Jiwei Network Report (Text/Lin Meibing) After the LCD panel industry has just experienced the longest downward cycle, the consumer electronics market has not picked up in the first half of 2023, the competition in the panel industry has entered a white heat, and the elimination of old low-generation production lines has accelerated. Recently, Nanjing CEC Panda, JDI, AUO and other panel factories have successively announced the sale or shutdown of LCD panel production lines.
As the LCD panel industry gradually enters the stage of oligopolistic competition, the elimination of low-generation production lines has not stopped. In recent years, Chinese mainland LCD panel industry has risen rapidly, leaping to become the world's largest LCD panel production base, South Korea, Japan, China Taiwan and other countries and regions panel manufacturers are unable to compete, up to now, has shut down more than 20 old production lines, other old production lines or low-generation production lines may also be shut down, mergers and acquisitions, transformation of the end.
It is worth noting that the knockout is not only a trend in the LCD panel industry, but also in the OLED industry. With the continuous release of the production capacity of the 6th generation flexible OLED production line, Samsung Display rigid OLED has been hit by dimensionality reduction and has to reduce the capacity utilization rate; At the same time, the efficiency and competitiveness of 4.5-generation and 5.5-generation OLED production lines are inferior to the 6th-generation lines, and they will also be forced to shut down or transform.
Panel factories stopped production one after another
Recently, four panel factories such as Nanjing CEC Panda, Panasonic, JDI, and AUO have successively announced the sale or shutdown of LCD panel production lines.
Nanjing CEC Panda Liquid Crystal Display Technology Co., Ltd. (hereinafter referred to as Nanjing CEC Panda) has continued to lose money in recent years, with accumulated liabilities of more than 11 billion yuan, and 76.85% of its equity and debt rights were publicly listed for sale on the Shenzhen United Equity Exchange at the end of July, with a transfer reserve price of 1,546.15 million yuan.
Recently, the LCD panel production line has been stopped or closed
Source: Jiwei Grid Collation
Panasonic announced on August 1 that it will liquidate its subsidiary that produces liquid crystal displays (LCDs) to accelerate its transition to electric vehicle (EV) battery manufacturing. Back in 2019, Panasonic decided to close the factory and scale down its LCD business to selling only inventory products; In 2021, Panasonic officially withdrew from the LCD panel market and bid for auction the production equipment of its Himeji 8.5 generation line.
On August 2, JDI announced its decision to discontinue LCD panel production at its Tottori Plant in Japan by March 2025 and to develop and design JDI's automotive technology business as a strategic operation center. According to JDI, the Tottori G4 production line produces a-Si LCDs, which are not cost competitive, the technology is not as good as LTPS LCDs, and demand is declining, so the company decided to end production at the Tottori plant to better respond to customer needs, strengthen the company's competitiveness, and improve profitability.
AUO announced on August 4 that it will close its C5D and C6C production lines in Tainan. AUO said that considering the impact of terminal demand and long-term supply and demand contraction, the company's operation strategy based on flexible planning, focusing on the layout of new technologies in the market and the demand for high-value goods, after careful assessment, will close the C5D and C6C plants in Tainan, and arrange the capacity planning and scheduling to other production lines to improve the optimal performance and configuration of the company's overall production and manufacturing.
Analysts pointed out that Nanjing CEC Panda, Panasonic, JDI, AUO stopped or withdrew shows the harsh living environment of the LCD panel industry. Among them, Nanjing CEC Panda and Panasonic have only one production line, no scale advantage, it is difficult to survive in the highly competitive LCD panel market for a long time, especially Nanjing CLP, there is a huge loss, have to choose to sell. JDI has been losing money for a long time, and the shutdown of the Tottori plant is conducive to reducing losses. AUO's C5D and C6C production lines are old production lines, which are not competitive enough and have forced to close the factory.
Discontinuation has become the norm in recent years
In recent years, the LCD panel industry has never stopped shuffling, and stopping production or closing factories has become a normal phenomenon.
JDI ceased production of its Nengmei LCD panel factory as early as the end of 2017 and transferred it to JOLED. In 2020, JDI sold the land, buildings and equipment of its Baishan LCD panel factory to Sharp and Apple. In March 2023, JDI once again announced the sale of its Dongpu LCD panel factory to Sony Semiconductor, and the original factory's VR, automotive and newly developed display production operations will be transferred to other JDI factories, and the employees of the original factory will also be transferred to other JDI factories to provide continuous employment opportunities.
In recent years, LCD panel production lines have been suspended or closed
Source: Jiwei Grid Collation
Similarly, LG Display (LGD) also closed its P2, P3, and P4 low-generation LCD panel factories in 2017. In 2022, LGD will continue to close the P5 and P7 LCD panel factories and transfer the demand for P5 orders to the P6 production line. In 2023, LGD further revealed at the first quarter results briefing that the Guangzhou 8.5-generation LCD panel production line is in operation, but the production capacity has shrunk by 50%.
Compared with LGD, Samsung Display moved earlier to shut down the factory. In 2016 and 2021, Samsung Display closed a 7th generation LCD panel production line; In 2017, Samsung Display closed four more 5th generation LCD panel production lines and sold the equipment to Chinese manufacturers; In 2020, Samsung Display began to rebuild L8-1 into an 8.5-generation QD-OLED production line; in 2021, Samsung Display sold Suzhou 8.5-generation LCD panel production line to TCL Huaxing; in 2022, Samsung Display closed the L8-2 LCD panel factory and announced in 2023 that it would be converted to an 8.6-generation OLED production line for IT equipment.
AUO and Innolux have actively carried out a variety of measures this year to accelerate the transformation of low-generation LCD panel production lines. The production line of AUO Longtan Desire Park 5A plant has been closed at the end of June, and relevant personnel have been transferred to 5B factory, and it is planned to transfer it to the mass production of Micro LED new technology platform and automotive display integration module production line in the future.
Innolux plans to shut down its 5.5-generation LCD panel production line and consolidate the production capacity of its three Gen 5 plants. Innolux Chairman Hong Jinyang pointed out that the company will have comprehensive planning, for example, in response to the future development of 5G/6G communication technology may require more low-orbit satellite signal receiving equipment, and Innolux has long cooperated with strategic partner Kymeta to produce flat panel satellite dishes, this 5.5 generation factory has a lot of room to invest more competitive production capacity.
Analysts pointed out that LCD panels are a fully competitive industry, new factories eliminate old factories and high-generation production lines eliminate low-generation production lines have become the industry norm, only with market changes and continuous innovation can survive to the end, otherwise it is easy to be eliminated by the market.
The old production line has become the hardest hit area
From the above cases, it can be found that the manufacturers who closed the factory are mainly from Japan, South Korea and Taiwan.
At present, the global LCD panel industry has formed an oligopoly pattern with Chinese manufacturers as the core. Chen Jianzhu, senior analyst of IDC's global professional foundry and display industry research team, said that BOE, Huaxing Optoelectronics, and Huike together account for more than 60% of the global TV panel market, plus Innolux, which ranks fourth, with a total market share of more than 75%; If only Chinese mainland panel market accounts for more than 65%, the impact on the supply of TV panels is amazing.
With the rise of the Chinese mainland LCD panel industry, it is an inevitable trend for Japan and South Korea to close the LCD panel production line.
Hu Chunming, executive deputy secretary-general of the LCD Branch of the China Optics and Optoelectronics Industry Association, believes that Chinese mainland a large number of 8th generation lines and 10th generation lines have been put into production, forming a scale, and the production line costs, efficiency, and market competitiveness of other countries or regions are not as good as Chinese mainland, and will naturally be eliminated. For example, JDI, AUO, and Innolux were forced to shut down their low-generation LCD panel production lines one after another to reduce losses; LG Display and Samsung Display chose to accelerate the pace of transformation from LCD to OLED, trying to use OLED to compete with Chinese mainland manufacturers.
In 2023, the external environment is particularly severe and complex, affected by inflation, geopolitics and other factors, people reduce consumer electronics spending, various display application markets continue to decline, so that the LCD panel industry competition is extremely fierce, Japan, South Korea, Taiwan manufacturers some old or low-generation production lines are eliminated. Because the low-generation production line equipment is old, the production product specifications are not as good as the high-generation production line, and it cannot keep up with the current market demand such as large size, high resolution, and high refresh rate, and it is easy to be replaced by high-generation production lines in the fierce market environment.
In the field of TV LCD panels, although the price has been rising, the market has not improved significantly, and panel manufacturers can only affect supply and demand through production control and maintain the price upward trend. Zhao Jun, CEO of TCL Huaxing, pointed out that the overall market this year is slowly recovering in the cold winter. In the first half of this year, the market ushered in a recovery, but the external market demand did not grow significantly, and the recovery of the panel industry was more due to the corresponding adjustment of the panel factory's business strategy, more flexible response to changes in the market, and more the result of adjustment and optimization on the supply side.
However, artificial price control is unlikely to be maintained for too long, and once demand falls again, LCD panel prices will be difficult to control. In the fourth quarter of this year, the demand for LCD panel procurement will decrease, and the price increase trend may not necessarily continue, and the final price may be the same as the end of the previous quarter in the upstream and downstream manufacturers' game.
The market environment for small and medium-sized LCD panels is more harsh. Originally, a-Si LCD and LTPS LCD have a certain competition, now after the release of flexible OLED production capacity, it has also entered the market at a low price, and the LCD panel is unable to resist and can only be quickly replaced, making the survival space of the low-generation LCD panel production line smaller and smaller. Jiwei consulting analysts pointed out that in the overall market recession, small and medium-sized LCD panel manufacturers were originally under pressure to move forward, and this year they suffered from flexible OLED dimensionality reduction, and their market share was further eroded, and the old or low-generation LCD panel production lines were under greater pressure to survive.
In order to reduce losses, AUO, Innolux, JDI, and Nanjing CEC Panda have stopped producing low-generation LCD panel production lines, and LGD Guangzhou high-generation LCD panel production line production capacity has also been forced to reduce by half. However, manufacturers such as AUO, Innolux, LGD, and Samsung Display are not willing to be forced out, and are also actively looking for new ways out through transformation. AUO plans to adjust the factory area of Longtan Desire Park, which is expected to be transformed into a mass production line of MicroLED new technology platform and automotive display integration module in the future. Innolux transformed its Gen 3.5 LCD panel production line into a panel-level chip packaging line, and is considering converting one of its Gen 5.5 LCD plants to Micro LED panel production. Samsung display after turning off the 7th generation line and 8.5th generation line. Turn it into an OLED, QD-OLED factory. LGD plans to convert the Paju P7 plant into an OLED production line.
Next year may set off a wave of mergers and acquisitions
The knockout round of the LCD panel industry is not over, and factory closures and mergers and acquisitions brought about by oligopolistic competition patterns, overcapacity, structural upgrades and other factors will continue to occur. Xie Qinyi, senior research director of Omdia's display department, expects that from the second half of this year, panel factories will gradually close old production lines, or mergers and acquisitions, or transformations. Qunchuang may also stop the first and second old production lines of less than 5 generations in the second half of the year, and second-line panel factories such as Xianyang Rainbow will usher in mergers and acquisitions.
At present, the LCD panel industry has not come out of the downturn, and the head panel manufacturers have moved relatively consistently in order to make profits, bringing greater competitive pressure to the second and third line panel manufacturers. Xie Qinyi pointed out that the current LCD panel industry has formed an oligopolistic competition situation, and some poorly operated small panel factories may gradually be merged and acquired by large manufacturers in the future. In the future, the out-of-market and elimination of low-generation LCD production lines of 7 generations and below will become frequent.
Dong Min, deputy secretary-general of the China Electronic Video Industry Association, also believes that the current TV LCD panel price has been rising, although manufacturers are losing, but the acquisition price is difficult to negotiate, but next year if the panel price does not continue to rise, LG Display Guangzhou 8.5 generation LCD panel production line, rainbow photoelectric 8.6 generation line may be acquired.
In the long run, the gradual shrinkage of LCD panel factories is irreversible, but with the different operating conditions of manufacturers, the exit rhythm is different.
The OLED knockout will begin
Some industry insiders believe that the structural elimination of the LCD panel industry may be repeated in the OLED panel industry.
In the field of OLED, low-generation production lines may be the first to be eliminated. At present, the production capacity of the 6th generation flexible OLED production line continues to be released, bringing greater survival pressure to the 5.5th generation and 4.5th generation OLED production lines, of which the JOLED 5.5 generation printed OLED production line has been discontinued. If the 5.5th generation and 4.5th generation lines continue to survive, they may need to find new ways to survive, such as switching to automotive display, wearable display production line or R&D production line. Hu Chunming believes that with the intensification of market competition, low-generation OLED production lines will also be eliminated, for example, 4.5-generation OLED production lines are not competitive enough and may be gradually replaced by 6-generation flexible OLED production lines.
Rigid OLED production lines are also facing great operating pressure. In recent years, the release of flexible OLED production capacity has also had a major impact on rigid OLEDs. In order to seize market share, domestic flexible OLED panel manufacturers have a very aggressive price strategy, forming a dimensionality reduction blow to rigid OLED, and Samsung shows that rigid OLED production is declining rapidly. In order to improve the utilization rate of rigid OLED capacity, Samsung Display is actively converting to IT OLED, but the current IT OLED market volume cannot fully digest its rigid OLED capacity.
Under the offensive of domestic flexible OLED, Samsung Display is likely to be evaluating when to shut down the low-generation rigid OLED production line. Industry insider Wu Qing (pseudonym) believes that Samsung Display Company's rigid OLED production line equipment has been amortized, if the 4.5th generation, 5.5th generation rigid OLED production line is unprofitable, 8.6th generation rigid OLED production line can undertake IT application rigid OLED orders, it is possible to abandon the small and medium-sized LCD business that year to take the initiative to shut down the rigid OLED production line and sell related equipment. UBI Research CEO Lee Chung-hoon even pointed out that initially they expected Samsung Display to shut down its rigid OLED business around next year, but given the current situation, it could be this year at the earliest.
Under the nest, there are finished eggs. In the case of a slump in the consumer electronics market, LCD and OLED panel manufacturers in the first half of this year are under tremendous operating pressure, and most manufacturers cannot avoid the end of losses. From the second half of the year to the first half of next year, if the consumer electronics market still does not improve, LCD and OLED may usher in a new round of elimination.