What Display Daily think: While the inherent risks and obstacles that are in front of TCL CSOT as it tries to lift itself to BOE levels, the upside is enough to warrant more aggression on the part of the company in pursuing a strategy that should give China two equally powerful players in the market.
BOE needs a strong TCL CSOT as much Samsung needs LG. It’s not even about the dynamics of competition which might spur each company to do better, but more about having a familiar face around as the Chinese companies compete against the Koreans.
Yup, there is a symmetry to BOE and TCL CSOT going up against LG and Samsung at Apple, for example. BOE, no matter how big, on its own, is just poking the bears at Apple. If TCL CSOT is right there with them, it gives some comfort to the buyer knowing that they have a stick to poke BOE with.
BOE, on its own, is not a usurper but a marauder. BOE and TCL CSOT together become viable alternatives against Samsung and LG.
It doesn’t matter how big businesses get and how big contracts get, you always want a hedge. BOE needs TCL CSOT to be its hedge, and when TCL CSOT is sitting right next to BOE, it has a hedge, too.
It doesn’t make sense for TCL CSOT not to receive government backing on its ambitious plans. BOE needs that investment as much as TCL CSOT, even if they would never ever admit to it. For that reason alone, I don’t see the same challenges that The Elec sees. There’s a bigger national play here.
TCL CSOT Plans Major Expansion in 6th Generation OLED Production Amidst Financial and Market Challenges
According to a report in The Elec, TCL CSOT is a looking to expand its production capacity for 6th generation OLED panels. TCL CSOT’s current production capacity for 6th generation OLED panels is 45,000 sheets per month, whereas their main competitor, BOE has a much larger capacity of 144,000 sheets per month. This significant difference in capacity puts TCL CSOT at a disadvantage in the market.
TCL CSOT has recently requested quotes from domestic equipment manufacturers for new 6th generation OLED production equipment. They are considering an investment to increase their capacity either by 15,000 sheets per month or 30,000 sheets per month. For a 15K per month expansion, they might use existing space in their Wuhan T5 line, which currently houses other display production lines. If they decide on a 30K per month expansion, they will need to build a new factory since their existing facilities do not have enough space.
The estimated cost to build a new 6th generation OLED line with a monthly capacity of 15K is about 2 trillion won (approximately $1.6 billion). There are concerns about whether TCL CSOT will be able to secure the necessary local government support for such a large investment. In China, government support can be crucial for large-scale industrial projects. Additionally, the market dynamics are uncertain. While OLED adoption in the Chinese smartphone market has increased, there are also signs that demand for lower-priced rigid OLED panels (produced by Samsung) is rising.
Increasing their production capacity is vital for TCL CSOT to compete more effectively with BOE in the OLED market. This expansion would also position TCL CSOT to potentially supply OLED panels to major smartphone manufacturers like Apple in the future. TCL CSOT is also known to have offered to purchase an LCD plant and patents from LG Display in Guangzhou, China, for a price in the mid to high 1 trillion won ($725 million) range. If this purchase is combined with the cost of building a new OLED line, TCL CSOT would need close to 4 trillion won ($2.9 billion) in total funding.
Some industry experts believe that TCL CSOT’s expansion is a possibility, but there are significant financial and logistical hurdles to overcome. The success of this investment would depend on securing sufficient funding and navigating the market and regulatory challenges. In summary, TCL CSOT is actively seeking to expand its 6th generation OLED production capacity to better compete with BOE and meet the growing demand for OLED panels. However, they face significant financial and logistical challenges in achieving this goal.
