Tighter supply of color filters, polarizers and driver ICs, coupled with strong consumer electronics demand during the holiday stock-up, is slowing production cost reductions for LCD panels, according to WitsView, a division of TrendForce.
“As upstream suppliers are less willing to make further price concessions, panel makers are constrained in their cost-cutting efforts,” said WitsView. “In general, the cash costs of LCD panels in the fourth quarter of 2016 have fallen by just one to two percent compared with the prior quarter.”
One of the challenges in the display supply chain is a short supply of color filters for Gen-3.5 and Gen-4.5 panels. According to WitsView, this is due to a significant increase in the volume of additional orders for LTPS LCD panels used in smartphone displays because some manufacturers haven’t been able to buy enough supply of AMOLED panels for their high-end phones.
WitsView reports that “most of the additional LTPS panel orders are going to Japan Display (JDI), which lacks the capability to produce color filters for its older panel fabs. This surge of demand for JDI panels therefore has generated a rush of orders for dedicated color filter suppliers in the second half of 2016.”
In addition, the shortage is exacerbated by Dai Nippon Printing’s production scale back. DNP, a major provider of color filters for LCD panels, plans to shut down its Gen-6 facility by the end of November, WitsView said.
“DNP’s moves are also going to have an impact on the production of LTPS panels in recently built fabs that can manufacture color filters,” said WitsView. “This is because at the early stages of production, panel makers have to address the quality issues of their color filters (i.e. lens mura). Hence, they would still rely on outside suppliers.”
Another potential supply issue in the panel market is the tight supply of polarizers used in large-size TV panels. “The popularity of 55-inch and 65-inch TV sets has greatly expanded the consumption of Cyclo Olefin Polymer (COP) film, which is a material that made up the polarizers for large-size TV panels.”
The challenge is COP film is exclusively supplied by a Japanese chemical company and demand has outpaced supply, said WitsView.
Display makers may also see constrained supply for LCD driver ICs. WitsView reports that semiconductor foundries are adjusting their capacity utilization to address demand for other chip products, particularly fingerprint sensors.
“With fingerprint recognition gradually becoming a standard feature in high-end smartphones, demand for related IC products has soared in the second half of 2016 and is squeezing the wafer capacity for LCD drivers,” said WitsView.
Other supply chain issues are also impacting the global display market including fab closures, production halts, and lower yields.
“The scheduled closure of a Samsung fab has caused the supply to tighten and prices to rise for panels sized 40 to 45 inches,” said Iris Hu, WitsView research manager, in a statement. “To avoid high panel costs and improve profitability, TV brands have shifted their attention to the larger size segments. As a result, monthly shipments of panels sized 55 inches and above expanded three percent in October, countering to the trend of decline.”
“While it would be a unrealistic to expect an increase in unit demand next year in view of an overall sluggish global economy outlook, market revenue for flat panel displays can be expected to grow significantly following a rebound in panel prices along with an increased demand for premium display products,” said Ricky Park, director of DisplayResearch at IHS Markit, in a statement.
The key factor that will drive global revenue growth of 9.3 percent in 2017 is the rebound in panel prices in 2016, according to DisplayResearch. Park attributes the rebound to “supply-related issues such as restructuring of liquid crystal display (LCD) display fabs, production halts, and deteriorating yields from the maximization of production efficiency. Price increases were not just restricted to TV panels, but also smartphone, desktop monitor, and mobile PC-use panels, all of which turned upward from the second quarter.”
“Revenue growth in the flat panel display market is also being pushed by an increased supply of premium products that has raised the overall average selling price (ASP),” according to DisplayResearch. “The demand switch towards premium products, include consumer preferences for larger-size displays for TVs, desktop monitors, and tablets and for high-definition panels, including ultra-high definition displays. There was also a demand switch for AMOLED panels in smartphones, and for oxide and low-temperature poly silicon panels in mobile PCs and desktop monitors.”