More LCD Capacity
TCL (000100.CH) has indicated that it has authorized the construction of a new 15b RMB ($2.35b US) Gen 6 LCD fab in Wuhan. The new fab will be financed (see below) by the company (11b RMB to start) and the Wuhan government and we note that Samsung Display became an 11.03% shareholder in Chinastar when it sold its Suzhou fab to the company. TCL owns ~93% of the holding company, with the Chinese government holding the rest. The fab will be built in 2 phases, the first with a capacity of 30,000 sheets/month and a second phase of 15,000 sheets/month and will be based on IGZO rather than LTPS. Chinastar (pvt), the display production entity owned by TCL, has only one Gen 6 LCD fab (T3), which it has indicated is running at full capacity, with most of the company’s additional LCD capacity being dedicated to large panel production on Gen 8.5 or Gen 10.5/11 fabs.
While Chinastar also has a Gen 6 OLED fab (T4), with the shift toward IT products seen in the LCD space over the last few months, it would seem that TCL felt it would need to bolster its ability to capitalize on that change. The project is expected to take 18 months to complete (phase 1) and will be focused on small and medium sized ‘value-added’ panels, including phones, laptops, automobile displays and VR panels, along with touch panels and Mini-LED backlighting, and while the focus seems to be on IGZO , LTPO was also mentioned in the details. Full phase one production capacity is expected to take a total of 24 months (6 months from initial production, and phase 2 is expected to be at full production 36 months from the start of the project.
As we have noted previously, panel producers have increased their focus and dependence on IT products over the last few quarters, much of which was a result of the instability in large panel LCD display prices, which had been on a significant downtrend until late 2Q 2020, at which point they ran from near lows to peak prices reinforcing those large panel capacity projects that Chinese panel producers had been so fond off. However the rise in large panel prices and the lack of further fiscal stimulation measures began to take its toll on large panel price in July, which encouraged panel producers to shift capacity to IT products, which have remained relatively stable in price.. While this has helped mitigate the effects of the large panel price reductions seen over the last 6 months, it also has encouraged panel producers to add IT panel capacity, such as the Chinastar project mentioned herein.
While this certainly seems like the right path for panel producers in the short-term, it adds to the higher risk profile for panel producers that we have been espousing recently. IT panel prices have begun to decline, albeit not at the rate seen with TV panels, but even relatively small IT panel price declines will quickly reduce panel producer margins, and the anticipation of additional IT capacity will do little to help. Again, many panel producers look only at their ability to compete with others and not at the industry as a whole, which is a sure sign that what has been hoped to be a more stable and mature LCD display industry will remain as cyclical as it has been in the past.
While Chinastar also has a Gen 6 OLED fab (T4), with the shift toward IT products seen in the LCD space over the last few months, it would seem that TCL felt it would need to bolster its ability to capitalize on that change. The project is expected to take 18 months to complete (phase 1) and will be focused on small and medium sized ‘value-added’ panels, including phones, laptops, automobile displays and VR panels, along with touch panels and Mini-LED backlighting, and while the focus seems to be on IGZO , LTPO was also mentioned in the details. Full phase one production capacity is expected to take a total of 24 months (6 months from initial production, and phase 2 is expected to be at full production 36 months from the start of the project.
As we have noted previously, panel producers have increased their focus and dependence on IT products over the last few quarters, much of which was a result of the instability in large panel LCD display prices, which had been on a significant downtrend until late 2Q 2020, at which point they ran from near lows to peak prices reinforcing those large panel capacity projects that Chinese panel producers had been so fond off. However the rise in large panel prices and the lack of further fiscal stimulation measures began to take its toll on large panel price in July, which encouraged panel producers to shift capacity to IT products, which have remained relatively stable in price.. While this has helped mitigate the effects of the large panel price reductions seen over the last 6 months, it also has encouraged panel producers to add IT panel capacity, such as the Chinastar project mentioned herein.
While this certainly seems like the right path for panel producers in the short-term, it adds to the higher risk profile for panel producers that we have been espousing recently. IT panel prices have begun to decline, albeit not at the rate seen with TV panels, but even relatively small IT panel price declines will quickly reduce panel producer margins, and the anticipation of additional IT capacity will do little to help. Again, many panel producers look only at their ability to compete with others and not at the industry as a whole, which is a sure sign that what has been hoped to be a more stable and mature LCD display industry will remain as cyclical as it has been in the past.
RSS Feed