What They Say
Our Display Daily today is a guest article from Bob O’Brien of DSCC and covers OLED materials, but Ross Young from the firm also published a blog about capex in the display industry.
The big news is a boost in spending on LCD equipment to respond to the demand and pricing in the LCD market. DSCC sees LCD revenues rising 32% in 2021 to $112 billion on strong unit and area growth with prices and profitability rebounding to or even exceeding the 2017 levels. With LCD suppliers able to sell everything they can make at attractive margins; it should be no surprise that most LCD manufacturers are looking to expand capacity. However, unlike previous upturns when many new fabs were built, in this upturn panel suppliers are looking to stretch their capacity through smaller investments, simplifying their processes, debottlenecking, etc
There will be two new G8.6 mega fabs being built. However, overall, LCD will remain below the level of investment from 2016 to 2021.
OLED investment has seen a downgrading of DSCC’s outlook compared to the previous forecast. Some lower-tiered Chinese mobile OLED manufacturers are struggling with their utilization, profitability and financing resulting in a number of fab delays and one cancellation. In addition, OLED TV spending in China was also delayed as manufacturers increase their emphasis on miniLEDs which can significantly boost performance and raise LCD panel prices/revenues/profitability. As indicated, OLED equipment spending on an install basis is expected to decline double-digits in 2021, 2022 and 2023, but surge in 2025 on investment delays. Total 2020-2025 OLED equipment spending on an install basis is expected to fall 2% or $1.2B versus DSCC’s last forecast to $49 billion.
Overall display equipment will be up on an install basis in 2021 at $16.6 billion, but down on a move-in basis to $12 billion. (Japanese makers tend to use the install basis, while others use move-in to recognise revenues).
What We Think
We’re at the top of the Crystal Cycle at the moment and the relatively lower level of investment in LCD compared to previous cycles does suggest that this cycle may stay positive for longer than previous turns around the process. One of the factors in this is that the Koreans are not involved in LCD expansion. As I have written over the years, Samsung was good at bringing new capacity in when the market was strong, against the dynamics of other firms that relied on external finance. They could only raise money for new investment when the cycle was good, but the capacity typically came in when the cycle was in a weak phase, adding to the downturn. So, it’s feasible that this cycle could stay positive for a while.
In China, the reality of the difficulty of making good OLEDs and winning key customers is constraining the enthusiasm for more investment. (BR)
