Large Flat Panel Display Capacity to Increase; Prices to Fall

With the construction of several new Generation 10.5 fabs underway, and the first mass production shipments expected in the first quarter of 2018, prices for large flat panel displays (FPDs) are expected to drop as production capacity surpasses market demand.

IHS Markit reports that several suppliers - BOE, China Star, LG Display and Foxconn - are planning to build seven new Generation 10.5 factories by 2020, resulting in Gen 10 and larger FPD capacity to grow at a compound annual growth rate of 59 percent between 2017 and 2022. Gen 10.5 fabs will be used to produce large-size 65-inch and 75-inch TV panels.

The new Gen 10.5 fab capacity translates into 735,000 substrates per month by the end of 2022, which is “enough capacity to produce more than 60 million 65-inch televisions a year,” said Charles Annis, senior director at IHS Markit, in a statement.

Annis forecasts Gen 10 and larger fabs will account for 26 percent of large-area capacity by 2020, up from four percent in 2017.

Market researcher TrendForce expects the first Gen 10.5 fab, owned by China’s BOE Technology (BOE), will start mass production at the end of the first quarter of 2018. It will become the industry’s largest-generation panel fab and enable BOE to reach a new high of shipments, according to the TrendForce.

“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,” said Anita Wang, senior research manager of WitsView, in a statement.

Korean and Taiwanese panel makers have already increased their shipments of 65-inch and 75-inch panels in advance, which totals 11 million and 1.6 million units in 2017, respectively, according to TrendForce.

WitsView’s survey of Gen-10.5 fabs 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. Sakai Display Products (SDP) is also building a Gen 10.5 facility in Guangzhou. In the U.S., Foxconn’s Wisconsin project is expected to include a Gen 10.5 line. WitsView also said there are reports that LGD is planning to build a plant in Paju to process Gen 10.5 glass substrates.

WitsView also predicts that China’s share of global production capacity will overtake South Korea as the leading producer for large-size LCD panels in 2017. China’s share of global capacity area is expected to be about 50 percent by 2020.

“Sixty-five-inch and larger panels are predicted to be one of the fastest growing segments of the FPD market over the next five years. Even so, with so many new Gen 10.5 factories being built, capacity is forecast to surge ahead of demand,” Annis said.

As the Gen 10.5 factories ramp-up, industry watchers, including IHS Market and WitsView, expect prices to fall. IHS Market estimates that prices for 65-inch and larger panels will fall by about five percent annually.

“Overall, as panel makers continue to increase production capacity in 2018, the panel market will experience an oversupply, thus leading to a continuous drop in panel prices. However, lower panel prices will be lead to more product promotion from brands,” said TrendForce.

“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,” according to Wang. “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.

TrendForce estimates large-size panel demand and supply by area will grow by seven percent and 7.7 percent, respectively in 2018. “As the market demand increases, the glut ratio for large-size panels will also change from 7.8 percent to a more balanced figure of 5.2 percent.”

Annis said FPD makers are moving quickly to build Gen 10.5 fabs, which are highly optimized for 65- and 75-inch panels, as premium television move to larger sizes as prices fall.

However, there are high capital costs to build a new Gen 10.5 factory. IHS Markit estimates total project costs to build a fab with a monthly capacity of 60,000 substrates is between $3.4 billion and $6 billion. As a result, some panel makers are turning to regional governments for support, said Annis.

It is also creating big opportunities for the supply chain particularly equipment makers. IHS Market’s Display Supply Demand & Equipment Tracker estimates that FPD equipment spending will reach a record high of more than $20 billion in 2018 in large part due to new Gen 10.5 factories.

A few panel makers still have not invested in a Gen-10.5 fabs due to the potential financial burden, according to WitsView. “Going forward, the generational divide in the manufacturing process will significantly influence the competition in the panel industry.”