Vertical Divider
Musing on Production
OLED TV Sales in 2020 May Not Meet LGD’s Expectations
February 16, 2020
TV brands using LG Display’s OLED panels are struggling, as the steep decline in LCD panel prices drags on prices for TVs. Although the company’s TV OLED panels managed to return operating profits through 3Q, the business dropped into the red in 4Q due to promotional costs, a decline in shipment volume, and startup costs related to the Guangzhou plant. LG Display’s original shipment target for 2020 was 6.5m (vs. 3.2m in 2019), but 4.5m–5.0m may be more realistic assuming no major price cuts (i.e., 15% or more) for screens sized 65 inches and smaller. The Guangzhou G8 plant has at last finished eliminating bottlenecks and putting mass production systems in place, but the company will adjust the pace of capacity expansion to keep output in line with demand. Cost reductions will accrue through the use of multi-model glass (MMG) technology, allowing it to produce multiple panels of differing sizes from the same plate (for example, 55 and 65 inch, or 77 and 48 inch). Mass production for small/medium panels at the E6 plant (30,000/ month) finally commenced in 4Q 2019, and 4m–5m panels were produced in 2019 for the iPhone 11 Pro Max (6.46 inch), of which 3m–4m were shipped. Sluggish demand for use in the Pro Max means shipments will probably be low, with shipment/production volume of up to 20m for use in the new product (6.06 inch). Actual capacity is around double that figure. The situation regarding the Gen 10.5 OLED fab remains unclear, because LCD earnings are eroding faster than expected, while demand for TV OLEDs is sluggish. Demand could feasibly be stoked through OLED price cuts, but startup costs related to the Guangzhou plant mean current profitability levels offer limited room to cut prices significantly, leaving LG Display with only one option, namely, to adjust the pace of capacity expansion in the Guangzhou plant in keeping with actual demand. Although the Paju G10.5 plant is expected to start mass production from 1Q 2022, there is a possibility that the timing may be pushed back depending on: 1) when the company can secure enough demand to support full capacity utilization at the Guangzhou plant (around 90,000–100,000/month, including phase two); and 2) the cash flow situation. The current bottom emission panel design, which results in relatively low aperture ratios, could be a limitation for 8K TVs and could delay production if the company switched to a top emission design. From: Mizuho Securities
OLED TV Sales in 2020 May Not Meet LGD’s Expectations
February 16, 2020
TV brands using LG Display’s OLED panels are struggling, as the steep decline in LCD panel prices drags on prices for TVs. Although the company’s TV OLED panels managed to return operating profits through 3Q, the business dropped into the red in 4Q due to promotional costs, a decline in shipment volume, and startup costs related to the Guangzhou plant. LG Display’s original shipment target for 2020 was 6.5m (vs. 3.2m in 2019), but 4.5m–5.0m may be more realistic assuming no major price cuts (i.e., 15% or more) for screens sized 65 inches and smaller. The Guangzhou G8 plant has at last finished eliminating bottlenecks and putting mass production systems in place, but the company will adjust the pace of capacity expansion to keep output in line with demand. Cost reductions will accrue through the use of multi-model glass (MMG) technology, allowing it to produce multiple panels of differing sizes from the same plate (for example, 55 and 65 inch, or 77 and 48 inch). Mass production for small/medium panels at the E6 plant (30,000/ month) finally commenced in 4Q 2019, and 4m–5m panels were produced in 2019 for the iPhone 11 Pro Max (6.46 inch), of which 3m–4m were shipped. Sluggish demand for use in the Pro Max means shipments will probably be low, with shipment/production volume of up to 20m for use in the new product (6.06 inch). Actual capacity is around double that figure. The situation regarding the Gen 10.5 OLED fab remains unclear, because LCD earnings are eroding faster than expected, while demand for TV OLEDs is sluggish. Demand could feasibly be stoked through OLED price cuts, but startup costs related to the Guangzhou plant mean current profitability levels offer limited room to cut prices significantly, leaving LG Display with only one option, namely, to adjust the pace of capacity expansion in the Guangzhou plant in keeping with actual demand. Although the Paju G10.5 plant is expected to start mass production from 1Q 2022, there is a possibility that the timing may be pushed back depending on: 1) when the company can secure enough demand to support full capacity utilization at the Guangzhou plant (around 90,000–100,000/month, including phase two); and 2) the cash flow situation. The current bottom emission panel design, which results in relatively low aperture ratios, could be a limitation for 8K TVs and could delay production if the company switched to a top emission design. From: Mizuho Securities
|
Contact Us
|
Barry Young
|