is stated at 45,000 sheets/month, although we expect that represents the total LTPS backplane output, rather than OLED output, which we expect to be 15,000 sheets when the fab opens, with 30,000 sheets for LTPS backplanes. We expect phase 2 to increase the LTPS backplane output to 45,000 sheets, and the OLED output to 22,500 sheets/month when completed, which we expect in late 2020 or early 2021.
China Star is also building a Gen 11 mixed use fab in Shenzhen which is expected to be able to produce both large panel LCD and OLED displays. That fab was capped last month and is expected to be in operation toward the end of this year, with commercial production levels in 1Q 2019, although we would expect that much of the initial output of that fab would be for LCD large panel production. The total capacity of this fab is expected to be 90,000 sheets/month, although we would expect the split between LCD and OLED to be ~70%/30%. Using those percentages, we would expect the initial production capacity for phase 1 of the project to be ~7,500 OLED sheets/month. This fab has been constructed to be most efficient for large size TV panels, with six 75” panels being able to be cut from a single sheet at a 94% efficiency ratio. This means only 6% of the glass is wasted, as opposed to a Gen 8.5 fab, where only two 75” TV panels could be cut from a single sheet, yielding a very poor 56% efficiency.
As we have noted in earlier notes, Chinese panel producers have latched on to the concept of mixed mode large panel production and China Star has designed this fab to be able to mix two panel sizes on the same sheet, in this case 43” and 65” panels, which greatly increases efficiency. Since this has not been done on Gen 11 by any other panel producer, we did the calculation, which yielded five 65” and eight 43” panels on one sheet of Gen 11 glass, with a nearly 98% efficiency, which would seem a profitable trade off against a slower process time for multi-mode fabs.
We note that the completion of construction of a fab, and the fab’s official opening do not necessarily mean that the fab is in actual production, other than being able to move a substrate across the line from start to finish. In fact, the time needed to go from fab opening to actual mass production levels varies considerably between producers, with Samsung Display (pvt), having the most OLED experience, likely the shortest, and those, like China Star, with little or no commercial flexible OLED experience, the longest. In this case, China Star seems to have made a realistic timeline when estimating full mass production, which is unusual in the industry.
We have included three charts below, the first of which indicates Chinastar’s increasing raw OLED capacity, but it gives little indication as to whether that capacity will be used for small panel production, such as smartphone panels or tablets, or large panel production, for OLED TV and signage. Figure 3 breaks that capacity down into its size components, which indicates Chinastar’s desire to become a supplier of OLED TV panels, competing with LG Display (LPL), currently the only OLED TV panel supplier. Figure 4 however, and this is across the industry rather than for Chinastar only, indicates what we believe is a more realistic way to look at actual capacity, that of ‘available’ capacity. As we have noted in the past, most capacity estimates in the display space are theoretical and represent a situation rarely seen in commercial production, that of 100% factory efficiency. In order to meet the ‘stated’ capacity of a fab, it would have to be utilizing every piece of equipment at 100% efficiency (that means no maintenance downtime), operating 24/7 and if we include unit volumes, running at 100% yield. All fabs have equipment that needs to be cleaned (particularly OLED deposition tools) and maintained, and all fabs take time to reach even much lower equipment utilization rates when they first start production, sometimes as long as 18 months. Chart 4 estimates our ‘available’ capacity expectations for OLED production, compared to the stated capacity, taking into consideration a variety of factors that we believe make the available capacity numbers considerably closer to what the industry can actually produce.
China Star is also building a Gen 11 mixed use fab in Shenzhen which is expected to be able to produce both large panel LCD and OLED displays. That fab was capped last month and is expected to be in operation toward the end of this year, with commercial production levels in 1Q 2019, although we would expect that much of the initial output of that fab would be for LCD large panel production. The total capacity of this fab is expected to be 90,000 sheets/month, although we would expect the split between LCD and OLED to be ~70%/30%. Using those percentages, we would expect the initial production capacity for phase 1 of the project to be ~7,500 OLED sheets/month. This fab has been constructed to be most efficient for large size TV panels, with six 75” panels being able to be cut from a single sheet at a 94% efficiency ratio. This means only 6% of the glass is wasted, as opposed to a Gen 8.5 fab, where only two 75” TV panels could be cut from a single sheet, yielding a very poor 56% efficiency.
As we have noted in earlier notes, Chinese panel producers have latched on to the concept of mixed mode large panel production and China Star has designed this fab to be able to mix two panel sizes on the same sheet, in this case 43” and 65” panels, which greatly increases efficiency. Since this has not been done on Gen 11 by any other panel producer, we did the calculation, which yielded five 65” and eight 43” panels on one sheet of Gen 11 glass, with a nearly 98% efficiency, which would seem a profitable trade off against a slower process time for multi-mode fabs.
We note that the completion of construction of a fab, and the fab’s official opening do not necessarily mean that the fab is in actual production, other than being able to move a substrate across the line from start to finish. In fact, the time needed to go from fab opening to actual mass production levels varies considerably between producers, with Samsung Display (pvt), having the most OLED experience, likely the shortest, and those, like China Star, with little or no commercial flexible OLED experience, the longest. In this case, China Star seems to have made a realistic timeline when estimating full mass production, which is unusual in the industry.
We have included three charts below, the first of which indicates Chinastar’s increasing raw OLED capacity, but it gives little indication as to whether that capacity will be used for small panel production, such as smartphone panels or tablets, or large panel production, for OLED TV and signage. Figure 3 breaks that capacity down into its size components, which indicates Chinastar’s desire to become a supplier of OLED TV panels, competing with LG Display (LPL), currently the only OLED TV panel supplier. Figure 4 however, and this is across the industry rather than for Chinastar only, indicates what we believe is a more realistic way to look at actual capacity, that of ‘available’ capacity. As we have noted in the past, most capacity estimates in the display space are theoretical and represent a situation rarely seen in commercial production, that of 100% factory efficiency. In order to meet the ‘stated’ capacity of a fab, it would have to be utilizing every piece of equipment at 100% efficiency (that means no maintenance downtime), operating 24/7 and if we include unit volumes, running at 100% yield. All fabs have equipment that needs to be cleaned (particularly OLED deposition tools) and maintained, and all fabs take time to reach even much lower equipment utilization rates when they first start production, sometimes as long as 18 months. Chart 4 estimates our ‘available’ capacity expectations for OLED production, compared to the stated capacity, taking into consideration a variety of factors that we believe make the available capacity numbers considerably closer to what the industry can actually produce.
Figure 1 - China Star T4 OLED fab Roof Cap - Source: Ren Yong
Figure 2 – Chinastar Raw OLED Capacity - Source: SCMR LLC, Displaysearch, Company Data
Figure 3 - Chinastar OLED Capacity - Large vs. Small - Source: SCMR LLC, Displaysearch, OLED-A, Company Data
Figure 4 - Raw OLED Capacity vs Utilized OLED Capacity - Source: SCMR LLC, Displaysearch, OLED-A, Company Data
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