SFA extends BOE tool supply contract
SFA Engineering (056190.KS) has extended its contract with Chinese panel supplier BOE (200725.CH) from March to May for the delivery of tools worth $32.8m US. SFA supplies a variety of display production tools ranging from glass handling equipment to OLED evaporators, coaters, and sputtering tools. SFA has been under significant pressure to meet the needs of the rapidly expanding OLED production space as has its competitor Nikon Corp (7731.JP), as they both supply tools that are key to the OLED production process. Extended backlogs have been commonplace for these tools for a number of years, with such issues increasing as new entrants try to ramp commercial production. We would expect the contract extension is a result of delivery dates being pushed out by the vendor rather than the buyer, as they struggle to meet delivery dates, which is why we take a somewhat more conservative view of the ramp in actual OLED capacity. Fab announcements are made and press releases show big factories, but if the equipment was a few months late, the actual production from the fab will also be delayed. We call it ‘utilized’ or ‘available’ capacity, rather than the often cited theoretical capacity.
SFA has been involved with Samsung Display’s (pvt) A3 OLED expansion project (~$47m), China based Visionox’s (pvt) Gen 5.5 OLED fab expansion ($93.5m), and BOE’s Gen 6 OLED project, and has likely been unable to meet exact delivery dates for all concerned, similar to how Nikon has had to eliminate some customers in order to allocate resources to major projects, such as the recently announced LG Display (LPL) Gen 10.5 fab and an unspecified Sharp/Hon Hai project which will use Nikon photolithography tools. As these tools are usually customized, they tend to have lead times of at least 9 months, and potentially as much as 18 months. While we might assume that the BOE Gen 6 project might be delayed by 60 to 90 days, the overall OLED capacity timeline will not move much as we have built an extended ramp into our capacity model for those OLED producers who have relatively little high volume OLED production experience.
SFA has been involved with Samsung Display’s (pvt) A3 OLED expansion project (~$47m), China based Visionox’s (pvt) Gen 5.5 OLED fab expansion ($93.5m), and BOE’s Gen 6 OLED project, and has likely been unable to meet exact delivery dates for all concerned, similar to how Nikon has had to eliminate some customers in order to allocate resources to major projects, such as the recently announced LG Display (LPL) Gen 10.5 fab and an unspecified Sharp/Hon Hai project which will use Nikon photolithography tools. As these tools are usually customized, they tend to have lead times of at least 9 months, and potentially as much as 18 months. While we might assume that the BOE Gen 6 project might be delayed by 60 to 90 days, the overall OLED capacity timeline will not move much as we have built an extended ramp into our capacity model for those OLED producers who have relatively little high volume OLED production experience.
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