Surprise, Surprise, Samsung Display Keeps the Faith a Bit Longer
In a completely unsurprising move, Samsung Display (pvt) has decided to push the end of its large panel LCD production from 12/31/2020 to some point in the future ‘based on market demand and profitability’, which means until panel prices fall below break-even. This follows the same tactic from LG Display (LPL), who also postponed large panel LCD production closings into 2021. Samsung Display has already sold their Suzhou Gen 8 fab to Chinastar (pvt), who will continue to supply LCD panels to Samsung Electronics (005930.KS), but might see a bit less demand as it competes with Samsung Display’s other large panel LCD fabs.
China’s largest panel producer BOE (200725.CH), Samsung’s largest outside supplier was also expecting to see increasing orders in 2021 as SDC ended large panel production, but the SDC fab closing extension could put that on hold at least until panel pricing settles down.
On an overall basis SDC’s extended production will likely be absorbed by its parent, but that will offset some of the expectations for LCD display industry growth in 2021. Samsung overall will see some offset to the double whammy it would have received as it absorbed rising panel prices at the set level while gaining little from SDC’s panel production profitability if all fabs had closed at year-end.
Given that there is now no timeframe for closures from both South Korean LCD panel producers, and Samsung Display has converted a portion of its L8 LCD fab from LCD to QD/OLED, it is difficult to map the impact of the timeline change on the display market, but from a monthly perspective SDC’s L8-2 fab has a stated capacity of 190,000 sheets/month, and assuming that it has converted ½ of the L8-1 fab, L8-1 would have a capacity of 85,000 sheets/month, for a total of 275,000 sheets/month. If these fabs were to produce only 28” monitor panels (a logical choice at 88% substrate efficiency), they could produce 6.6m units/month at 100% utilization, or just under 20m units/quarter. Considering that the industry will have shipped ~165m monitor units in 2020, or 41.25m units/Q, the addition of ~20m units from this fab alone would be a bit under half of monitor demand for the quarter.
While much of this capacity will go directly to Samsung Electronics, it does reduce the need for capacity that would have been provided by other suppliers and will go toward reducing capacity tightness generally, although less so for TV panel production. The substrate efficiency of Gen 8.5 LCD fabs for 65” and larger TV panels is relatively low compared to smaller panel production efficiency, such as monitor or notebook panels, which would steer SDC toward smaller panel production, leaving large panel TV production to those producers with Gen 10 or higher capacity. Again, these are back-of-the-envelope calculations and do not take into account Samsung Display’s Gen 7 capacity or are they realistic in that they use only 28” monitors as an example, with fabs typically producing a number of panel sizes each month. They also assume 100% utilization which is also not the norm, but they do give some idea as to the potential impact to broad-based supply.
All in, Samsung Display’s postponement was an easy decision for the company to make as panel pricing rose to profitable levels as the year progressed. Over the next few weeks we will run a few possible scenarios that would include SDC’s and LG Display’s ‘new’ outlook on LCD panel production to see what the supply/demand balance would look like and how much the timeline changes would affect the overall large panel display market. We will try to look at the most realistic scenarios possible but there have been few times that we can remember the display space being in a greater state of flux so it might take a bit of time to establish parameters for the large number of variables on both sides of the supply/demand equation.
China’s largest panel producer BOE (200725.CH), Samsung’s largest outside supplier was also expecting to see increasing orders in 2021 as SDC ended large panel production, but the SDC fab closing extension could put that on hold at least until panel pricing settles down.
On an overall basis SDC’s extended production will likely be absorbed by its parent, but that will offset some of the expectations for LCD display industry growth in 2021. Samsung overall will see some offset to the double whammy it would have received as it absorbed rising panel prices at the set level while gaining little from SDC’s panel production profitability if all fabs had closed at year-end.
Given that there is now no timeframe for closures from both South Korean LCD panel producers, and Samsung Display has converted a portion of its L8 LCD fab from LCD to QD/OLED, it is difficult to map the impact of the timeline change on the display market, but from a monthly perspective SDC’s L8-2 fab has a stated capacity of 190,000 sheets/month, and assuming that it has converted ½ of the L8-1 fab, L8-1 would have a capacity of 85,000 sheets/month, for a total of 275,000 sheets/month. If these fabs were to produce only 28” monitor panels (a logical choice at 88% substrate efficiency), they could produce 6.6m units/month at 100% utilization, or just under 20m units/quarter. Considering that the industry will have shipped ~165m monitor units in 2020, or 41.25m units/Q, the addition of ~20m units from this fab alone would be a bit under half of monitor demand for the quarter.
While much of this capacity will go directly to Samsung Electronics, it does reduce the need for capacity that would have been provided by other suppliers and will go toward reducing capacity tightness generally, although less so for TV panel production. The substrate efficiency of Gen 8.5 LCD fabs for 65” and larger TV panels is relatively low compared to smaller panel production efficiency, such as monitor or notebook panels, which would steer SDC toward smaller panel production, leaving large panel TV production to those producers with Gen 10 or higher capacity. Again, these are back-of-the-envelope calculations and do not take into account Samsung Display’s Gen 7 capacity or are they realistic in that they use only 28” monitors as an example, with fabs typically producing a number of panel sizes each month. They also assume 100% utilization which is also not the norm, but they do give some idea as to the potential impact to broad-based supply.
All in, Samsung Display’s postponement was an easy decision for the company to make as panel pricing rose to profitable levels as the year progressed. Over the next few weeks we will run a few possible scenarios that would include SDC’s and LG Display’s ‘new’ outlook on LCD panel production to see what the supply/demand balance would look like and how much the timeline changes would affect the overall large panel display market. We will try to look at the most realistic scenarios possible but there have been few times that we can remember the display space being in a greater state of flux so it might take a bit of time to establish parameters for the large number of variables on both sides of the supply/demand equation.
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