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 $10 billion by that year, according to the Q3 update of the DSCC Quarterly OLED Shipment and Fab Utilization Report. The report includes Q2 actual shipments plus DSCC’s forecast by quarter for the rest of 2019 for smartphone models for the top brands, along with shipment data by application for ten different applications for OLED display panels.
We have updated DSCC’s Quarterly OLED Supply/Demand and Capital Spending Report for Q3, with DSCC’s latest capacity outlook for the industry and our forecast for OLED panel demand. As we have reported for more than a year now, OLED for smartphones (technically, for Small & Medium applications) continues to have a substantial oversupply which is expected to persist for years. We have revised our outlook for OLED TVs on both the supply and demand sides, and while we continue to expect high utilization at OLED TV fabs, we no longer describe this as supply constrained.
In our Quarterly Display Supply Chain Financial Health Report, we compare the financial results of all panel and equipment suppliers. We covered the panel supplier results 2 weeks ago; here we will cover the equipment supplier results.
With all the financial results of panel makers for Q2 2019 now available, we have compiled a comparison view as part of DSCC’s Quarterly Display Supply Chain Financial Health Report. The report allows a direct comparison of the companies in the industry on a common currency (US$) on the important metrics for business success. The comparison highlights the dominant position of Samsung in terms of industry profits, as well as some of the challenges faced by the industry.
In our latest Quarterly Display Capex and Equipment Report, we extended our capacity forecasts out to 2025 which produced a number of interesting results.
First, we now see total display capacity rising at a 4% CAGR from 2018-2025 with OLEDs rising at a 20% CAGR and LCDs rising at a 3% CAGR. The OLED share of display capacity is expected to rise jump from 5% to 14% as new OLED fabs are built, some LCD fabs are converted to OLEDs and some LCD fabs are downsized or shut down.
The display industry has been plagued by oversupply, in both LCD and OLED, and panel maker margins have suffered as a result. Tianma beat the trend and reported solid operating results in Q2 on the basis of its exceptionally high area ASPs and steady shipments.
Tianma reported net income of CNY 354 million (US$52 million) on revenues of CNY 7.7 billion ($1.12 billion). While these figures were down from a year ago, by 3% and 27%, respectively, Tianma’s performance looks better than nearly all its competitors. As shown in the second chart here, Tianma actually managed to increase its gross margin, operating margin, and EBITDA margin compared to a year ago, but its net margin suffered because of increased interest expense and other non-operating expenses.
DSCC Releases Q3’19 Quarterly Display Capex and Equipment Report – Forecasts Extended to 2024 as Visibility Improves
DSCC has released the latest issue of its popular Quarterly Display Capex and Equipment Report. In this issue, forecasts were extended to 2024 as we were able to include a healthy increase in new fabs where probabilities have recently improved. Relative to previous issues, we added the following mobile OLED fabs:
When the news this week hit on President Trump’s tweets about raising tariffs on $300 billion in imports from China, I knew it deserved mention in this blog. I have been saying for quite some time about the US-China trade war that “it will get worse before it gets better”, and up to now I’ve been right. The latest round will be implemented on September 1st unless the US and China reach a deal before then, which I think is unlikely.
Reuters reported this week that Foxconn is in discussions to appoint banks to find a buyer for its LCD factory that is being built in Guangzhou. While Foxconn replied in a written statement that “As a matter of company policy, Foxconn does not respond to market rumors or speculation,” Reuters reported that multiple contacts within Foxconn were involved in the discussion. If true, the sale of such a new plant would be unprecedented in the flat panel display industry.
During the 2019 UDE in Shanghai this week, TV brands demonstrated their TV products with two major mainstream technology camps covering OLED TV and 8k QLED TV. In addition to its line of OLED TVs, Hisense launched the first TV with BOE’s 65” dual cell TV panel, the U9E model. Hisense plans to sell U9E at CNY 17,999 (~$2600), CNY6,000 less than their 65” OLED TV. The U9E thickness is ~13mm, but OLED TV can achieve 4mm. Hisense claimed that the BD Cell TV exceeded the peak brightness, color gamut, color accuracy and HDR certification requirements of OLED TVs.
Sales for OLED stack materials for all applications are expected to grow at a 17% annual CAGR from $1.04 billion in 2018 to exceed $2 billion in 2022 and reach $2.28 billion in 2023, according to the latest update of DSCC’s Quarterly OLED Material Report, written in cooperation with the OLED Association. The report details all aspects of OLED materials, including multiple applications, supplier matrices, and cost comparisons.
Nameplate or unyielded capacity is the most common, but often least useful way to look at OLED capacity. In LCDs, it is more acceptable to focus on unyielded capacity as yields are in a relatively tight range. However, in OLEDs, yields span a wide range. So, yielded capacity is a better snapshot of a company’s production capability.
In DSCC’s Quarterly Display Supply Chain Financial Health Report, we analyze and compare all publicly traded display equipment suppliers’ financial results and include insights from our Quarterly Display Capex Report where appropriate. As revealed in the latest issue, Nikon jumped from #3 to #1 in Q1’19 in display equipment supplier revenues on the strength of recognizing six G10.5 litho tools, which are the most expensive tools in TFT backplane fabs by a significant margin. Nikon enjoyed 6% Q/Q and 13% Y/Y growth to $398M in display equipment revenues in Q1’19, while many of its other competitors saw declines. We expect Nikon to lead in litho equipment revenues in 2019 with a 68% to 32% revenue share advantage over Canon in the $2.1B display litho market. Nikon is expected to have an 84% revenue share in LCDs and a 17% share in OLEDs. Litho market share is forecasted out to 2023 in DSCC’s Quarterly Display Capex and Equipment Service.
Foxconn this week submitted plans for construction of its first major manufacturing facility at its Wisconn Valley complex and received a recommendation for approval by the Mount Pleasant village Plan Commission. The company also saw a leadership change this week, with Chairman Terry Gou stepping down to focus on his campaign for President in Taiwan.
Corning held an Investor Day event in New York City on Friday, June 14th, and rolled out new strategic targets for the corporation, but the most important development of the day for the display industry was given by an executive who was not present. Corning’s John Zhang, Senior Vice President and General Manager of Corning Display Technologies, appeared in a video feed to announce that Corning will build two new Gen 10.5 glass plants in the coming year, in Guangzhou and Wuhan, China. While Corning did not discuss the clients for these plants, we know that the Guangzhou plant will be supplying Foxconn’s plant in that city, and the Wuhan plant will supply BOE’s second Gen 10.5 plant there.
I recently finished our Q2’19 Quarterly Display Capex and Equipment Service Report which was expanded by 21 additional categories this quarter to 64 different equipment segments as mentioned at https://bit.ly/2XAUnuV. However, there were a number of other additional deliverables and highlights.
DSCC has updated its Quarterly OLED and Mobile LCD Fab Utilization Report with results for May and the latest estimates for June. As shown in the chart here:
Source: DSCC Quarterly OLED and Mobile LCD Fab Utilization Report
DSCC announces the arrival of our latest report, the Quarterly All Display Fab Utilization Report, available immediately. With many equipment and materials suppliers’ financial results directly related to panel suppliers’ fab utilization, we developed this service to help companies, industry analysts and financial analysts assess the impact of flat panel display suppliers’ fab utilization on company performance and the industry outlook.
We’ve seen a few developments on the Foxconn – Wisconsin project in the last few weeks. Here’s an update of the latest:
Sony held its Investor Relations Day this week in Tokyo, Japan, and the company is riding high, with earnings in its most recent fiscal year (FY 2018 ended March 31, 2019) nearly doubling to ¥916 billion ($8.2 billion) and improvements in multiple businesses. The vast conglomerate has a wide range of businesses, but for DSCC Weekly Review readers we will focus on the display-related Home Entertainment and Mobile Communications segments, which followed presentations for Sony’s Game & Network Services (PlayStation), Music, and Pictures segments.
Q4’18 equipment supplier financial data is often not released until the last day of March in Korea which causes a delay in releasing our aggregated look at quarterly results for equipment suppliers in our Quarterly Display Supply Chain Financial Health Report. So, finally, we have the financial data for 22 equipment companies covering company revenues, display equipment revenues, bookings, backlog and more. As shown below, it was a down quarter from record Q3’18 results for display capex, total display equipment spending and display equipment revenues for the 22 companies (21 after the merger between Wonik IPS and Wonik Tera) we follow.
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