Display Fab Utilization Down in Q4/Q1 with Recovery in Q2 2020
Display industry fab utilization fell to 83% in Q4 2019 and will fall further to 81% in Q1 2020, according to the latest release of DSCC’s Quarterly All Display Fab Utilization Report, issued this week. In Q4 2019, total TFT input for all display makers was flat Q/Q and down 2% Y/Y at 69.4 million square meters, and in the current Q1 2020 we expect total TFT input to fall 4% Q/Q to 66.7 million square meters, which would be up 1% compared to Q1 2019.
The report details capacity, TFT input, and utilization for every flat panel display fab in the industry, more than 100 fabs in all, and includes pivot tables to allow segmentation by supplier, country, TFT fab generation, backplane, frontplane, or substrate type. The report provides historical utilization back to Q1 2018 and a forecast for 2020.
The slowdown that started in Q3 has extended into Q4 and Q1, with utilizations lowest in Korea and Japan, as shown in the first chart here. Sharp’s Gen 10 fab in Sakai (actually Sakai Display Products, partly owned by Sharp) will again take a substantial reduction in utilization in Q1 2020, similar to their slowdown in Q1 2019.
TFT Monthly Fab Utilization by Country, 2019-2020
A view of TFT input shows the extent that China has taken over the industry in just the last two years. In Q1 2018, China represented 39% of total industry TFT input on an area basis, but by Q3 of 2019 China was larger than all other regions combined, and by the end of this year China will be 59% of all industry TFT input.
Quarterly TFT Input by Country, 2018-2020
Looking at the picture by frontplane or display technology, we see that OLED fabs are consistently run at much lower utilization than LCD fabs, this is largely driven by the low UT% at Samsung’s flexible OLED lines. UT% for OLED has followed a consistent pattern in recent years, with utilization low in Q1 and rising to a peak in Q3 with a slowdown in Q4. This view also makes clear that total industry utilization closely follows LCD UT%, since LCD still makes up 95% of total industry capacity. Therefore the industry slowdown from Q3 2019 to Q1 2020 is appropriately described as an LCD slowdown.
Quarterly TFT Utilization by Display Technology, 2018-2020
A view of TFT input by Gen size shows the slow erosion of the once-dominant position of Gen 8.5, as the two Korean giants shut down some of their LCD capacity in this gen size to convert to OLED. As recently as Q1 2018, Gen 8.5 represented 55.5% of total industry input (and a slightly lower % of industry capacity), but by the end of this year that share will be reduced to 40.5%.
Quarterly TFT Input by Gen Size, 2018-2020
After the slowdown in Q1, we expect industry utilization will increase in Q2 and Q3 2020 and return to the normal pattern of Y/Y increases. We expect TFT input to increase by 1% Y/Y in both Q1 and Q2 2020, but then accelerate to 7% Y/Y increases in Q3 and Q4.
Years ago, the display industry was stuck in a reliable crystal cycle pattern characterized by odd years that started weak and ended strong (2005, 2007, 2009) and even years that started strong and ended weak (2006, 2008). The big capacity increases in China fueled by government subsidies have altered the crystal cycle, but have not eliminated it, and we appear to be now in a pattern whereby 2019 started strong and ended weak, and 2020 has started weak and will end strong. The 2019 crystal cycle slowdown has claimed some casualties (in SDC and LGD shutdowns), but for the survivors it looks like better times are ahead.