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Acceleration of LGD’s OLED Business in 2022 is Critical for Business Sustainability
Large Area OLEDs LGD plans to ship 8m OLED panels for use in TVs in 2021. The company changed its pricing strategy and hiked prices by about 5%–10% for 65"/55"/48" in 2Q without brands changing their plans. Prices continued rising for LCD panels too in 2Q, and there is a chance that prices will significantly fall for large panels of 65” or bigger in 3Q either. In Japan, the US, and Europe, OLED TV sales are strong and have been beating sales of Mini LED LCD devices from rival Samsung Electronics (VD division). As a result, OLED prices may also remain the same in 3Q. The key period to watch for is the period from the second half of 4Q to 1H 2022, when the decline in LCD prices will likely sharpen. Visual Display’s decision to adopt Samsung Display’s QD-OLED (starting in 2022) will have little immediate impact as Samsung Display has the capacity to produce only 30,000/month for G8. Visual Display may only procure 1m units per year. In order to provide 2m units, Samsung Display would need to invest to increase capacity by at least 30,000/month. Although the quality evaluation is extremely high for QD-OLED samples for TV makers, investment decisions have been delayed since it is difficult to be profitable due to the high technological and cost hurdles. If Samsung Display decides not to make additional investments and instead switches gears to prepare for mass production of QNED (blue LED + QDCF) in 2023–2024, there would be a higher likelihood that LG Display supplies OLED display panels to Visual Display. In this situation, it may be more realistic for the company to invest more in its Guangzhou plant (30k–60k), shift to OLED for P7/P8 from 2023, and restart plans to invest in G10.5. In the medium/long term, these OLED developments may be positive for device and components manufacturers and benefit the company’s suppliers even more.
LCD Displays The company will delay the closure of the P7 factory (G7.5) to the end of 2022 or later due to strong demand from the TV industry (LG Electronics). However, partly due to a shortage of components, output declined from 150,000/month to 140,000/month at the end of 1Q 2021 and from 170,000/month to 160,000/month at the end of 2Q (versus 100,000/ month in 4Q 2020). Although output has been significantly rising from 4Q 2020, it was a bit lower than expected. The company is also extending production at the P8 factory (G8) to 2023 or later to have the factory specializes in providing supplies to the IT industry. Output should rise from 100,000/month to 140,000/month (currently around 130,000/ month). Because Samsung Display decided to postpone the closure of its T8 factory again (to the end of 2022), and because Chinese manufacturers are increasing production (especially for currently existing factories such as HKC), global large FPD production capacity is expected to rise 12.9% in 2022, much higher than the estimate for demand (3.8%).
If supplies of components such as glass substrates, polarizing plates, and driver ICs are better than this year, the supply-demand balance may worsen for large LCDs in 2022. This month, the price of mid-tier 32”/43” LCD panels declined slightly for the first time in one year. Whether we enter a phase where the supply-demand balance worsens in earnest hinges on demand. Our focus is on 1) the situation (impact on demand from a rise in retail prices) in the US, where performance is still strong for TVs, which account for 80% of demand (in surface area terms); and 2) the strength of final demand from the IT space (particularly monitors and laptops), where supply has not been keeping up with demand, although these products only account for 20% of demand. First, we will be looking at the back- to-school shopping season. For the first point, LG Display’s management team is a bit negative on 43” and smaller displays. For the second point, it does not foresee any problems this year. In our opinion, there is a low chance that panel manufacturers will lower production as long as LCD prices do not significantly fall (50% or more). It seems the environment will continue to be relatively good for major components manufacturers (in terms of volume/area and prices).
Small/medium OLED: E6-1 is an 6-2 (30,000/month), which are factories essentially dedicated to Apple, shipped 22m displays for use in the iPhone 12 (6.06”) in 2020. It is estimated that about 18m were shipped in 1H 2021 alone. For the new phones (the iPhone 13), the company has received validation for 6.06” (13) and 5.4” (13 Mini). We have upwardly revised our annual shipment volume estimate, which includes displays for current devices, from 47m units to 50m units. For 2H, it expects to be operating at almost full capacity, so earnings will likely continue to improve in 3Q and 4Q. In 2022, the iPhone 14 will likely not have a Mini, and two devices will likely each have a 6.7” and a 6.06” display. The Pro (6.7”/6.06”) will likely use LTPO- OLED (consumes little electricity), and the 14 (6.7”/6.06”) will likely have LTPS- OLED. Our eyes are on whether the LG Display can win orders for the LTPO device and two LTPS devices. To boost production, there is a high chance the company will decide to invest in the E6-3 factory. We expect mass production in 2Q 2022. As capacity rises for a modular factory in Vietnam (about 7.5m/month from 3Q of this year), the company will likely aim to ship 60m–70m units in 2022. In our 1Q results flash, we talked about the prospects of investing in E6-4 for the IT industry (tablets and laptops), but there are still many variables on this front. This is because the adoption of OLED for the iPad will likely be strategically pushed back (to 2023 or later for 10.9” and to 2024 or later for 12.9”). For LTPS-LCD (AP3), the company seems set to focus on the auto industry and some smartphone makers.
Large Area OLEDs LGD plans to ship 8m OLED panels for use in TVs in 2021. The company changed its pricing strategy and hiked prices by about 5%–10% for 65"/55"/48" in 2Q without brands changing their plans. Prices continued rising for LCD panels too in 2Q, and there is a chance that prices will significantly fall for large panels of 65” or bigger in 3Q either. In Japan, the US, and Europe, OLED TV sales are strong and have been beating sales of Mini LED LCD devices from rival Samsung Electronics (VD division). As a result, OLED prices may also remain the same in 3Q. The key period to watch for is the period from the second half of 4Q to 1H 2022, when the decline in LCD prices will likely sharpen. Visual Display’s decision to adopt Samsung Display’s QD-OLED (starting in 2022) will have little immediate impact as Samsung Display has the capacity to produce only 30,000/month for G8. Visual Display may only procure 1m units per year. In order to provide 2m units, Samsung Display would need to invest to increase capacity by at least 30,000/month. Although the quality evaluation is extremely high for QD-OLED samples for TV makers, investment decisions have been delayed since it is difficult to be profitable due to the high technological and cost hurdles. If Samsung Display decides not to make additional investments and instead switches gears to prepare for mass production of QNED (blue LED + QDCF) in 2023–2024, there would be a higher likelihood that LG Display supplies OLED display panels to Visual Display. In this situation, it may be more realistic for the company to invest more in its Guangzhou plant (30k–60k), shift to OLED for P7/P8 from 2023, and restart plans to invest in G10.5. In the medium/long term, these OLED developments may be positive for device and components manufacturers and benefit the company’s suppliers even more.
LCD Displays The company will delay the closure of the P7 factory (G7.5) to the end of 2022 or later due to strong demand from the TV industry (LG Electronics). However, partly due to a shortage of components, output declined from 150,000/month to 140,000/month at the end of 1Q 2021 and from 170,000/month to 160,000/month at the end of 2Q (versus 100,000/ month in 4Q 2020). Although output has been significantly rising from 4Q 2020, it was a bit lower than expected. The company is also extending production at the P8 factory (G8) to 2023 or later to have the factory specializes in providing supplies to the IT industry. Output should rise from 100,000/month to 140,000/month (currently around 130,000/ month). Because Samsung Display decided to postpone the closure of its T8 factory again (to the end of 2022), and because Chinese manufacturers are increasing production (especially for currently existing factories such as HKC), global large FPD production capacity is expected to rise 12.9% in 2022, much higher than the estimate for demand (3.8%).
If supplies of components such as glass substrates, polarizing plates, and driver ICs are better than this year, the supply-demand balance may worsen for large LCDs in 2022. This month, the price of mid-tier 32”/43” LCD panels declined slightly for the first time in one year. Whether we enter a phase where the supply-demand balance worsens in earnest hinges on demand. Our focus is on 1) the situation (impact on demand from a rise in retail prices) in the US, where performance is still strong for TVs, which account for 80% of demand (in surface area terms); and 2) the strength of final demand from the IT space (particularly monitors and laptops), where supply has not been keeping up with demand, although these products only account for 20% of demand. First, we will be looking at the back- to-school shopping season. For the first point, LG Display’s management team is a bit negative on 43” and smaller displays. For the second point, it does not foresee any problems this year. In our opinion, there is a low chance that panel manufacturers will lower production as long as LCD prices do not significantly fall (50% or more). It seems the environment will continue to be relatively good for major components manufacturers (in terms of volume/area and prices).
Small/medium OLED: E6-1 is an 6-2 (30,000/month), which are factories essentially dedicated to Apple, shipped 22m displays for use in the iPhone 12 (6.06”) in 2020. It is estimated that about 18m were shipped in 1H 2021 alone. For the new phones (the iPhone 13), the company has received validation for 6.06” (13) and 5.4” (13 Mini). We have upwardly revised our annual shipment volume estimate, which includes displays for current devices, from 47m units to 50m units. For 2H, it expects to be operating at almost full capacity, so earnings will likely continue to improve in 3Q and 4Q. In 2022, the iPhone 14 will likely not have a Mini, and two devices will likely each have a 6.7” and a 6.06” display. The Pro (6.7”/6.06”) will likely use LTPO- OLED (consumes little electricity), and the 14 (6.7”/6.06”) will likely have LTPS- OLED. Our eyes are on whether the LG Display can win orders for the LTPO device and two LTPS devices. To boost production, there is a high chance the company will decide to invest in the E6-3 factory. We expect mass production in 2Q 2022. As capacity rises for a modular factory in Vietnam (about 7.5m/month from 3Q of this year), the company will likely aim to ship 60m–70m units in 2022. In our 1Q results flash, we talked about the prospects of investing in E6-4 for the IT industry (tablets and laptops), but there are still many variables on this front. This is because the adoption of OLED for the iPad will likely be strategically pushed back (to 2023 or later for 10.9” and to 2024 or later for 12.9”). For LTPS-LCD (AP3), the company seems set to focus on the auto industry and some smartphone makers.
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