Display Fab Utilization Increased in Q1; Slowdown Expected in Q2-Q3 2020

Published April 27, 2020

Display industry fab utilization defied both our predictions and the coronavirus by increasing to 85% in Q1’20, according to the latest release of DSCC’s Quarterly All Display Fab Utilization Report, issued this week. In Q1 2020, total TFT input for all display makers was up 1% Q/Q and up 5% Y/Y at 69.8 million square meters, but the demand for LCD applications cannot support such high utilization rates. In the current Q2 2020, we expect total TFT input to fall 6% Q/Q and 7% Y/Y to 65.8 million square meters.

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 by month for 2020.

The slowdown that started in Q3 2019 extended into Q4, but Q1 utilizations increased in January in Taiwan and Korea, as shown in the first chart here. Sharp’s Gen 10 fab in Sakai (actually Sakai Display Products, partly owned by Sharp) sustained relatively high utilization in Q1, but has taken a substantial reduction in utilization in April 2020, similar to their slowdown in Q1 2019.

TFT Monthly Fab Utilization by Country, 2019-2020

Source: DSCC’s Display Fab Utilization Report

Looking at the picture by main application and display technology, we see that mobile 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. In contrast, utilization of LGD’s OLED TV lines have been the highest UT% in the industry for any application, as LGD was effectively constrained by capacity before they have started to ramp capacity in their Gen 8.5 fab in Guangzhou, China. We start counting Guangzhou capacity in Q2 2020, which explains why the OLED TV UT% drops in the current quarter, before recovering in the 2nd half.

UT% for flexible 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 TV UT%, since LCD still makes up 72% of total industry capacity.

Quarterly TFT Utilization by Display Technology, 2018-2020

Source: DSCC’s Display Fab Utilization Report

DSCC expected that the 2H 2019 slowdown would persist in Q1, but the increase of LCD TV panel prices seems to have convinced panel makers to run at high utilization to make as much as possible. Unfortunately, the high utilization leads to an oversupply, and we are seeing panel prices fall in Q2 with weak demand (see separate story in this issue). Up to now, we are not seeing significant inventory builds at panel makers, so we believe that inventory is building further down the value chain at set makers and ODMs.

TV panel prices are already near their all-time lows, and we expect them to reach new lows by the end of this quarter, along with a slowdown of utilization to 78% in Q2. We expect the slowdown to persist and worsen into Q3 with worldwide utilization at 76%, before recovering to 80% in Q4. Because of the dramatic decline in demand expected to result from the COVID-19 pandemic economic shock, we expect worldwide TFT Input to be down Y/Y in Q2-Q4 by 7%, 6%, and 4%.

The display industry, and particularly the LCD makers, experienced a terrible 2019 with oversupply driving prices down and leading to shutdowns. The industry was poised for a rebound in 2020 but that has been cut short by COVID-19. Instead the industry will probe new depths.

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Written by

Bob O'Brien