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Tianma’s Recent Commitment to Growth Undermined by COVID-19
April 19, 2020
Tianma was founded in 1983 and has been producing LCD panels since 1984, being the 1st TN-LCD production line in China. In 2010 the company began construction of its first OLED pilot line, leading to the construction of its Gen 5.5 and Gen 6 OLED lines over the next few years and now produces both rigid and flexible OLED displays as well as LCD from its own fabs and others purchased from other manufacturers. In full scale production since 2013 Tianma supplies to a number of Chinese brands, and has been generating between $550m and $585m/quarter last year.
Revenue increased ~4.7% last year although earnings were down after panel prices dropped considerably during the year, as the company was forced to take a number of write-downs in 4Q including a $42.3m inventory write-down, a $13.4m Fixed Asset adjustment, and a $7m goodwill adjustment, which generated a $42.2m operating loss for 4Q. Given that 1Q 2020 is expected to be a particularly bad quarter, normally the weakest of the year along with the effects of the COVID-19 virus in China, this will likely push Tianma into the red again, possibly giving pause to the company’s expansion plans. Nonetheless, Tianma is continuing their expansion plans and has recently begun to bring in equipment for the phase 2 expansion of their G6 OLED fab in Wuhan, which is a bit behind our schedule (April) but should begin production in 3Q this year. Additionally, the company is about to begin construction of a larger G6 OLED fab in Xiamen, expected to be completed in 3Q 2022 and continues to produce at its Gen 5.5 OLED fab in Shanghai, along with the G4.5 pilot line, while still operating a number of LCD and shared use production lines. The Xiamen and Wuhan LCD lines had been operating at near full capacity until recently and were likely driving a good portion of the company’s profitability, but the ability of being able to run those lines at full capacity in 1Q and possibly again in 2Q is questionable.
While the virus spread has apparently ended in China demand from outside China is declining and the necessity for capacity expansion is weaker than only a few months ago, and even then, they were operating in an over-capacity mode. Competition for at least Mainland small panel OLED business comes from Samsung Display, EDO and BOE, which is increasing capacity the fastest in the space. As a result, Tianma will likely continue to operate in the red for the 2nd quarter and possible the 3rd quarter. From: SCMR, LLC
April 19, 2020
Tianma was founded in 1983 and has been producing LCD panels since 1984, being the 1st TN-LCD production line in China. In 2010 the company began construction of its first OLED pilot line, leading to the construction of its Gen 5.5 and Gen 6 OLED lines over the next few years and now produces both rigid and flexible OLED displays as well as LCD from its own fabs and others purchased from other manufacturers. In full scale production since 2013 Tianma supplies to a number of Chinese brands, and has been generating between $550m and $585m/quarter last year.
Revenue increased ~4.7% last year although earnings were down after panel prices dropped considerably during the year, as the company was forced to take a number of write-downs in 4Q including a $42.3m inventory write-down, a $13.4m Fixed Asset adjustment, and a $7m goodwill adjustment, which generated a $42.2m operating loss for 4Q. Given that 1Q 2020 is expected to be a particularly bad quarter, normally the weakest of the year along with the effects of the COVID-19 virus in China, this will likely push Tianma into the red again, possibly giving pause to the company’s expansion plans. Nonetheless, Tianma is continuing their expansion plans and has recently begun to bring in equipment for the phase 2 expansion of their G6 OLED fab in Wuhan, which is a bit behind our schedule (April) but should begin production in 3Q this year. Additionally, the company is about to begin construction of a larger G6 OLED fab in Xiamen, expected to be completed in 3Q 2022 and continues to produce at its Gen 5.5 OLED fab in Shanghai, along with the G4.5 pilot line, while still operating a number of LCD and shared use production lines. The Xiamen and Wuhan LCD lines had been operating at near full capacity until recently and were likely driving a good portion of the company’s profitability, but the ability of being able to run those lines at full capacity in 1Q and possibly again in 2Q is questionable.
While the virus spread has apparently ended in China demand from outside China is declining and the necessity for capacity expansion is weaker than only a few months ago, and even then, they were operating in an over-capacity mode. Competition for at least Mainland small panel OLED business comes from Samsung Display, EDO and BOE, which is increasing capacity the fastest in the space. As a result, Tianma will likely continue to operate in the red for the 2nd quarter and possible the 3rd quarter. From: SCMR, LLC
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