LGD Expands?
There has been some stir in the Korean trade press about LG Display’s (LPL) plans to expand it small panel OLED capacity which we found a bit odd considering the company announced plans to do so back in August of 2021. In our 8/17/21 note, we outlined what we expected from the $2.8b project that LG Display had indicated that would be implemented over the next 2 ½ years. LGD did not give much detail on the plan, which could include both a greenfield fab or capacity expansion at the company’s Gen 6 OLED fabs in Paju and Gumi, with the latter being the more logical path.
Our take at the time was for a 10,000 sheet/month expansion at E6, which had already been discussed by the company, being boosted to 15,000 sheets/month, and an additional 15,000 sheet expansion in Paju, which could change to 30,000 sheets/month as the company’s business with Apple (AAPL) improved. The current iteration, as noted in the Korean trade press, is that LG Display is ordering as many as eight ‘exposure machines’ at a cost of over 10b won ($8.4m US), indicating that LG Display is moving ahead with its expansion plans and could double its Gen 6 capacity by 2024.
Headlines aside, LG Display has two competitors in the Apple small panel OLED display supply chain, Samsung Display (pvt) and BOE (200725.CH), with SDC the leading supplier and BOE the new entrant. SDC continues to push toward adding technology to its existing capacity, such as LTPO (Low-Temperature Poly-Oxide), that Apple desires, while BOE is adding Gen 6 OLED capacity at a rapid rate, expecting to complete its 3rd Gen 6 small panel OLED fab this year. While BOE is likely going to supply Apple with less sophisticated LTPS OLED panels, LGD is in that middle ground, supplying some LTPS and LTPO this year. In order for LGD to compete with both SDC and BOE, they have little choice but to expand small panel capacity, not as much for the 2022 year, but for 2023 and 2024 when BOE could represent not only a capacity competitor but a technology competitor.
The surprise to us is that, if the trade press holds true, that it took 6 months for LGD to finalize its plans while BOE continues its expansion and SDC converts more capacity to LTPO. Negotiations with Apple over 2023 and 2024 supply contracts and the possibility of LGD expanding its small panel OLED relationship with Apple to larger displays (tablets, laptops) could have slowed actual capital deployment, but LGD has little choice but to expand capacity if it wants to remain a competitive small panel OLED display supplier to Apple. We do note that LGD did have to face the issue of parent LG Electronics’ (066570.KS) termination of its smartphone business, and the weakening of Huawei’s (pvt) smartphone business, but BOE is certainly moving ahead with the idea that they can be a serious contender, so there is little room for a more refined decision process. We expect LGD made at least verbal commitments for key expansion equipment in 4Q last year as part of its expanding commitment to Apple, making the recent fury over LGD’s expansion a less important event.
Our take at the time was for a 10,000 sheet/month expansion at E6, which had already been discussed by the company, being boosted to 15,000 sheets/month, and an additional 15,000 sheet expansion in Paju, which could change to 30,000 sheets/month as the company’s business with Apple (AAPL) improved. The current iteration, as noted in the Korean trade press, is that LG Display is ordering as many as eight ‘exposure machines’ at a cost of over 10b won ($8.4m US), indicating that LG Display is moving ahead with its expansion plans and could double its Gen 6 capacity by 2024.
Headlines aside, LG Display has two competitors in the Apple small panel OLED display supply chain, Samsung Display (pvt) and BOE (200725.CH), with SDC the leading supplier and BOE the new entrant. SDC continues to push toward adding technology to its existing capacity, such as LTPO (Low-Temperature Poly-Oxide), that Apple desires, while BOE is adding Gen 6 OLED capacity at a rapid rate, expecting to complete its 3rd Gen 6 small panel OLED fab this year. While BOE is likely going to supply Apple with less sophisticated LTPS OLED panels, LGD is in that middle ground, supplying some LTPS and LTPO this year. In order for LGD to compete with both SDC and BOE, they have little choice but to expand small panel capacity, not as much for the 2022 year, but for 2023 and 2024 when BOE could represent not only a capacity competitor but a technology competitor.
The surprise to us is that, if the trade press holds true, that it took 6 months for LGD to finalize its plans while BOE continues its expansion and SDC converts more capacity to LTPO. Negotiations with Apple over 2023 and 2024 supply contracts and the possibility of LGD expanding its small panel OLED relationship with Apple to larger displays (tablets, laptops) could have slowed actual capital deployment, but LGD has little choice but to expand capacity if it wants to remain a competitive small panel OLED display supplier to Apple. We do note that LGD did have to face the issue of parent LG Electronics’ (066570.KS) termination of its smartphone business, and the weakening of Huawei’s (pvt) smartphone business, but BOE is certainly moving ahead with the idea that they can be a serious contender, so there is little room for a more refined decision process. We expect LGD made at least verbal commitments for key expansion equipment in 4Q last year as part of its expanding commitment to Apple, making the recent fury over LGD’s expansion a less important event.
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