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Chinese panel manufacturers actively enter the IT panel field to promote the recovery of LCD factory investment

2022-01-11 14:59

Key Points

  • TV panels sold very well during the global COVID-19 pandemic, but it was the IT sector that was more popular in the market. Further, with the evolution of the IT industry, the so-called IT (Information Technology, information computer industry) panel demand is evolving to the IoT (Internet of Thing, Internet of Things) panel demand.
  • Global laptop and tablet panel sales have nearly doubled from $14.6 billion in 2019 to $28 billion in 2021.
  • In addition to BOE, by far the world's largest FPD producer, the Chinese mainland manufacturer's IT panel market share is far lower than its TV panel share, far behind Taiwan manufacturer and LG Display. So mainland Chinese manufacturers see a big opportunity to diversify their product portfolio away from their heavy reliance on the TV market, which will help mitigate the extremes of the crystal cycle and take share from competitors.
  • With the shift in capacity allocation in many Chinese mainland factories, the expansion of incremental capacity, and the construction and planning of new factories targeting IT panels, interest in the market and technological evolution of IT panels has increased significantly.
  • New LCD factories that have already ordered equipment will almost certainly be built as planned, while China's IT panel production will continue to increase in the coming years. This will help mainland Chinese manufacturers diversify their businesses, but it also raises concerns about overproduction of IT panels.

 

Not long ago, some media quoted China's major panel manufacturers as saying that after building a large number of 8.5/8.6 generation line and 10.5 generation line LCD factories for TV applications, "no longer invest in LCD". Recently, however, predictions for new factory investment in China are shifting from OLED for smartphone applications to LCD, especially for IT production.

2020The surge in demand driven by the new crown epidemic from mid-to mid -2021 turned the oversupply of large-size LCDs into a shortage in 2019, while also pushing panel prices and panel manufacturers' profits to all-time highs in the first half of 2021. Even though the TV panel market is clearly on a downward trend, the super-cycle of the past year has affected the actual and planned investment strategies of panel manufacturers.

TV panels sold well during the epidemic, but the IT sector is more popular in the market, and the current IT panel application has gradually integrated with the so-called IoT (Internet of thing, Internet of Things) megatrend, and it will continue to outperform the overall panel market. For example, the amount of sales of laptops and tablets has almost doubled from $14.6 billion in 2019 to $28 billion in 2021 (seeFigure 1）。

Figure 1: Notebook and Tablet Panel Sales Amount

Source: Omdia

In terms of area, demand for laptops and tablets has expanded from 16.3 million square meters in 2019 to 23.2 million square meters in 2021. Omdia predicts that the amount of panel sales will decline moderately as panel prices begin to decline from 2022 onwards. Even so, with the accelerating shift to mobility in the workplace and more and more online education, sales will remain above pre-pandemic demand in the future. In terms of area, demand is expected to continue to grow year on year. Driven by the same market trends, the growth path of demand for desktop display panels is very similar to that of laptops and tablets.

 

Further, with the evolution of the IT industry, the so-called IT (Information Technology, information computer industry) panel demand is evolving to the IoT (Internet of Thing, Internet of Things) panel demand, which represents more opportunities and challenges.

 

ITThe outstanding performance of the panel market has aroused great interest from all FPD panel manufacturers, especially those in mainland China. With the exception of BOE, by far the world's largest FPD producer, mainland Chinese manufacturers' IT panel market share is much lower than their TV panel share and far behind Taiwan manufacturers and Lejin Display (seeFigure 2）。

Figure 2: Share of laptop panel shipments, 2021

Source: Omdia

The market growth has attracted the attention of mainland Chinese panel manufacturers, who see it as a great opportunity to diversify their product portfolio away from their heavy reliance on the TV market, which will help ease the extremes of the crystal cycle, and to take share from competitors.

With the shift in capacity allocation in many Chinese factories, the expansion of incremental capacity, and the construction and planning of new factories targeting IT panels, interest in IT panel sales has increased significantly.

 

Figure 3: Schedule of confirmed and under consideration FPD plants in China and India, 2021-2024

Source: Omdia

Note: The Gantt chart above only shows the timing of the first phase, total capacity or ramp capacity by the end of 2026. It does not include plants built before 2021, but includes those that expand after. In Omdia's methodology, only plants with a probability of ≥ 30% are counted in the forecast of supply and equipment. See Omdia's《3Q21 OMDIA OLED and LCD Supply Demand & Equipment Tracker 》for more details and the latest forecasts.Figure 3Of the 13 plants shown, more than half produce LCDs. Huaxing T9, Huaxing T5, Tianma TM19, Xinli Sichuan No. 3 factory and BOE B15 new factory will be dedicated to IT panel production. At the same time, the planned Huike H6, Visino V4, Huaxing T8 and Vedanta VED 1 Plant in India all plan to allocate some capacity to IT. The two new factories of Huaxing Optoelectronics, T9 and T5, are now planned to be fully dedicated to IT production and are advancing rapidly. Other plants listed for 2023 and beyond are speculative, though.

From the third quarter of 2020 to the third quarter of 2021, Chinese panel manufacturers have reaped huge returns on their investment in LCD factories, as brand owners have been unable to purchase enough panels to meet their stated demand and panel prices have soared. At the same time, Chinese manufacturers look at the utilization and profit margins of their LCD and OLED factories, and clearly see that their LCD factories are more productive and profitable. This, in turn, has led to multiple new LCD factory plans, and at least in the case of the Huaxing Optoelectronics T5 plant, the company can be seen shifting its planned OLED plant to LCDs.

This reappears the prospect of future investment in LCD factories, once again proving the versatility and staying power of mainstream LCDs. This also marks a significant investment by Chinese manufacturers to gain market share in the IT panel sector.

With the industry now past the epidemic super-cycle, panel prices are beginning to fall and the market, financial and political environment has become less favorable. Panel manufacturers may again shift or even cancel some investment plans. In any case, the factories that have already ordered the equipment will almost certainly be built as planned, and China's IT panel production will continue to increase in the coming years. This will help Chinese manufacturers to diversify their business, but it also raises real concerns about overproduction of IT panels.

Depending on the scale of this production surge, the current stable IT market may suffer from greater competition and lower prices, putting pressure on current market leaders and making the field less attractive to new players themselves than they originally expected.

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