Readying for TV Replacement Demand, Chinese Panel Makers Expand Capacities, TrendForce Reports

Major Chinese panel makers BOE Technology Group Co. (BOE), China Star Optoelectronics Technology (CSOT), and Nanjing CEC-Panda LCD Technology Co. (CEC-Panda) will begin mass production on their new Gen 8.5 fabs at the start of this year’s second quarter, according to the latest observation from WitsView, a division of TrendForce. The production of the large-size TFT-LCD panel for 2015 is estimated to reach a capacity of 232.3Mn m2, with a 7.3% increase over 2014. Boyce Fan, senior research manager for WitsView, said that the ambitious Chinese panel makers are planning additional capacity expansions in the next three to four years. Hence, the capacity of large-size TFT-LCD panel production is likely to surpass 270.7Mn m2. 

Much of the expansion in the global capacity of large-size LCD panels has been concentrated in China since the start of 2014 

Backed by the huge internal demand, China-based TV brand vendors have secured their dominance over the domestic market and setting their sights abroad. Hence, their panel demands remain robust. “Under the guidance of the state’s industrial policies, China is now the home of fabs established by domestic panel vendors as well as their Korean counterparts. The country has turned into a display manufacturing hub with the best prospect for further developments. 

Moreover, the TV market enjoyed a surge of replacement demand in 2014 and this helped the panel industry to climb out of its slump. Panel makers not only made a turnaround but also started to report big profits, strengthening the Chinese government’s resolve to make bigger investments in the industry. Consequently, many fab-building plans have sprung up this year. In addition to BOE’s announcement of a Gen 10.5 fab in Hefei and a Gen. 8.5 fab in Fujian, other panel makers such as CSOT and CEC-Panda are planning to invest in new fabs as well. 

Based on Fan’s assessment, these large-scale capacity expansion projects by the Chinese panel makers reveals China’s three major aspirations for the panel industry: 

Firstly, China hopes that its domestic panel maker BOE is able to replace its Japanese rival Sharp as the leader in Gen 10 panel processing. China’s Gen 10.5 fab exceeds Sharp’s Gen 10 fab in terms of investment, and it will be able to achieve a symbolic technological milestone if it enters mass production as scheduled. 

Secondly, these Chinese companies are on their way to become the largest panel makers in the world as they are making strides with their capacity expansions. 

Thirdly, the average TV size will get bigger and bigger, so investments in larger generation fabs will pay off for the Chinese panel makers when the next wave of TV replacement demand hits. 

Betting on the next wave replacement demands for TVs, Chinese manufactures expand capacities for Gen 8.5 and 10.5 fabs 

The consumer demand have already left TVs sized under 40 inches and is now moving to 40 to 50-inch. Presently, the demand outlook for sizes 50-inch and above is very positive, with the demands for 55 and 65-inch products gaining strength. Fan noted that the most efficient cut size for a Gen 8.5 panel is the 55-inch, and for a Gen 10.5 panel it will be the 65-inch. The capacity expansion in both Gen 8.5 and 10.5 is a signal that the Chinese panel makers will be going head-to-head against their Taiwanese competitors, who are currently churning out 65-inch TV panels from their Gen 6 fabs. 

“For fabs processing panels sized Gen 8.5 and above, China has a considerable edge relative to other regions when it comes to the overall area capacity,” said Fan. When the next wave of replacement demand for TV of larger sizes appears, Taiwanese panel makers with their smaller area capacities may be in a disadvantage. And this is one reason why earlier this year Taiwanese panel makers announced plans to expand their Gen 8.5 capacities. 

However, the increase in the TV screen size usually matches the advances in the large-screen display technology. In this respect, the Taiwanese and Korean panel makers have better technology specifications that give them rooms to make strategic maneuvers. In sum, the competition is likely to become more intense among panel manufacturers from different regions when the next wave of replacement demand for TVs arrives. The heated contest will be over capacities, sizes, display technologies, and specs.