As LCD panel makers try to juggle the conflicting demands of emerging short-term oversupply and the need for more capacity in the longer term, we are seeing seemingly conflicting announcements that promise huge next-Gen fabs together with announcements of reductions in plant utilization.

Ken Werner
Senior Analyst and Editor

Last week Samsung Electronics announced plans to build a Gen 11th LCD plant at its LCD complex in Tangjeong, South Chungcheong Province, after cancelling an earlier plan to build a Gen 10 plant. You may remember that when Sharp announced its commitment to build a Gen 10 plant, Samsung was very cautious, citing the view — widely accepted at the time — that the cost per area of producing displays reached its most favorable value at Gen 8, so there wasn’t much reason to go to larger mother-glass sizes.

Samsung has obviously changed its mind in the ensuing couple of years, although one analyst was quick to observe that with a likely substrate 10 to 20% larger than Sharp’s Gen 10 2880mm x 3130mm, the new fab was really a Gen 10.5 rather than Gen 11. The emerging de facto standard for Gen 11 is 3,200mm x 3,600mm, he said.

"Construction on the plant is slated to begin in 2009 and production is projected to commence possibly from the third quarter of 2010,'’ a high-ranking industry source told The Korea Times last Thursday. Samsung and industry sources said the company has opened discussions with Sony about Sony’s committing to purchase panels from the Gen 11 line, despite the fact that Sony had made such an agreement with Sharp for obtaining output from Sharp’s Gen 10 line. The Sony-Samsung JV for making displays on Gen 8 lines continues to be successful so Samsung would like to continue the relationship, apparently.

Some industry analysts, The Korea Times reported, said Samsung’s goal is to maintain its current momentum by producing very large numbers of the industry’s mainstream 40-inch level LCD TV sets rather than going after the super-sized panel segment.

Where pull-backs are evident is on Gen 6 lines. For instance, Innolux Display is reducing the size of the first phase of its Gen 6 plant, CMO is slowing down its Gen 6 capacity ramp, and CPT VP James Wu said it’s inevitable his company will trim plant utilization rates for Q3. What happened, according to Digitmes, is that the anticipated strong demand for 40-inch LCD-TVs didn’t materialize because of the global economic turndown, and Gen 7.5 and Gen 8 lines were converted to making 32-inch sets, which maintained their popularity. This freed up capacity in Gen 6 fabs, which was shifted to making panels for monitors and notebooks. But the IT segment has now been hit with excessive inventory, so capacity at the Gen 6 fabs is now greater than needed.

But hope springs eternal, with monitor makers expecting a Q4 resurgence fueled by deferred purchases and holiday season largesse. Whether this expectation is reasonable or fanciful remains to be seen.