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The latest analysis by WitsView, a division of TrendForce, reveals that China is set to overtake South Korea this year as the leading producing region for large-size LCD panels. In terms of area, China’s share of the global production capacity for large-size panels will surpass South Korea’s in 2017. By 2020, China’s share of the global capacity area may reach around 50%.
“Both domestic and foreign panel makers continue to build and expand their fabs in China because of the country’s enormous market and the financial support from the Chinese government, said Anita Wang, senior research manager of WitsView. “At the same time, the capacity share of South Korea has shrunk. Samsung Display (SDC) closed its Gen-7 fab L7-1 at the end of 2016, and both SDC and LG Display (LGD) have lowered their Gen-5 capacity.”
According to WitsView’s latest estimate, China’s share of global capacity area for large-size panels will reach 35.7% for 2017, up from 30.1% for 2016. Taiwan’s capacity share is projected to jump from 28.9% in 2016 to 29.8% in 2017, making the island the second-largest producing region. South Korea will slide down to third place in the 2017 capacity share ranking with 28.8%, a significant drop from its leading share of 34.1% in 2016.
Several major panel makers have invested heavily in Gen-10.5 capacity
With the South Korean panel makers lowering their production capacity, the global production capacity in area for large-size panels is estimated to reach 246.6 million square meters, representing an annual increase of just 1.3%. This year’s capacity area growth rate is also the lowest within the recent two- to three-year period. Over the next three years, however, six new Gen-10.5 fabs are expected to be in operation, and capacity area growth will again take off. WitsView forecast that the global capacity area for large-size panels will expand by 8% to 9% annually from 2018 and 2020, totaling around 317.8 million square meters per year by the end of the period.
Wang added: “Looking ahead, investments in production capacity among competing panel makers will reach a new level. Next year, a Gen-10.5 fab in Hefei, China, owned by BOE Technology (BOE) will be entering mass production, thus replacing Sharp’s Gen-10 fab in Japan’s Sakai as the world’s largest-generation panel fab. Nonetheless, other major panel makers are also planning to establish their own Gen-10.5 lines within the next several years.”
A survey of Gen-10.5 fabs that are under planning or construction shows that in China, domestic panel maker China Star Optoelectronics Technology (CSOT) will build a plant in Shenzhen, while BOE plans to set up another line in Wuhan. There is also a Gen-10.5 facility that is being built in Guangzhou by Sakai Display Products (SDP). In the U.S., the Wisconsin project that was announced by Foxconn is expected to include a Gen-10.5 line as well. As for South Korea, there are reports of LGD planning to build a plant Paju for processing Gen-10.5 glass substrates.
Rapid expansion of Gen-10.5 capacity will also increase the risk of oversupply in the future
Comparatively, the area size of a piece of Gen-10.5 glass substrate is about 1.8 times as large as that of a piece of Gen-8.5 glass substrate. Given the size difference, the risk of oversupply for large-size panels is going to be much greater as more Gen-10.5 capacity becomes available.
WitsView points out that the panel industry over the past several years has worked to raise the demand for large-size TV sets as to help consume the production capacity of fabrication lines of larger generations. With more Gen-10.5 facilities entering mass production, the industry will be pushing panels sized 65 inches or larger as the main products for the TV market. There will also be corresponding promotional activities from panel makers and TV brands to have consumer demand concentrate on that ultra-large size range as well.
WitsView furthermore anticipates that panel makers with Gen-10.5 capacity will be under pressure to lower their prices, and this in turn will affect prices of panels that come from fabs of smaller generations. Currently, most 65-inch panels are made on Gen-6 lines, while 75-inch panels mainly roll out from Gen-7.5 lines. When the new Gen-10.5 fabs enter operation, products made in Gen-6 and Gen-7.5 plants will be facing intense price competition and have slimmer profit margins.
WitsView also notes that a few panel makers still have not invested in a Gen-10.5 fab due to the potential financial burden. Going forward, the generational divide in the manufacturing process will significantly influence the competition in the panel industry. However, the ability to adjust product mix quickly will be key to the survival of panel makers in the future as they encounter oversupply resulting from the capacity expansion.