Vertical Divider

​

Sharp to Expand IGZO and OLED Production
March 26, 2018
​ 
Sharp’s business strategy changed in 2016 when Hon Hai purchased a controlling (66%) stake in the company for $3.5b.  Hon Hai Chairman Terry Gou already owned a piece of Sharp’s Gen 10 fab, so he was familiar with the company’s strengths and weaknesses.  Aside from aggressive plans to revive the once dominant Sharp TV brand, which had languished as the company’s financials worsened, he is now focused on Sharp’s capabilities in using IGZO backplanes for large and small panels.  Sharp worked with IGZO since 2012 and has developed processes with better yields than its competitors. As a result, Sharp will ramp up IGZO and OLED production, while paring down LTPS and a-Si. Looking at the plants:

1. Kameyama Plant No. 1 (G6: LTPS): 22k/M→ Hon Hai (sold to INX) Kaohsiung G6 support, Will convert to Oxide. G6: 22k/M. 4.7“ x 360 panels for capacity of around 8m/M.
   1. Since investment will use advance payments from Apple, Supply to other companies comes with conditions attached, no supply as of August 2017.
   2. Apple: Company makes 4.7” panels for the iPhone; but could start manufacturing OLEDs in 2021 at the earliest
   3. Strategy following capital injection from Hon Hai: Currently dedicated production for Apple. The future is oxide for medium-size displays

(Tablets, NB) and large panels (8k)

1. Hon Hai Group support: Support for start-up of Kaohsiung G6 LTPS plant (mass production to commence in 3Q 16).

1. Kameyama Plant No.2 G8：IGZO/A-Si): Will depend on the combination of IGZO and A-Si; output of about 72k/M is expected.
   1. G8: Capacity to grow to 45k/M for IGZO and shrink to 27M for a-Si, Currently: A-Si: resumed 32” production (10K/M), small-scale production of 80/90” units, with input under 5K/M. IGZO: aiming to expand to include iPad Pro (12.9” / 10.5”) and iPad (9.7”) with 20-25K/M, Notebook PCs with 5M/M. For now, the main focus is on medium-size displays for tablets, NB, and automotive applications
   2. Ideal format: Best solution is transfer medium and small-scale and IGZO, where substrate prices are more than 5x higher (production capacity using 8 masks is estimated at around 50k/M). In future, plant could be used for making large-scale OLED substrates.
2. IGZO current situation: Supplying for iPad, iPad Mini, and iPad Pro and Macbook and demand is strong. Almost stopped producing IGZO for smartphones.
   1. Advantages of IGZO and G8: Could see increasing utilization for medium-sized units. Oxide makes significant contribution to energy saving (and lighter product) in tablets and notebooks and looks promising.
   2. Apple could change to Oxide for all tablets and MacBooks. Samsung Display’s withdrawal from tablet-related business represents an opportunity in 2017 or later. Needs all-around marketing focus for PC
   3. Still, over the medium and long terms lingering potential for a switch to OLED for both Tablets/NB.
   4. CEC Panda G8 IGZO plant (60K/M: Nanjing): company has secured half of production capacity. Outsourcing some panels for iPad?
   5. Investment in Hon Hai and SDP’s Guangzhou G10.5 plant: Earnings from IP and technical support? Could we see investment in a second G10.5 plant in collaboration with Chinese companies?
3. Large panels: Integration with INX and Panda’s LCD businesses and Hon Hai’s assembly and TV businesses. Possible supply of OLED for TVs in future
   1. Organizational management: Ideal is complete management integration with Hon Hai and INX. However, INX is not a subsidiary of Hon Hai (since Hon Hai’s stake is below 25%), and we expect Hon Hai to provide most of the management.
   2. Factories (production): Co-operation with INX (for A-Si/IT applications and 39.5”/43”/50”/58”/65”/75” TVs) and Panda（Oxide/IT applications and 55” TVs). Module & TV design/LCM/assembly carried out by Hon Hai. Sharp to be the OEM producer and focus on sales in the Japanese, European, and Asian markets.
   3. G8: 80” and 90” units only to be  a-Si, with the rest Oxide (medium and small-sized units). However, the company is also considering utilization of OLED substrates in future for 8K panels. It could also leave 32” panels.
   4. G10：40”/45”/60”/70”/120”. Future possibilities for development of OLED substrates with some annealing. Possibility of OLED panel production for TVs by adding another building. →In the end, the company might not invest in another building at Sakai, but rather support Guangzhou G10.5. After that, there are plans for three G10.5 plants in China, the US, and India.
   5. Digital Signage Already developing at SH. Possibility of using sales channels at Hon Hai and INX.
   6. Technology: Developing copper wiring, photo alignment (VA/IPS), curved panel technology and TP technology already used by Sharp at INX. Outlook for Oxide and LTPS unclear given relationship with SEL.
   7. Sales: Possibility of using INX’s sales route (Chinese brands, Disti and Turkey).
   8. Relationship with Samsung: In exchange for commitment for continuous supply for G10 onwards, Sharp could take orders for TV assembly and ODM and EMS work from Hon Hai.
   9. Strengthening relationship with Panda: A partner at the Nanjing G6/G8 plant, but not for other domains. Xianyang G8.6 involves ex-INX employees. Chengdu G8.6 production involves ex-SH employees. However, Panda’s parent company, CEC, is also the parent of TPV, which is in competition with HH. Is there a possibility that CEC could link up with Hon Hai?
4. S/M-sized panels: Major synergies with LCD. Will company be able to develop OLED alone?
   1. Organizational management: Since INX is weak in medium-sized panels, operations to be at Hon Hai itself (in Taiwan and at Century in China).
   2. Factories (production): G6: from AAPL to O/C for non-AAPL customers; in future, OLED substrates as well. The G8 plant will be used for medium-sized Oxide product. The G4 plant (A-Si) and G4.5 plant (LTPS) could be used for automotive, pachinko and FA applications, but since there would still be excess production capacity there could be an impairment loss or a closure. We believe one solution would be a merger with INX’s G5 operations (Fab 3/5). The company will also be able to use the 60k/M capacity at Panda Nanjing(G8-Oxide). Sharp’s front-end processing technology will be valuable to HH and INX.
   3. Applications: smartphone product will be made at Sharp’s Kameyama 1 plant and Hon Hai’s Kaohsiung No. 6 plant. High-end product for automotive and IT applications will be made at the Kameyama No 2 and Panda G8 plants. IT product will be made at Century G5 and INX.
   4. Sales: Expansion to include Hon Hai’s EMS and ODM clients. Broad range of customers including Apple (SP/Tablets and MacBooks), Huawei, Xiaomi, Motorola, Dell and HP. However, sales of these custom products will require a major expansion in technical, marketing and support personnel.
   5. Back-end processing: Moving toward the fusion of SH (Wuxi, Dongguan), HH and GIS plants. Basically, work split among SH (front-end), GIS (LCM+TP), and HH (product assembly)
   6. OLED development: R&D followed by a test production line and then a mass production line. G6: for a 50K/M line, investment of ¥500b–¥600b in necessary. However, there is a growing possibility that Sakai will see only a G4.5 line (15K/M). If G6 investment is not made at Sakai, and there are inquiries from APPL, will we suddenly see investment in a G6 line at Zhengzhou?

 
 
 
Sharp appears to be making these shifts in backplane and panel production for two reasons.  First, it sets them apart from other panel producers that are using a-Si or LTPS. Sharp believes IGZO can support the high pixel density applications at 1/3 the capital cost of LTPS.  Second, to further their relationship with Apple, to whom they supply the 4.7” display for the iPhone 8 and for iPad and MacBook panels.  If they are able to offer Apple high quality IGZO based LCD displays in larger volumes, they have the potential to increase their Apple business and maybe hedge their previous lack of traction in OLED with IGZO based small panel OLED displays, rather than the LTPS OLED displays being offered by most vendors. 

Figure 1: Sharp's 3.4" Flexible OLED Demo -

Source: cdrinfo.com
​