LG Display – New OLED fab in China – Yes and No
Speculation over LG Display’s (LPL) potential OLED plans seems to have reached a fever pitch as the Korean and Chinese press argue over whether LG Display has decided to build a new OLED plant in Guangzhou China. The Korean press hints that equipment suppliers have become more optimistic that LG Display will begin construction of a new OLED fab in China in 2Q, while Chinese press says LGD has denied such speculation but also hints that the company and the local government are still in negotiations, and documents have been filed to that end.
We note that LG Display indicated on their 1Q conference call that capex could expand from current levels but it was “too early to tell”, which is in keeping with our expectations that they will make a decision on additional capacity plans by the end of 2Q. We believe that Guangzhou would be the likely location for such a new fab, as China is the biggest market for the company’s OLED TVs, but LG Display has a number of expansion and construction plans in progress currently, and the addition of a new large scale project in China could prove to be a burden as LGD is also evaluating plans for a Gen 10 LCD fab, to help it compete in the ultra-large format TV display space, and is building its OLED lighting line, along with the E4 expansion and the completion of its E5 flex line.
While the optimism of the Chinese regional press probably has some credibility behind it, as municipal governments in China have been actively pursuing display industry participants for years, and have offered some extremely lucrative incentives to make those deals happen, the South Korean government is quite wary of allowing technology such as flexible OLED to leave the country. In fact, this has been a sore point between the two countries since 2013 when a Taiwanese company purchased BOE Hydis, a South Korean panel producer that had fallen on hard times and then closed the company after its IP (developed in Korea) was licensed by its new owner to other display producers. We believe that LGD will eventually opt for a fab in China, however the real question would be whether such a fab will be LCD, OLED, or a bit of both, and to what length the South Korean government will try to regulate any ‘technology leakage’ as the Chinese press has labeled the issue.
We note that LG Display indicated on their 1Q conference call that capex could expand from current levels but it was “too early to tell”, which is in keeping with our expectations that they will make a decision on additional capacity plans by the end of 2Q. We believe that Guangzhou would be the likely location for such a new fab, as China is the biggest market for the company’s OLED TVs, but LG Display has a number of expansion and construction plans in progress currently, and the addition of a new large scale project in China could prove to be a burden as LGD is also evaluating plans for a Gen 10 LCD fab, to help it compete in the ultra-large format TV display space, and is building its OLED lighting line, along with the E4 expansion and the completion of its E5 flex line.
While the optimism of the Chinese regional press probably has some credibility behind it, as municipal governments in China have been actively pursuing display industry participants for years, and have offered some extremely lucrative incentives to make those deals happen, the South Korean government is quite wary of allowing technology such as flexible OLED to leave the country. In fact, this has been a sore point between the two countries since 2013 when a Taiwanese company purchased BOE Hydis, a South Korean panel producer that had fallen on hard times and then closed the company after its IP (developed in Korea) was licensed by its new owner to other display producers. We believe that LGD will eventually opt for a fab in China, however the real question would be whether such a fab will be LCD, OLED, or a bit of both, and to what length the South Korean government will try to regulate any ‘technology leakage’ as the Chinese press has labeled the issue.
LG Display's P10 plant under construction in Paju, South Korea - Source: Electronic Times
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