With the FPD equipment market booming in 2017, we are often being asked by investors:
2017 vs. 2018 OLED Fab Activity
In 2017, we believe 250K substrates of monthly TFT/OLED input capacity will be installed as shown in Figure 1 and in the Q1’17 issue of our Quarterly OLED Supply/Demand and Capital Spending Report. This data is based on surveys of OLED manufacturers and equipment and materials suppliers. In 2018, the number is expected to rise slightly to 252K substrates. However, in 5.8” unyielded equivalents, the difference will be much more significant with 2017 at 47.3M per month vs. 2018 at 60.1M per month, a 27% difference also shown in Figure 1. This difference can be attributed to differences in substrate size with 2017 featuring 5 out of 19 installations below 6G. On the other hand, in 2018, just one installation out of 17 will be below 6G. In addition, there are expected to be two installations for TVs at 8.5G in 2018 vs. none in 2017. Thus, given that larger glass sizes result in higher tool prices, we should see a nice increase in fab equipment spending from 2017 to 2018 in OLEDs. We should also add that evaporation market leader Tokki will increase its capacity by two ½ G6 systems from 2017 to 2018 and its total capacity by 1 unit.
Figure 1: 2017 vs. 2018 OLED Installations (Install Basis)
How about on a PO or bookings basis? Assuming a 9-month lead time between PO and install, we show 2017 on a PO basis at 272K substrates of monthly input capacity vs. 2018 at 208K, a 31% difference as shown in Figure 2. We also show 2018 below 2016. However, we should note there is still likely a wide margin of error on 2019 fab schedules/2018 PO timing and, in many cases, PO to install timing has been longer than 9 months. In terms of 5.8” equivalents on a PO basis, we also show 2017 leading with 2018 and 2016 quite similar. So, it looks clear from our data that 2018 OLED spending will exceed, not fall below 2017, which will result in 2017 leading in bookings. Which quarter will be the peak quarter for OLED bookings? We show peak OLED equipment bookings occurring in Q3'17 with POs for well over 100K substrates of OLED equipment being issued.
Figure 2: 2017 vs. 2018 OLED Installations (PO/Bookings Basis)
2017 vs. 2018 LCD Fab Activity
In the case of LCDs, we believe 2017 will be a stronger year than 2018, although more capacity may get pulled in from 2019 if equipment makers are able to pull in their delivery timing. As shown in Figure 3, we expect 16% more LCD capacity installed in 2017 vs. 2018 in terms of # of substrates, but just 2% more on a 55” equivalent basis due to more 10.5G capacity being installed in 2018 than 2017. In 2017 and 2018, BOE will install 120K capacity at 10.5G with China Star installing 75K. These installations should consume all of Nikon’s 10.5G exposure tool capacity at their current rate of 1 tool per month. Nikon will need to significantly boost their output in order to enable LG Display, Foxconn or HKC to install 10.5G capacity in 2018. LG will reportedly have its 10.5G fab completed in Q2’18, but we still don’t see them installing equipment until 2019. However, as a result of these 10.5G projects in 2019, 2019 should be another strong year for LCD equipment spending. While 2017 may be slightly larger than 2018 in LCDs, we believe higher OLED spending will push the 2018 market above 2017.
Figure 3: 2017 vs. 2018 LCD Installations
For more detailed information on OLED equipment spending, please see our Quarterly OLED Supply/Demand and Capital Spending Report. For a detailed look at all equipment and panel suppliers financials, please see our Quarterly Display Supply Chain Financial Health Report. In addition, the OLED and LCD equipment market outlook will be a major topic at the SID/DSCC Business Conference on May 22nd.
Note, this article is a subset of a larger article that appeared in our newsletter.