As the flat panel display industry struggles with oversupply, LGD reported another big loss in its Q3 earnings release this week, kicking off what it likely to be a grim earnings season for panel makers.
We have been alluding to some fab delays and cancellations in some recent articles in the DSCC Weekly Review, so in this article, we will try and quantify it. Why is this happening? This is happening because of excessive TV panel inventory in Q3’19 and Q4’19, at a time when prices are already low, manufacturers are losing money and more capacity is coming online.
Recently, we reported that Sharp placed the second 45K substrate per month of input capacity of its G10.5 fab on hold. Now, they announced that they have delayed the start of volume production on the initial 45K by 6 months. Rather than a September – October start, they are delaying their ramp till April. It has been said in the display industry that is always best to be first to a new generation, so that your fab ramps its yields ahead of the others, and to have scale. In the case of Sharp in Guangzhou, they are last to a G10.5 and are reducing their scale. Now they are delaying their ramp by 6 months which means their yields will be even farther behind their competitors BOE and CSOT and are trying to reduce their scale while BOE and CSOT are going to be ramping their 2nd G10.5 fabs boosting their scale and further reducing their material prices.
On September 30th, we published that SDC would spend around $11B on its QD-OLED fabs. On October 10th, they made it official at an agreement ceremony held at its Asan 2 campus. It was announced that:
Samsung released its guidance for Q3’19 and is expecting its 4th straight quarter of a Y/Y revenue decline. In $US, revenues are expected to fall 11% Y/Y while rising 8% Q/Q to $51.9B. Revenues are rising for the 2nd straight quarter on a sequential basis, but are down Y/Y on much lower memory pricing. Operating income guidance was for a 14% Q/Q increase and a 59% Y/Y decline to $6.4B. Although operating income was 8% better than consensus, it is down significantly on lower margins in its semiconductor business which will likely remain its highest margin category. Company-wide operating margins are expected to improve slightly from 11.8% in Q2’19 to 12.4% in Q3’19 as the memory market begins to stabilize, but is well below the 27% earned in Q3’18 when semiconductor operating margins were 55%.
The display market turned in Q3’19 from healthy to oversupply as utilization dropped from 89% to 85% and is expected to keep falling in Q4’19 to 80%. What happened? The drop can be attributed to:
Mobile OLED panel shipment revenue will increase to nearly $36 billion by 2023 and OLED TV and monitor panel revenue will add another $10 billion by that year, according to the Q3 update of the DSCC Quarterly OLED Shipment and Fab Utilization Report. The report includes Q2 actual shipments plus DSCC’s forecast by quarter for the rest of 2019 for smartphone models for the top brands, along with shipment data by application for ten different applications for OLED display panels.
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