Samsung Display recently announced it will end all LCD (Liquid Crystal Display) production by the end of 2020, a big move for a company that led the market a decade ago.
Samsung will shut down two South Korean LCD fabs and a third in Suzhou, China, is expected to be sold, according to Ross Young, a display analyst at Display Supply Chain. LG Display, also based in South Korea, said earlier in 2020 that it will halt domestic production of LCD TV panels by the end of 2020.
These changes in the LCD display market are likely to accompany consolidation among players in China, possibly benefiting China Star, which could acquire SDC Suzhou and CHOT, while BOE acquires CEC Panda. With such moves, China Star would control 23% of the market while BOE would control 34%, Young predicted.
“Interesting times [are] ahead for the LCD industry,” Young said in an April 6 blog.
Aside from which companies control the market, Young predicted supply and demand fluctuations will lead to LCD panel price increases in 2021 and 2022, meaning that LCD TVs should cost more than they do today, he said in an email to FierceElectronics.
Consumers may not see the price increases compared with price reductions for other technologies like quantum dots/wide color gamut, as well as 8K, “but basic prices are likely to increase as more LCD TV capacity goes offline,” including with the Samsung closures, Young added.
Samsung has a “very strong position in mobile OLEDs” (Organic Light-Emitting Diodes} that are used in its smartphones and Samsung dominates that market with double-digit operating margins, Young said.
“But in LCDs, Samsung has been in negative double- digit margins for the past four quarters,” Young said. “I think this explains their move” to shutter operations. In fact, Samsung Display’s LCD operating margins fell to a negative 45% in the fourth quarter of 2019.
As with just about any electronics product, COVID-19 has had an impact on the LCD TV market. Demand in early 2020 has been down because of the virus, which has created a double-digit surplus which has reversed recent price trends, Young said. “We showed panel prices going up in January and February on supply constraints from COVID-19 impacting the supply chain, but they started going back down in April as the supply chain came back on as demand has dropped,” Young added.
Another major factor in the overall equation is how the Chinese government props up Chinese-based electronics companies. LCDs are sold below cost for most manufacturers and China has been subsidizing its LCD industry, “which put non-Chinese manufactures in a tough spot. This is why Samsung and LG are moving aggressively to OLEDs where they have a greater device technology and manufacturing technology advantage,” Young added.
Chinese display manufacturers get government subsidies and reduced taxes depending on the province where they operate, Young said. In general, these companies receive half the cost of the fab they use to produce displays, plus reduced taxes and utilities and low or no interest loans.