What They Say
DSCC pointed out that the LCD continues to suffer with display fab utilisation further slowing in Q3 and worse than expected. After a 6% sequential decline in Q2’22, total TFT input for all display makers in Q3 was down 20% QoQ and 24% YoY at 66.1 million m², and in the current Q4’22 the firm expects total TFT input to be flat Q/Q and down 23% Y/Y at 66.1 million m².
Utilisation fell 7% in Q2 and another 15% in Q3 to 65%, the lowest point since the financial crisis of 2008-2009. DSCC expects utilisation to come in again at 65% in Q4 before staging a modest recovery in Q1’23.
DSCC covered regional differences and also highlighted the difference between LCD production which is ‘fungible’ (The End of Fungibility in the Display Business?) and OLED, where fabs are designed for specific applications. However, weak demand means that even these fabs are below 70% capacity. The firm also looks by brand and sees Sharp and AUO under particularly high stress. It also pointed out that HKC has had higher utilisation than expected and higher than average in Q4 after a planned IPO in October was suspended by the Shanghai Stock Exchange. DSCC said that HKC has not provided the exchange with the required financial information.
What We Think
Oh, dear. Not much good news here, but that would have been a surprise given the general level of doom and gloom around high tech in general and device sales in particular.
The HKC situation is interesting. I wonder (and this is purely speculation, but based on 30+ years of company management!) if HKC is ‘teeming and ladling’, a financial scheme I first met four decades ago. It means processing a lot of business that is sold for cash, or for close to cash, while stretching the credit from suppliers (or simply not paying them). It is seen by some as a way to generate cash if you have none, but rarely ends well. It can, however, win a little time, if you can keep your suppliers supplying.
Earlier this month, Trendforce also published its views on utilisation and said that it thought that Q4 could slip to 60% in Q4. It said that G5 and G6 fabs (used for IT products) could drop to 48.2% in Q4, down from 54.1% in Q3. It also said that LGD is planning to close its P7 G7.5 fab in the first quarter of next year, but is running at higher level in advance of the closure. However, CSOT has a new T9 (G8.6) fab in development in Guangzhou. The fab is believed to be at low levels of production at the start of its ramp with volume arriving early in 2023. (BR)
