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Outfitting a Fab with Used Equipment Saves Capital But Is it Cost Effective?
As older LCD fabs are closed, the equipment becomes a way for companies to expand quickly or for new players to enter the market at costs well below market. Buyers of used equipment can quickly establish a new fab or expand capacity by shortcutting standard process of RFQs, tool vendor selection, and delivery delays, assuming that whomever they purchased the equipment from had already done due diligence. Chinese provinces or cities that missed the growth of the display industry are still trying to attract China’s more established panel producers to their cities but lack the risk capital to stake the large (and expensive) greenfield projects that such producers would require. They are trying to attract local companies to establish local panel production by offering to finance less costly 2nd hand equipment. While it may seem like a quick and less expensive way to enter the display panel production market, the industry is moving so quickly that unless a new vendor has an established customer base, by the time the fab is in full production, the equipment is outmoded, and the industry’s focus may have changed. There are examples of the process working and used equipment from Panasonic, LG and Samsung is available.
But there is also a history of used equipment purchases not living up to expectations. China’s 2nd Gen 6 LCD fab, built by Panda, which is owned by China Electronics, was based on equipment purchased from Sharp in 2009 and CEC assumed that its vast connections in the CE space in China would facilitate the process. The fab began production in 2011 and endured years of losses and is being considered for sale by CEC to stop the bleeding at Panda.
China’s Truly has been a buyer of used display production equipment. The company’s Gen 4.5 Huzhou fab was purchased from Samsung Display with negotiations starting back as far as 2013, although the fab did not start production until early 2017 and has been problematic in terms of profitability. Truly also purchased a Gen 5 LCD fab and color filter line from Samsung Display which it began to install in 2017 but still faces low utilization and is operating at low capacity levels, and another larger purchase of Gen 5 equipment that had a stated capacity of 140k, but feedback has indicated that some of the equipment is so outdated that it will either have to be replaced or the fab will operate at much lower capacity.
While it would seem that a number of these fab purchases might live up to expectations, it hasn’t deterred Chinese producers from continuing to look for bargains. There are currently three projects in China, one of which is based on Gen 5 equipment purchased from LG Display and two with Gen 7.5 and Gen 8.5 equipment purchased from Samsung Display. None of these projects is in the mass production phase and at least one has been temporarily delayed.
All of these programs have targeted LCD production, which is in a state of oversupply. Perhaps, these provinces will look to OLED production, which has demand and a number of older fabs that are underutilized by the larger panel makers.
As older LCD fabs are closed, the equipment becomes a way for companies to expand quickly or for new players to enter the market at costs well below market. Buyers of used equipment can quickly establish a new fab or expand capacity by shortcutting standard process of RFQs, tool vendor selection, and delivery delays, assuming that whomever they purchased the equipment from had already done due diligence. Chinese provinces or cities that missed the growth of the display industry are still trying to attract China’s more established panel producers to their cities but lack the risk capital to stake the large (and expensive) greenfield projects that such producers would require. They are trying to attract local companies to establish local panel production by offering to finance less costly 2nd hand equipment. While it may seem like a quick and less expensive way to enter the display panel production market, the industry is moving so quickly that unless a new vendor has an established customer base, by the time the fab is in full production, the equipment is outmoded, and the industry’s focus may have changed. There are examples of the process working and used equipment from Panasonic, LG and Samsung is available.
But there is also a history of used equipment purchases not living up to expectations. China’s 2nd Gen 6 LCD fab, built by Panda, which is owned by China Electronics, was based on equipment purchased from Sharp in 2009 and CEC assumed that its vast connections in the CE space in China would facilitate the process. The fab began production in 2011 and endured years of losses and is being considered for sale by CEC to stop the bleeding at Panda.
China’s Truly has been a buyer of used display production equipment. The company’s Gen 4.5 Huzhou fab was purchased from Samsung Display with negotiations starting back as far as 2013, although the fab did not start production until early 2017 and has been problematic in terms of profitability. Truly also purchased a Gen 5 LCD fab and color filter line from Samsung Display which it began to install in 2017 but still faces low utilization and is operating at low capacity levels, and another larger purchase of Gen 5 equipment that had a stated capacity of 140k, but feedback has indicated that some of the equipment is so outdated that it will either have to be replaced or the fab will operate at much lower capacity.
While it would seem that a number of these fab purchases might live up to expectations, it hasn’t deterred Chinese producers from continuing to look for bargains. There are currently three projects in China, one of which is based on Gen 5 equipment purchased from LG Display and two with Gen 7.5 and Gen 8.5 equipment purchased from Samsung Display. None of these projects is in the mass production phase and at least one has been temporarily delayed.
All of these programs have targeted LCD production, which is in a state of oversupply. Perhaps, these provinces will look to OLED production, which has demand and a number of older fabs that are underutilized by the larger panel makers.
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Barry Young
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