The trough of the global panel industry has arrived. How do we spend this winter?

"The panel price collapse, terrible, almost all the industry continues to lose money." This is an analyst focusing on the panel industry said to the micro-network.

Looking at the performance of various manufacturers in the first half of 2019 and the performance of manufacturers in the "liquid crystal panel" in the past few years, the global panel industry has already entered the harsh winter. We can find that the global semiconductor display panel industry is gradually shifting to a new pattern under the trend of worldwide transfer, technological route change, and scale-oriented concentration.

Of course, most panel makers are facing overcapacity, falling prices, and losing money in the past two years. How can we succeed in wintering? Even in this situation, turning crisis into opportunity and establishing a cycle advantage is worthy of our consideration.

Panel industry dilemma: oversupply or will continue

Li Dongsheng, chairman of TCL Group, said at the performance exchange meeting in August: "The global display panel industry will have a two- or three-year low valley period, and industrial concentration will increase. Industry mergers and acquisitions are inevitable."

Since 2017, the price of display panel industry products has been falling all the way. The industry believes that panel prices have fallen, mainly due to overcapacity and oversupply. Taking BOE as an example, two of the three major segments of the business achieved growth, with only display and sensor components down. BOE said that the overall growth of the display device market was lower than expected and the supply exceeded demand.

In fact, the price of display panels has continued to decline in the past two years. The main reason is that the investment in domestic panel production lines has increased in recent years. Although the panel market has great potential, the market demand for new forms such as folding screens and curved screens is increasing, but the tradition is The LCD panel has shrunk significantly, so the capacity of the panel factory has expanded or even exceeded, which is the main reason for the price drop.

The staff of the BOE production line told the reporter: "After the start of the production line, it is not good to stop or reduce production." This is because once the production is stopped, there is a possibility that the loss will be more than the overcapacity.

For future markets, panel makers are mostly cautious. The overall growth of the display device market in the two years can be foreseen, the oversupply situation is still the main tone for the time being, which is also destined to show that the price of the panel continues to drop is a great opportunity. However, some insiders also said that the market segment of display panels is already brewing, and the growth rate is beginning to come up. The prospect of the innovation market is very promising.

Industry profits have "diving", shutting down and reducing production

In the first half of 2019, it can be said that it is a challenge for panel makers. Taking TV large-size panels as an example, the global TV panel industry is facing difficulties. Sigmaintell pointed out that panel production capacity has maintained rapid growth, supply and demand have been seriously out of balance, panel prices have accelerated, and manufacturers' operations and profitability are facing severe challenges.

In the decline in the price of major-size panels, the major panel makers in the world suffered losses in the mid-2019, including South Korea's Samsung and LG, and Taiwan's AUO and Innolux.

In the bleak picture of the continued decline in the price of major-size panels, the 2019 mid-year report of the world's major panel makers was revealed one by one in the past month. Whether it is South Korea's Samsung and LG, or Taiwan's AUO and Innolux, they have all suffered losses in their semi-annual reports.

Samsung's first quarter revenue was 52.4 trillion won (about 45.18 billion US dollars), down 13.5% year-on-year; net profit was 5.04 trillion won (about 4.35 billion US dollars), down 56.9% year-on-year, the drag of display business is important the reason. The Samsung Display Panel business fell into losses in the first quarter due to a decline in demand for flexible screens and an increase in the market for large displays.

In the second quarter of 2019, LG Display's display company LG Display's revenue dropped 5% to 535.3 billion won (about 4.56 billion US dollars), and its operating loss was 369 billion won (228 billion won in the second quarter of 2018).

AUO’s consolidated revenue for September was 23.87 billion yuan (NT$), a decrease of 1.1% from August and a 13% decrease from the same period last year. The consolidated revenue for the third quarter was NT$70.05 billion, which was the same as the second quarter and a decrease of 13.6% from the same period last year. AUO Chairman Peng Shuanglang once said that the company's capacity utilization rate will be adjusted in the third quarter, mainly based on two factors, one is market demand, and the other is whether the panel price maintains a healthy enough level.

Innolux's consolidated revenue in September was NT$21.7 billion (approximately RMB5.028 billion), an increase of 3.1% from August but a decrease of 11% from the same period last year. The third quarter self-integration and revenue was NT$63.3 billion (approximately RMB 14.669 billion), a decrease of 14.4% from the same period last year and an increase of 0.2% from the second quarter.

Looking back on their financial performance in the past three quarters, this is the fourth consecutive quarter since 2018, when Taiwanese manufacturers have suffered losses for two consecutive quarters and Korean manufacturers for two consecutive quarters.

Although we have seen Korean and Taiwanese manufacturers try to reverse this loss by continuously increasing R&D investment, capital expenditures, and advanced products, it seems to have little effect.

South Korea's Samsung Electronics 2019 operating profit margin has slipped to -2.4% in the first half of this year. This is the third consecutive year after the Q1 in 2016, Samsung Electronics Panel business has once again suffered huge losses.

Because large-size panels continue to have the strength of land-based manufacturers, the panel price war in this field has become more and more fierce. The panel factory has suffered losses, and many manufacturers have to start production reduction or shut down some production lines from September.

According to relevant sources of the research institute, Samsung's 8.5-generation line of 120K/month capacity in South Korea has been shut down since July. In recent years, the Korean display giant LGD, which has invested heavily in OLEDs, has also planned to close. Stopped the large-size LCD panel production capacity in Korea.

Wang Jingyi, senior research manager at TrendForce, pointed out that this wave panel capacity adjustment is most positive for Korean panel makers. Among them, Samsung Display (SDC) was hit by the brand's fourth-quarter TV panel purchase demand, and in September and October, South Korea's 7th generation line and 8.5 generation line capacity were significantly reduced. It is expected that the September and October 7th generation line will be reduced. More than 50%, 8.5 generation line is about 3~40%.

AUO began to reduce 8A (8.5 generation line) and 6B (6th generation line) from September. 8A is mainly affected by the price and demand of 55-inch panel. The 4th quarter is estimated to be only about 50%. . 6B is a 65-inch drop and is expected to decrease by 20% in the fourth quarter.

Huaxing Optoelectronics (CSOT) has been renovating the machine for the T2 (8.5th generation line), so from the beginning of September to the end of the year, the T2 film is expected to decrease by 20%. The BOE Hefei 10.5 line and the Rainbow Optoelectronics (CHOT) 8.6 generation line were also reduced by about 20% from the end of the year. Guangzhou Sharp's 10.5-generation line panel factory also suspended production plans this year due to poor TV market conditions.

As the Korean panel factory closed a large number of production lines this year, the capacity of the new factory of China's panel factory continued to open. After a long period of time, China's panel makers increased their investment in large-size glass to 42.3%. The year will approach 50%.

Due to the increasing production capacity of large-size panels of domestic LCD panel factories such as BOE and Huaxing Optoelectronics, and the market demand is not high, they can only cut prices madly to seize the market. Although it is unable to escape the impact of the industry downturn, net profit has declined in the 2019 semi-annual report that has been announced by Huaxing Optoelectronics, Tianma and BOE, but this is related to South Korea's Samsung, LGD, Japan Sharp, Taiwan Innolux, AUO and other panels. Compared with the losses of the factory, the domestic mainland manufacturers are still in good condition.

How to spend the winter?

After decades of development, the global display panel industry has undergone great changes. At present, the focus of the panel industry is shifting to mainland China. I believe that China will become a major town in the panel industry in the future.

According to IHS forecast data, in the next five years, the annual composite growth rate of the global panel area will be reduced to 5%. Among them, TCL Huaxing and BOE, the leading enterprises in mainland China, rank the top two with 17% and 11% respectively.

With the 11-generation line of the two mainland powers put into production, mainland Chinese manufacturers will continue to consolidate the voice of the global LCD panel and continue to compete with Korean manufacturers in terms of scale and technology.

After the land panel manufacturers added the 10.5 generation line, Korean panel makers gradually shifted their focus to OLED and Micro LED; Taiwan panel makers have been unable to invest in OLED, and will be betting on Micro LED in the future; Japanese panel makers who have been sticking to LCD Very passive and gradually being marginalized.

According to the report from Korean media Business Korea, the development of the display industry is gradually deteriorating, and the situation of oversupply is becoming more prominent. In order to solve this problem, LG Display and Samsung Display, two major Korean manufacturers, are striving to cope with these problems through investment.

Samsung Display announced on the 10th that it has a portfolio of up to 13.1 trillion won, or about $11 billion, to build a QD-OLED production line at its factory in Chungcheongnam-do. Although Samsung shows that the market for small and medium-sized OLED panels used in smartphones accounts for more than 90% of the market share, with the negative growth of the smartphone market and the efforts of Chinese manufacturers in this market, Samsung is eager to find new sources of profit.

In the face of the forward-looking layout of Korean and Taiwanese panel makers, land panel manufacturers are also well prepared. Land panel manufacturers have invested heavily in small and medium-sized AMOLEDs, and some production lines have been mass-produced. For example, the Wuhan Huaxing 6-generation flexible AMOLED production line is expected to be mass-produced in the fourth quarter of 2019, and is rapidly catching up with the pace of Korean manufacturers.

On large-size AMOLEDs, land-based panel makers are trying to skip the WOLED technology route and directly push the printing of OLEDs to compete with Korean manufacturers for the large-size OLED market. On the Micro LED, the land-based manufacturers are equally spared, because if the new technology layout such as Micro LED is not taken seriously, the advantages of the LCD panel industry accumulated by the land-based manufacturers are likely to cease to exist.

In the case of global panel makers entering the fierce competition, due to the slowdown in the growth of the consumer application electronics market, the panel production capacity is over, and the industry is caught in a low-price competition cycle. We have seen that Korean manufacturers such as Samsung and LGD have lost money and abandoned the original LCD LCD production line to switch to new technologies such as OLED. The former Taiwanese panel maker CPT has been discontinued and is on the verge of bankruptcy; the main supplier of iPhone panel One JDI lost money in a row and had to accept external funds to invest in OLED.

Looking back at the historical industry downturn, most of them will refactor the industry structure, and it is a must for all manufacturers to consider. Now the panel industry is in the midst of the contradiction between medium and long-term demand and short-term demand capacity, which also sets the basic style of the panel industry for at least two years.

How to spend this winter? Li Dongsheng, chairman of TCL, told reporters: "Huaxing Optoelectronics' countermeasures this year are "the ultimate efficiency, cost, survival, innovation, development and development", these two measures."

The advantage of Chinese companies lies in the cost of efficiency. To achieve this extreme, we must survive. The transformation and innovation development refers to optimizing processes, technological innovations, from domestic development to overseas markets and opening up new business areas. New businesses such as commercial displays will lead to faster scale growth.

After the spin-off of TCL Group in the first half of the year, Huaxing Optoelectronics has accumulated technology and experience. At the same time, Huaxing Optoelectronics has become the world's fourth largest LCD TV panel supplier. With the 11th generation line of Shenzhen full production at the end of the year, the industry ranking in the second half will be “ Take a look at two."

The industry predicts that flexible OLED screens will grow rapidly, so in recent years China and South Korea have increased their investment in flexible AMOLED panels. In the past two years, 50% of the global flexible AMOLED production capacity has come from mainland China. IHS Markit predicts that sales of OLED panels will reach $20.7 billion in 2019, and the share of the smartphone market is expected to exceed TFT-LCD for the first time, reaching 50.7%, and the market share will reach 73% in 2025.

OLED's position in the smart phone panel market continues to rise, bringing new opportunities to panel makers. Samsung smart phone OLED panel was originally limited to self-use, but since 2015, domestic mobile phones such as vivo and OPPO have begun to import OLEDs in large quantities, which has further expanded OLED in the smart phone market.

At the same time, domestic panel makers have begun to invest heavily in OLED panel production lines. Up to now, there have been more than 15 OLED panel production lines in China, and some of them have been in mass production.

The global small and medium-sized OLED planning capacity is very large, and the OLED panel has the advantages of thin and light, high color gamut, high technology integration, flexibility, etc. In the past two or three years, almost all mobile phone manufacturers have introduced OLED panels, and the development trend of OLED panels is flourishing. Therefore, this has become a new direction for panel manufacturers to explore new fields and seek technological innovation.

Unlike the path developed by Huaxing Optoelectronics, BOE is the way to take the scale effect of production capacity. Benefiting from the boost of China's domestic capital and the development of manufacturing industry in the past few years, the talents, technology and production capacity are rapidly concentrated in China. In the first half of the year, the global industry only has three panel leaders in China to continue to make profits. In the future, this trend is expected to further strengthen.

Although the panel industry is in a downturn, it can be seen that BOE has not stopped the pace of capacity expansion and increased its investment in flexible AMOLEDs. Under the scale effect, BOE resists the profit pressure of the industry's downturn and maintains a certain profitability. After several years of rapid expansion, it has established a global leading position in the fields of TV applications, IT applications, and mobile device applications.

5G Opportunity, 8K HD Application

TCL Chairman Li Dongsheng said to the outside world during the IFA period: "It is difficult to judge whether the global panel industry will improve next year because there are variables. Now a considerable part of the panel industry is losing money, and some less competitive capacity will be withdrawn. From the demand side, The number of display application scenarios has increased. In addition to household use, there are commercial displays. In the past few years, China’s Shangxian market has grown by more than 30% annually."

It is undeniable that when the industry's trough of the entire panel can be ended, there is no fixed number, but even so difficult, the players in the field, especially the leading mainland Chinese enterprises, will certainly not give up, may be able to take advantage of this industry. The crisis has expanded against the trend and seized the important position of the next stage.

First of all, the semiconductor display industry is the embodiment of the national science and technology strength, and has become the expression of strength at the national level. Secondly, in the future industrial layout of AIOT and 5G, the panel display application is a long-term and continuous demand, which will continue to grow, such as flexibility. Many product technological innovations, such as collapsible, transparent display, and near-eye display, are all in the making.

In order to “pass through” the cyclical downturn of the panel industry and avoid single business dependence, BOE has launched the Internet of Things as an emerging development business, aiming to find new growth points; while TCL is taking the “semiconductor industry finance” path through investment. Banks such as Shanghai Bank and Ningde Times have increased their income and risk.

Although the growth of smartphones in the past two years has slowed down, the small and medium-sized panel factory

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