The gist of it: Korea seems to be ceding LCD manufacturing to Chinese manufacturers. This may be a flawed strategy but spooked Korean investors may expect Samsung and LG to make cuts in order to continue to invest in the state aims to make Korea dominant in OLED manufacturing. In the meantime, the Chinese government may be reshaping its display manufacturing base to give prominence to a run on LCD market share while acknowledging that its manufacturers will look to other regions to setup OLED manufacturing to avoid geopolitical concerns, and take advantage of local incentive schemes.
The Chinese press is awash in rumors, and we already know how some Korean analysts view a possible abandonment of LCD manufacturing by local companies. As the story goes, in May 2012, LG Display (LGD) Guangzhou, a joint venture between LGD, Guangzhou Development Zone (Guangzhou Kaide Technology Development Co., Ltd.), and Skyworth, began construction on its Gen 8.5 line. The project, with a total investment of $4 billion, was shared between the entities 70:20:10. The factory went into production on September 1, 2014, with a monthly production capacity of 120,000 glass substrates. However, at the beginning of 2023, the capacity was cut by 50%.
This has led to rumors that TCL might take over LGD Guangzhou LCD panel production line, but LGD and TCL have both denied this. Apparently, LGD has contacted many potential buyers in China for its LCD business, including panel manufacturers and color TV manufacturers. One such potential buyer, Skyworth, a local color TV company once participated in LGD Guangzhou’s 8.5-generation line, denied any plans to take over the production line. In June 2022, Samsung Display completely withdrew from the LCD panel business after selling Samsung’s Suzhou 8.5-generation line to TCL. LGD has also halted its domestic LCD panel production in South Korea and now only operates its LCD panel business at Line 8.5 in Guangzhou.
Apart from the 8.5-generation LCD panel production line in Guangzhou, LGD has also invested in an 8.5-generation OLED panel production line in Guangzhou, where LGD and Kaide Technology hold 70% and 30% equity, respectively. This line has a maximum production capacity of 90,000 substrates per month. All this while China has risen to dominance in LCD manufacturing, possibly forcing an acceleration of Samsung and LGD’s plans to switch to OLED completely.
Despite the uncertainties and rumors, it is clear that there is a great deal of hand-wringing over the possible economic impact of large drops in orders and sales, and a real fear that a second half of 2023 rebound is looking less and less likely with every monthly revenue update. Korean investors and Wall Street may ultimately be the most influential voices in the room when final decisions have to be made. Samsung, in particular, has made some bold statements about continuing to spend in a downturn to prepare for a stronger position in rebound. LG is showing traction in automotive, one area of growth that is proving to be a bigger opportunity than anticipated. Additionally, the Korean manufacturers are also benefiting from their investments in OLED manufacturing and a more favorable position because of US sanctions on China, with Apple seemingly giving them a significant cut of their OLED business and the likelihood that it will generate sufficient volumes of new iPhone sales to make its Korean suppliers look like they bet on the right horse.
