As we all know, LCD panels are a capital- and technology-intensive industry, in which capital and technology complement each other. The model of China's display leader BOE is to acquire Hydis, a subsidiary of South Korea's Hyundai, through capital operations to master technology, and then continuously innovate based on the mastered technology to open up the market and accumulate capital. This method of snowballing through capital and technological innovation is a shortcut to rapid expansion. Mainland China, the world's largest market, is a large slope suitable for snowballing. However, there are a pair of giant hands pushing the snowball hard, and those giant hands are policy support.
It is the government's policy support in terms of capital such as land and taxation that allows Chinese panel companies to convert capital into technology without any worries and then use the least capital to expand production capacity --- 10%-20% of the funds of Korean panel factories can be used to achieve the same production capacity and maximize the realization of technology. Large-size 8.5 generation lines manufactured in mainland China have sprung up from none 5 years ago to 8 now, reducing the market share of Korean manufacturers to 1/3 and shortening the LCD technology gap to half a year to one year.
Capital is stretched thin, and the technology is almost the same. Korean manufacturers are in a difficult situation in the LCD market that has become a red ocean. Samsung’s LCD business loss reached US$670 million in the first quarter of 2016. What is even more powerless than the current difficult situation is that under the continuous offensive of mainland manufacturers, there is no future turning point. After learning from the pain, the Korean factory decided to shrink the LCD business and expand its own advantage - OLED business.
Refer to the following table for investment projects of Korean factories in the next three years:
It can be seen from the investment projects that although the investment amounts of the four major Chinese and Korean manufacturers are evenly matched, more than 90% of the investment amount of Korean manufacturers is in OLED. Samsung will even sell its 7th generation line LCD factory to shrink its front. In addition to the above-mentioned investment of more than 120 billion, it is foreseeable that in the next few years, LGD will inevitably increase its investment in small sizes to seize the market of Apple and mainland mobile phone manufacturers. Because the LGD E5 factory can produce 50 million mobile phone screens a year after completion, it is estimated that even Apple's demand will not be met. Samsung will not just watch LGD monopolize the cake of high-end OLED TVs, and will definitely initiate tens of billions of investments in large-size OLED production lines.
Although there is no capital advantage, Korean manufacturers are far ahead of mainland manufacturers in technology and market. In terms of small size, the process yield is stable and the production cost is even lower than LCD. Samsung made more than 400 million US dollars in profit from the small-size OLED business in the first quarter, with a market share of 98%. Large-size OLED TVs are also gradually getting better and dominating the high-end market in North America. The panels are exclusively supplied by LGD. The yield rate has steadily climbed, and the technology is five years or more ahead of the mainland.
Korean manufacturers have realized that their advantage lies in OLED technology leadership, so on the one hand, they have increased capital investment to expand their advantages, and on the other hand, they have strictly guarded against the loss of technical talent in OLED. The Korean government has also greatly increased technical barriers through talent review and other means. Mainland OLED technological progress may not be able to catch up as quickly as LCD through acquisitions or large-scale talent recruitment. Korean manufacturers could have taken a breather.
But on the 18th of this month, the invisible giant hand appeared again.
On the 18th, the National Development and Reform Commission and the Ministry of Industry and Information Technology issued the "Notice on the Implementation of Major Project Packages for Upgrading and Transformation of the Manufacturing Industry", requiring the focus on the development of new generation display mass production technologies such as low-temperature polysilicon (LTPS), oxide (Oxide), and organic light-emitting semiconductor displays (AMOLED), and the construction of high-generation production lines; the development of key materials and equipment fields such as glass substrates, brightness-enhancing films, photoresists, OLED evaporation process unit equipment components, and evaporation equipment automated transfer systems to enhance independent supporting capabilities. In addition, we will promote the joint development and industrialization demonstration of key common technologies and lay out forward-looking technology fields such as quantum dots and flexible displays.
These giant hands have undoubtedly spurred the already galloping mainland performance horses, and the Korean factory may not have much time to slow down.
ANNA