IHS says BOE will be largest display producer (area) by 2019 – We disagree
While we believe BOE is the most aggressive display panel producer in terms of production capacity, we do not expect BOE to surpass the overall capacity of LG Display by 2019 as stated by IHS in a recent blog. According to the IHS note, adding both LCD and OLED capacity, BOE will top the list of panel supplier capacity due to the potential for new fab construction, a portion of which is still in the planning stage, however our data suggests that such an occurrence will not happen until after 2020, if at all.
We model 21 panel producers, breaking down capacity by backplane type and display technology, with data going back to 2004, and while BOE certainly has an aggressive capacity growth rate, as can be seen in Fig. 2, 2017 will represent the slowest growth year in the company’s history. Looking back to the 1st half of 2016, the industry was seeing overall display demand from China, the fastest growing display market, beginning to slow, and panel pricing falling sharply. Capacity expansion decisions at BOE, and among most other panel producers, were put on hold until companies were able to see at least a slowing of panel price declines.
As 2016 developed, panel prices began to rise, to a degree based on a recovering North American economy, but also on production issues and fab conversions from LCD to OLED that pushed certain panel sizes into a shortage situation. As panel prices rose, capacity expansion plans resurfaced, but only those who had bucked the trend during the downturn were able to see real expansion this year. Samsung Display in particular, has followed a capacity expansion mindset antithetical to other producers, in fact, paying little attention to the current state of the industry, and capacity planning with a much longer-term view. This was apparent during a number of down cycles, when Samsung Display (pvt) built out LCD capacity while others added little, and even built extensive OLED capacity before the technology has been proven as a highly effective small display modality.
Now that pricing has increased from the 2016 lows, panel producers are returning to the expansion mode, particularly in the OLED space, where the attraction of Apple joining OLED display users has increased the capacity appetites of most display producers. Fig. 3 shows the capacity growth rates of Samsung Display, LG Display, and BOE, and it should be noted that Samsung Display’s absolute growth rate turned negative in both 2016 and this year, a function of LCD plant closings and their subsequent conversion to OLED production. Inherently, OLED production takes up more room than LCD production, and therefore OLED production capacity tends to be less than that of the LCD capacity it replaces, producing the negative capacity growth for Samsung.
LG Display however, shows rather consistent capacity growth, particularly since 2012, averaging ~7.8% during that period, and while it pales against the BOE 24% during the same period, LG’s capacity base has been developing since pre-2004 (the beginning of our data collection), while BOE began in a meaningful way in 2009. All in, we believe LG Display will continue to hold a combined capacity greater than any other panel producer through 2020 at least, and while BOE will certainly challenge that top spot, we believe they will not overtake LG in the 2019 or 2020 timeframe.
We model 21 panel producers, breaking down capacity by backplane type and display technology, with data going back to 2004, and while BOE certainly has an aggressive capacity growth rate, as can be seen in Fig. 2, 2017 will represent the slowest growth year in the company’s history. Looking back to the 1st half of 2016, the industry was seeing overall display demand from China, the fastest growing display market, beginning to slow, and panel pricing falling sharply. Capacity expansion decisions at BOE, and among most other panel producers, were put on hold until companies were able to see at least a slowing of panel price declines.
As 2016 developed, panel prices began to rise, to a degree based on a recovering North American economy, but also on production issues and fab conversions from LCD to OLED that pushed certain panel sizes into a shortage situation. As panel prices rose, capacity expansion plans resurfaced, but only those who had bucked the trend during the downturn were able to see real expansion this year. Samsung Display in particular, has followed a capacity expansion mindset antithetical to other producers, in fact, paying little attention to the current state of the industry, and capacity planning with a much longer-term view. This was apparent during a number of down cycles, when Samsung Display (pvt) built out LCD capacity while others added little, and even built extensive OLED capacity before the technology has been proven as a highly effective small display modality.
Now that pricing has increased from the 2016 lows, panel producers are returning to the expansion mode, particularly in the OLED space, where the attraction of Apple joining OLED display users has increased the capacity appetites of most display producers. Fig. 3 shows the capacity growth rates of Samsung Display, LG Display, and BOE, and it should be noted that Samsung Display’s absolute growth rate turned negative in both 2016 and this year, a function of LCD plant closings and their subsequent conversion to OLED production. Inherently, OLED production takes up more room than LCD production, and therefore OLED production capacity tends to be less than that of the LCD capacity it replaces, producing the negative capacity growth for Samsung.
LG Display however, shows rather consistent capacity growth, particularly since 2012, averaging ~7.8% during that period, and while it pales against the BOE 24% during the same period, LG’s capacity base has been developing since pre-2004 (the beginning of our data collection), while BOE began in a meaningful way in 2009. All in, we believe LG Display will continue to hold a combined capacity greater than any other panel producer through 2020 at least, and while BOE will certainly challenge that top spot, we believe they will not overtake LG in the 2019 or 2020 timeframe.
Total Display Industry Capacity - 2004 - 2020 - Source: SCMR LLC, Displaysearch, OLED-A
BOE Yearly Capacity Growth Rate - 2010 - 2020 - Source: SCMR LLC, Displaysearch, Company Data
Capacity Growth Rate Comparison - Samsung, LG, BOE - 2010 - 2020 - Source: SCMR LLC, Displaysearch, Company Data
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