LG Display Finalizes Additional OLED Investment
In our 7/28 note on LG Display (LPL) we indicated that the company has been reviewing plans for expanding its small panel OLED capabilities, an area that gets far less attention from the press than the company’s large panel OLED TV business. With the dissolution of parent LG Electronics (066570.KS) mobile business, some questioned plans to expand small panel capacity, however Apple (AAPL) has been expanding its small panel OLED sourcing from LG Display and likely needs a strong commitment from the company if it is to go further.
LG Display made a statement today that indicates they have decided to proceed with those small panel expansion plans. The investment will be $2.83b US to be spent over the next 2 ½ years but little detail was given so the possible alternatives are a Greenfield fab or and expansion or conversion of an existing fab. LG Display’s main small panel OLED production fabs are E5 and E6, both Gen 6 lines with original capacity (combined) of 75,000 sheets/month, however LGD has already mentioned that an additional 10,000 sheet/month capacity expansion was expected at E6, which we expect will expand to 15,000 sheets/month. Given the value of the announced investment we would expect another 15,000 sheet line, likely at the company’s production complex in Paju, South Korea, with the potential to expand to 30,000 if consumers warm to the concept of OLED for the iPad in 2023.
In the past Apple has made some upfront capacity investments by pre-paying for product. This type of investment goes toward a ‘guarantee’ of capacity share or even a dedicated line, which we would not rule out as to how LG Display might finance this project, along with its other (large panel OLED) expansion plans. Given the duration of the project, we expect LG Display will look to capitalize on that relationship or look toward the public markets to avoid adding additional debt, but we expect the investment in capacity will be staged carefully. All in, it’s a medium sized project that will likely depend on how LG Display’s relationship with Apple progresses, and how successful Apple is with expanding its OLED product line over the next two years.
LG Display made a statement today that indicates they have decided to proceed with those small panel expansion plans. The investment will be $2.83b US to be spent over the next 2 ½ years but little detail was given so the possible alternatives are a Greenfield fab or and expansion or conversion of an existing fab. LG Display’s main small panel OLED production fabs are E5 and E6, both Gen 6 lines with original capacity (combined) of 75,000 sheets/month, however LGD has already mentioned that an additional 10,000 sheet/month capacity expansion was expected at E6, which we expect will expand to 15,000 sheets/month. Given the value of the announced investment we would expect another 15,000 sheet line, likely at the company’s production complex in Paju, South Korea, with the potential to expand to 30,000 if consumers warm to the concept of OLED for the iPad in 2023.
In the past Apple has made some upfront capacity investments by pre-paying for product. This type of investment goes toward a ‘guarantee’ of capacity share or even a dedicated line, which we would not rule out as to how LG Display might finance this project, along with its other (large panel OLED) expansion plans. Given the duration of the project, we expect LG Display will look to capitalize on that relationship or look toward the public markets to avoid adding additional debt, but we expect the investment in capacity will be staged carefully. All in, it’s a medium sized project that will likely depend on how LG Display’s relationship with Apple progresses, and how successful Apple is with expanding its OLED product line over the next two years.
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