Has the LCD panel price rise cycle reached its peak?

The last time the industry’s price increase was shown was between 2015 and 2016. At that time, the whole industry in Mainland China set off a round of “lack of cores and fewer screens”. In the new investment cycle, from the national fund to the capital circle, a large amount of money has entered the panel and chip industry.

Unlike the chip industry, where the technical difficulty is more "advanced", the large panel industry has benefited from the global automation technology. With the overflow of process stereotypes, a large number of advanced manufacturing processes and processes have been solidified on the panel equipment and equipment. To get enough industry subsidies to support the price war, is the rapid increase in internal capacity utilization to dilute costs.

Moreover, the system integration technologies used in the manufacture of large panels are basically provided by major international companies such as Honeywell. While the aircraft and automobile manufacturing OEMs have also been taken over by China, these completely civilian-level system integration technologies are only Some efficiency optimization technologies are basically not involved in the "stuck neck" problem, which does not involve the so-called intelligent military technology of the West.

Therefore, in the manufacturing of large panels, the Chinese mainland began to catch up with South Korea and Taiwan in production capacity layout.

In particular, after Japan and South Korea became entangled in economics, trade and politics, Japan began to strategically support mainland China and Taiwan from technology to industry on large panels. The mainland of China was strategically supported by OLED technology, and Taiwan was strategically supported. LCD technology, so as to obtain the support of panel production capacity in these two places, to make up for the technological and industrial stagnation caused by the declining number of employees in Japan's own panel industry.

The layout of large panels in Mainland China is highly coincident with the layout of South Korea ten years ago. Therefore, after the panel production capacity in Mainland China has increased, it has directly replaced Korean panels with price advantages in the global market.

According to industry statistics, after panel production in mainland China has formed a scale of production capacity, the panel cost after subsidies is generally 15% to 25% lower than the cost of local Korean companies, which directly offsets the advanced manufacturing process of Korean corporate panels. Weak advantage on the market.

Coupled with the high-quality production lines and optimized generation production lines invested by mainland China in the later period, the cost advantage in panel economic cutting is higher, so that Korean panel companies basically have no competitiveness in the standard panel market.

Therefore, Korean panel companies have begun to eliminate low-generation panel production lines with low automation and low capacity utilization. Since 2018, Korean panel companies have entered a state of loss, and some orders have been issued to panels in mainland China and Taiwan. Enterprise foundry.

With the continuous release of production capacity in mainland China, Taiwanese panel companies doing standard products, especially panel production lines below the 6th generation, have also encountered the same problems as Korean panel companies. They have to withdraw from the market due to operating losses.

The remaining Taiwanese panel companies, such as Innolux, AUO, and Caijing, have received a large number of transfers of Japanese technology in advanced technology and advanced manufacturing processes due to their deeper involvement in operations. Therefore, they have differentiated products and are neutral. Its market position continues to receive orders from the global market, but its profitability is not as good as the previous two years.

However, Taiwan’s panel chip companies have developed rapidly in the past five years, including panel driver chips, and image quality algorithm chips. With Taiwan’s local chip foundry production capacity advantages and Japanese technology transfer advantages, they quickly occupied Japan. And European and American chip companies withdraw from the market.

Moreover, in the field of power management chips and touch sensor chips based on similar technologies, it has also accumulated advantages in the technology of panel driver chips, quickly obtained market opportunities, and coordinated with chip foundry production capacity to become the main supplier in the industry.

Although the large panel production capacity in Mainland China has achieved the first opportunity, it has not obtained the supporting advantages of the local market in the panel driver chip and the image quality algorithm chip. A large part of the reason is the booming security video market in Mainland China and the camera chip market. With rapid development, some manufacturers have moved to more attractive security and network surveillance video algorithm chips, as well as COMS image algorithm chips.

However, even if the big cycle is superimposed on the domestic advantages of mainland China, the large panel and related chip industries in mainland China have also fallen into a channel of profit decline under the price war in 2018. If it is not supported by the huge revenue figures brought by capacity growth, In fact, the profitability of panels has not reached the profit margins of panel and panel-related chip companies in South Korea and Taiwan in the previous cycle.

In 2019, the 10.5/11 generation line in Mainland China and the 8.6 generation line after the automated manufacturing upgrade will continue to open up. The supply and demand balance of the large panel industry has been broken, and the industry has entered a state of overcapacity. Some old panel production lines are very difficult to make profits, and their losses are rapidly expanding.

When several large panel production lines in Mainland China sold panels to the market at subsidized cost prices, the South Korean panel production lines and some old panel production lines in Mainland China both suffered losses of 15% to 25% or more. Inevitably, these panel production lines have all begun to seek capital from the mainland of China to take over the residual value of assets, so as not to lose all the initial investment.