Semiconductor M&A Accelerates in 2019
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It’s a classic dilemma for suppliers: prices decline more rapidly than manufacturing costs. Currently, display manufacturers are facing a squeeze as shipments of five-inch full-high-definition (FHD) mobile phone panels declined by 34 percent last year while manufacturing costs fell only 14 percent, according to IHS. Smartphone prices continue to fall, according to the researcher, so component price have to fall accordingly.
“Prices for TV panels have remained relatively flat since last year, but smartphone panel prices have been continuously falling during the same period,” said Jimmy Kim, principal analyst and researcher for IHS. “Growing numbers of panel makers are increasing their production allocations; however, in the current smartphone market, only mainstream and low-end products show any demand growth at all. Manufacturers are therefore looking at cost-saving measures, in order to bolster their bottom lines.”
Display manufacturers are focused on finding ways to reduce production costs in order to eke out profits, IHS said in its The Quarterly Smartphone and Tablet PC TFT LCD Cost Model report. If current price trends continue, manufacturing costs for five-inch FHD panels are expected to reach the break-even point by the end of this year.
With smartphone panel prices falling, some panel makers are replacing low-temperature polysilicon substrates (LTPS) with oxide semiconductor substrates. Others are reducing costs, by introducing multi-chip LED packages, RAM-less driver integrated circuits (ICs), composite optical sheets and other cost-effective component solutions.
Although panels for premium smartphones are becoming saturated, some panel makers are still expected to increase their capacity allocation for smartphone panels, since demand for mainstream and low-end products shows growth. This situation will, however, add pressure to lower prices for cost-competitive products.
For manufacturers, increasing profitability is not the same as cutting costs. Several display manufacturers are investing in newer panel technologies, such as organic light emitting diode (OLED), that command higher price tags and higher margins.
OLED has the advantage of using its own light source and is very conservative on power. Ongoing improvements in smartphone display performance are leading to increasing demand for high-resolution panels with lower power consumption requirements. These attributes aren’t supported by the most common legacy technologies (non-crystalline thin-film silicon or a-Si for short), according to IHS.
Global shipments of small and medium (nine-inches or smaller) a-Si TFT panels are forecast to decline 7 percent year over year in 2015, to reach 1.6 billion units. At the same time, combined unit-shipments of newer LTPS TFT LCD and oxide TFT LCD panels will grow 33 percent, to reach 676 million units, while AMOLED panel production will increase 44 percent, to reach 260 million units, IHS said in its Quarterly Small/Medium Shipment and Forecast Report.
“Multi-function smartphone panels will continue to dominate the small and medium-sized display market this year, leading to a growing shift from a-Si TFT LCD to LTPS/oxide TFT LCD and AMOLED panels,” said Hiroshi Hayase, senior director for displays at IHS Technology. “This trend is expected to accelerate LTPS TFT investment and AMOLED panel production starting in 2016, which could affect the future survival of a-Si TFT suppliers.”
“The smartphone performance revolution requires much higher displays resolution and lower power consumption, which at this time can only be supported by LTPS TFT LCD, oxide TFT LCD and AMOLED technologies,” Hayase concluded.
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