LG Gets Approvals to Build Gen 8.5 Fab in Guangzhou
July 16, 2018
Last week, we noted that the Chinese government approved the construction of a Gen 8.5 large panel OLED fab in Guangzhou, China. LGD had to garner approval from both the Korean government and the Chinese government for such a project, which has been an obviously difficult set of negotiations. Both parties have signed off on the project, however the terms remain unknown, although the primary requirements of both governmental groups include
Clearly, the main points seem to be at odds with each other and LG will have to walk a fine line between the two government agencies. Technology ‘transfer’ remains a sore subject in relation to foreign businesses working in China, and has been particularly sensitive for South Korea after Chinese panel producer BOE took over Hydis in 2003, eventually stripping the company’s technology and getting key engineering staff to move to China. The recent controversy that surrounds Chinese telecom giant Huawei, which concerns the allegation that Huawei left backdoors in its communication products that allowed it to spy on customers and led to a tacit US ban on Huawei smartphone sales and government procurement, along with past allegations that the Chinese government has placed stringent localization requirements on other foreign companies doing business on the mainland, all contribute to this issue.
LG Display has no desire to allow Chinese personnel access to its proprietary large panel OLED manufacturing expertise, although they probably can’t prevent some technology leakage over time. The two major OLED panel makers, BOE and CSoT claim to be working on OLED TVs but they are looking to use IJP and not VTE. However, both plan to use amorphous oxide backplanes and CSoT expects to use VTE until IJP can be implemented.
The new OLED display fab in Guangzhou, China is expected to cost ~$4.5b US. LGD’s joint ownership (70%) with the Guangzhou government (30%) seems to make the Korean government’s security concerns conceivable, but could just delineate China’s rules for access to any technology that is brought into the country by foreign investors. Aside from the initial funding by Guangzhou for the project itself, and the usual infrastructure enhancements provided by the local government (roads, power, water, etc.), LGD will also receive subsidies, as do mainland based Chinese panel producers. Such subsidies can supplement additional equipment purchases, expansion projects and even quarterly general operating costs. The plant itself (GP9A) was originally planned to be a two-phase 60,000-sheet/month Gen 8.5 OLED fab, using oxide backplane technology on what will likely be a glass backplane. LGD current OLED TV displays use a metal foil cover. The fab, which was originally planned to open in 4Q 2019, could be pushed back slightly due to the approval delays, but LGD’s last comments concerning the fab’s timing stated that they still expect the fab to open on time. We believe that the fab will have the room to add a 3rd phase, which could bring its total capacity to 90,000 sheets/month if completed.