Behind the storm of closing factories: the test or opportunity of China's panel industry

Once the second largest LCD panel company in the world and the top two brands with the largest LCD TV sales in the world, Samsung and LG are closing all LCD panel factories. -Many people think this is a big gift from competitors to panel companies in mainland China in 2020.

However, why do the two powers with global superiority voluntarily surrender? This obviously makes no sense. The "conspiracy" behind Samsung and LG's factory closures is the industry's focus. Perhaps this is not an opportunity for the Chinese mainland panel corps, but "another test"!

It is important to choose the time to retreat

At the end of January, Jeong Ho-young, CEO of South Korean display panel manufacturer LG Display, said that due to falling LCD prices and global oversupply, LG Display will stop producing LCD TV panels in Korea by the end of this year. In addition to the production line in Korea, LG's LCD panel has only a 8.5-generation line in Guangzhou, China. This means that LG is not far away from bidding farewell to LCD panels.

Also at the end of January, Samsung Display stated that it will shut down all its LCD panel production lines in South Korea and China by the end of this year. Samsung has completely abandoned LCD production. Samsung has LCD production lines in South Korea and a production line in Suzhou, China. Samsung plans to close all of these production lines.

There is a reason behind the two heavy news. "2018-2019 global LCD panel supply. With the expansion of BOE, Huaxing Optoelectronics, and Huike in mainland China, they have entered an oversupply stage, and product prices have continued to fall, and individual companies have suffered losses. "Situation. In particular, the 10.5 / 11 generation lines of BOE and Huaxing Optoelectronics have actually become "large-size leaders" and have formed a competitive advantage in the technology generation.

However, the choices of Samsung and LG are not only influenced by this long-term factor, but also include the "special situation" in January 2020: this is the impact of the new crown epidemic. By the end of January, the Chinese market had expected a sharp contraction in demand from January to February. At the same time, the risk of consumption growth in the global market is also rising. And in March when the news of Samsung's factory closure was large-scale fermentation in the country, the industry has expected the global color TV market to shrink by more than 10% throughout the year.

"It has already been surplus" and "unexpectedly shrinking demand": The two factors are superimposed, which makes LCD panel companies inevitably face a greater profit crisis in 2020. What's more, the production capacity in mainland China is still expanding. Therefore, from the perspective of Samsung and LG's operations, closing the LCD panel factory can be regarded as a "reduce loss" measure. Samsung / LG's large-scale closure of LCD panel factories this year is not only the result of long-term industrial development, but also the grasp of special time nodes!

Will you actively give up your share? NO!

"Reduction of production capacity of Korean companies can increase the global share of large and medium size LCD companies in mainland China by 2020 to more than 50% -60%!" Many such voices in the industry applauded Samsung LG's production reduction!

However, in the face of this change, there are at least two questions that need to be answered: First, in the near future, as the world's first and second largest color TV and Shangxian brands, Samsung and LG's "LCD TV, LCD Shangxian" industrial chain How to maintain it; Second, as the second largest panel company in the world, will the two really give up the "core manufacturing assets" of the modern display industry?

The answer to the first question has been released! In the middle of April, there was news that Samsung would “purchase LCD panels” from panel companies in Japan and Taiwan, such as Sharp and Innolux: I believe that this strategy will kill two birds with one stone. On the one hand, it solves the problem of panel demand for its own color TVs; on the other hand, it supports Japanese and Taiwan regions, especially Taiwan-based panel companies.

Under the crisis of oversupply of global panels, Korean companies are "sad", but after all, they have "the advantage of the brand market" and can still pass. However, the panel industry chain of Taiwanese companies has been out of the market for a long time, and the cost is not competitive, but it lags behind the mainland in terms of large size. Assuming that Japan, South Korea, Taiwan and the mainland are "dead in the LCD panel market", it is obvious that Taiwan ’s competitiveness Is one of the "weakest". ——The Korean system was discontinued and the share was given to the Taiwanese system.

Undoubtedly, under the pattern that the Japanese system has completely declined, it has cultivated a competitor in the Chinese camp.

Samsung's strategy is this, LG probably won't be surprised. Increasing purchases from Taiwan is a good strategy-around 2008, when the global panel supply was insufficient, there was even a case where "mainland color TV companies paid pre-paid panel orders and were cut off by Korean color TV companies." At the same time, domestic anti-monopoly agencies have also punished monopoly cases in which panel companies in Japan, South Korea, and Taiwan jointly manipulated prices. Therefore, from a historical point of view, under the background of the accelerated rise of panel companies in the mainland of Japan and South Korea, it is not impossible to cooperate strategically. (This can be regarded as a small conspiracy!)

The second question, does South Korea, which does not produce LCD panels, really give up the core of the modern display industry? The answer is of course no. In this regard, it must be recognized that in the next generation of OLED-QLED display, LG is the world's only large-scale OLED mass production company, Samsung is the industry leader for small-size OLED screens for up to 10 years, and currently has 80% Share advantage!

"Abandon the LCD and fully switch to the next generation of OLED and QLED technology!" This is the "yangmou" behind Samsung and LG's LCD shutdown. "Seize the opportunity of global panel surplus and poor profitability; seize the shrinking demand in the epidemic, and even a 3-year trough cycle; more seize the majority of LCD panel lines in mainland China are newly built within three to five years, and In the large-scale construction, it is in the window of opportunity such as cost investment period, and promotes the "complete upgrade of the display panel". If South Korea ’s Samsung and LG ’s strategy is successful, it means that “Chinese mainland panel companies are once again facing a backward generation”.
OLED is already the industry's "consensus action"

In October 2019, Samsung has announced that it will concentrate on investing 11 billion US dollars in the QD-OLED quantum dot panel production line. And LG's investment in large-size OLEDs has never stopped: At present, the 8.5-generation OLED project in Guangzhou is in the stage of mass production climbing, and the 10.5-generation line in Paju, South Korea is under construction.

It can be said that after the South Korean panel industry announced the full shutdown of the LCD panel line in early 2020, it has fully shifted from small to large size to the next generation of OLED technology-the discontinuation of LCD production in a sense is to free up equipment, plants and resources to meet OLED Expansion.

"Stop LCD, increase OLED" is not just the choice of Korean companies. In the small size field represented by mobile phones, in the past three years, all the new investments have been the "OLED" product line, and even the "flexible OLED" product line-the same is true in mainland China!

In the LCD product line, although there are new 8.6 generation lines and 10.5 / 11 generation lines after 2017, they are all invested in mainland China: after 2017, outside of mainland China, including second-hand lines, all No new liquid crystal product line capacity has been put into it. ——Even Hon Hai Guo Taiming promised Trump's US 10.5 generation LCD line has already bounced in the industry.

At the same time, BOE and Huaxing Optoelectronics, as the most powerful panel companies in the mainland, led the construction of an R & D system for OLED display technology. Even, in the past three years, the planned rigid OLED production line has been re-planned into a flexible OLED production line. Huaxing Optoelectronics also said that the second 11-generation LCD line in Shenzhen will arrange some OLED mass production capacity. The rising star of global LCD panel companies, Truly, which is famous for purchasing second-hand lines, also took out the largest investment in history: 6th generation OLED! The last entrant of the world ’s large-size LCD panel, Huike also planned the Changsha 8.6 generation line OLED panel ...

It can be said that investing in OLED is not only the choice of Korean companies, but also the "consensus" of all panel manufacturers in the world: there will be no new LCD investment after 2020-this is not a prediction, but a reality. If the panel industry will have a corner to overtake, then OLED is the best choice, and it is the choice of a hundred yards ahead.

With retreat as a priority, South Korea bets on its own future

However, under the enthusiasm of the OLED industry chain, the industry prospects are not "no risk." Unlike the highly mature LCD technology and talents everywhere (regardless of technical infringement, almost anyone can quickly build a high-quality team by digging people), OLED faces technical challenges.

From the perspective of profitability, global OLED companies may only have Samsung's small and medium-sized products for mobile phones to achieve "long-term, large-scale" profitability. Although LG is a leader in large-size OLED technology, it has not yet achieved long-term stable and reliable profitability. In addition, the OLED technology of other manufacturers, whether it is large or small, is either in the research and development stage, or has just entered mass production-there is no talk about "maturity".

"There are as many opportunities as there are risks!" This is the best description of the OLED industry. Compared with LCD, this new technology is not only more "unknown", but also more investment, and the concentration of the upstream industry chain (including equipment and materials) is also higher-these risks determine, it is possible to "take a step ahead" "Enterprises can establish industry leading advantages within a period of time and then obtain excess profits.

South Korea's Samsung and LG have made a decision to completely abandon LCD and switch to new technologies such as OLED. This is not only the two companies betting on their own future, but also the South Korean show legion is betting on their own future. Considering that the Korean government has always given important resource support for the development of emerging display technologies, this is also necessarily the "national will" of South Korea.

"The brand new and huge LCD capacity of mainland Chinese companies is like Yuan Shao ’s army in the battle of Guandu; and the OLED plan assembled in South Korea is more like Cao Cao on the rise!" Industry insiders believe that Korean companies cannot give up LCD as mainland China. The victory of the legion was nothing more than a "transmission of troops" before the "war of Guandu". "The final battlefield should be OLED, this is the question we should think about now-whether the LCD is strong or not, he is already in the past"

Catching up and surpassing is bound to be "endurance" competition

From ten years ago, almost all large-size LCD panels in the local mainland relied on imports, and now more than half of the global market share, this change is certainly gratifying. "However, this is just the first half of the industry's domestic and foreign competition: with Samsung and LG completely abandoning" LCDs with dominant mainland companies, "the battle for the second half has already begun!

"Are LCDs lagging behind when they are put into production?" If it is for mobile applications, the answer is yes. However, in color TV, LCD products have at least 10 years of life cycle. ——This is the good aspect! The bad aspect is that the panel industry upgrade is a round of "technology + capital" driving force. There are many people in the industry who are worried that "the excess liquid crystal force will lead to a bottleneck in OLED investment capacity." Competitors called for "overtaking opportunities".

In this regard, the author believes that the pursuit of catching up in any industry is a "endurance competition." Of course, the already launched OLED competition makes local panel companies must be able to withstand the pressure of a longer "investment period", but this is also the standard process of industry competition-victory cannot be built on the enemy's initiative to make mistakes, but can only be established On the basis of being better, harder, harder, and paying more.

Therefore, Samsung and LG's withdrawal from LCD is not only the moment for the local panel industry to "sing triumphantly," but to the eve of the "most critical battle." From the surpassing of LCD's fast-moving to the new track of OLED, there should not be any slack in the middle, but it should be a step ahead: to fight the existing LCD market and product profit war, OLED new technology innovation war, domestic The intensive war of industry integration, the investment war of a new generation of production capacity and the integration war of the international industrial chain-redouble their efforts to win all the time.