Rainbow Builds
In our 9/17/21 note, we indicated that Rainbow (600707.CH), aka Caihong Display Devices, aka IRICO had announced that the board has approved the construction of a large Gen 8.5+ LCD glass production facility in Xianyang. The project, which is to cost $1.41b US will consist of 8 hot lines and 4 cold lines, ~4 times the size of the company’s existing two Gen 8.5 glass lines in Hefei. At the time financing for the project had not been reached and caveats that the project might be delayed if full funding is not completed. It seems that while financing has not been confirmed, the company has decided to begin construction on the new project, which is to complement the company’s existing Gen 8.5 substrate line.
Rainbow indicated that based on the feasibility study and the stable operation of the existing G8.5 glass line, the project would begin construction. The first line was said to have operated at 100% capacity in 3Q and the cost structure was better than planned, achieving profitability in 3Q. The given timeframe for the construction is 36 months, so the earliest completion date would be 4Q 2024. As a new site, we believe the company will build the shell and necessary infrastructure for the facility and then add kilns and processing lines individually based on profitability prospects at the time.
As we noted previously, while Chinese glass producers are expanding capacity, they are not competing directly with Corning (GLW), Asahi (5201.JP), and NEG (5214.JP), who are supplying Gen 10.5 glass to China’s ultra-large panel fabs. While there is certainly a market for Gen 8.5 substrate glass in China (China hold >58% of Gen 8.5 LCD production capacity), much of the growth in the industry has been related to ultra-large TV panel production. China controls over 70% of that capacity but has been unable to supply quality substrate glass to its own producers, a sore spot with the Chinese government. While Rainbow is moving to expand its Gen 8.5 capacity to help its LCD producer’s source locally, they have yet to build out Gen 10.5 capacity.
Rainbow indicated that based on the feasibility study and the stable operation of the existing G8.5 glass line, the project would begin construction. The first line was said to have operated at 100% capacity in 3Q and the cost structure was better than planned, achieving profitability in 3Q. The given timeframe for the construction is 36 months, so the earliest completion date would be 4Q 2024. As a new site, we believe the company will build the shell and necessary infrastructure for the facility and then add kilns and processing lines individually based on profitability prospects at the time.
As we noted previously, while Chinese glass producers are expanding capacity, they are not competing directly with Corning (GLW), Asahi (5201.JP), and NEG (5214.JP), who are supplying Gen 10.5 glass to China’s ultra-large panel fabs. While there is certainly a market for Gen 8.5 substrate glass in China (China hold >58% of Gen 8.5 LCD production capacity), much of the growth in the industry has been related to ultra-large TV panel production. China controls over 70% of that capacity but has been unable to supply quality substrate glass to its own producers, a sore spot with the Chinese government. While Rainbow is moving to expand its Gen 8.5 capacity to help its LCD producer’s source locally, they have yet to build out Gen 10.5 capacity.
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