Market Insight

[Display Dynamics] IT displays could experience an oversupply storm in 2020

October 18, 2019

David Hsieh David Hsieh Senior Director, Displays

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Key findings

  • IT displays are experiencing a less severe oversupply due to various reasons: No new fabs for IT, outdated but stable applications, the PC industry’s strict specifications, Taiwanese makers’ competitiveness, and gaming as a new value-added application.
  • As LCD TV panels are in oversupply, panel makers are shifting more of the Gen 8 capacity to IT panels instead.
  • IHS Markit research shows that BOE, CEC Panda, China Star, and Samsung Display are all increasing their PC display production at their Gen 8.5 fabs.
  • With the panel makers shifting more capacity to IT, whether in terms of the glass substrate input or the area input, this will cause an oversupply as the 2020 IT display demand has not been growing from 2019. 

This 2019 has been a period of oversupply for the display industry as the panel prices plunged, panel makers’ profitability heavily declined, and some display manufacturers have had to seriously consider a capacity restructure and factory shutdown.

As was previously analyzed in [Display Dynamics] Deep and fast price drops for LCD TV panels; panel makers react with utilization cut in June 2019, the oversupply has caused some panel makers to begin reducing the capacity utilization of their fabs, including the newly built fabs. However, some display makers are adopting different approaches where instead of reducing the capacity utilization to curb the LCD TV panel output, they either increase the production of IT panels (LCD monitors, notebooks, and tablet PCs) or they shift some of the TV capacity to more IT-applicable capabilities such as slim bezels and in-plane switching (IPS), among others.

As a result of the stable demand and many high-end models (such as those with high resolution, wide-view angles, curved monitors, super slim bezel notebooks, gaming PCs, and so on), the demand for notebook panels and LCD monitor panels is comparatively stable. Mainstream panel prices are notably reduced, but still not as attractive as those of LCD TV panels.

The two figures below show the mainstream panel price reduction for notebooks and LCD monitors from April 2019 to December 2019 according to the Large Area Display Price Tracker. IHS Markit data shows that the mainstream notebook PC panel prices and LCD monitor panel prices are decreasing by a very minor but stable percentage, which is a stark difference from the price plunge of LCD TV open cells.

Factors for PC displays’ price stability

The stable panel price decline is helping to sustain a certain degree of profitability for panel makers. Based on IHS Markit data, the notebook panel prices and LCD monitor panel prices are shown to be comparatively stable rather than crashing under the overcapacity. These are caused by the following:

  • No new fabs: The newly added capacities in recent years are almost all targeting the LCD TV applications and smartphone display applications, especially in China. The display manufacturers, such as BOE, China Star, HKC, CHOT, CEC Panda, Tianma, and Visionox are all building the Gen 8.5, Gen 8.6, and Gen 10.5 for TVs while the Gen 6 LTPS and flexible OLEDs are for smartphone displays. The notebook displays and LCD monitor displays are currently not the focus areas of display manufacturers.
  • Outdated applications: Although the IT panel display is regarded as a traditional application, the demand has been stable. Unfortunately, it has been challenging for the display manufacturers to convince the government to subsidize them so that they can build a new LCD fab or OLED fab dedicated to IT applications.
  • The PC industry has strict requirements: Compared to LCD TVs, the PC display has been well-acquainted with the existing suppliers like Samsung Display, LG Display, AUO, Innolux, and BOE. Hence, it is relatively difficult for the newcomers like HKC, China Star, CEC Panda, and CHOT to increase their business and capture the market shares. For instance, the four leading players in the PC market–Dell, HP, Lenovo, and Apple–all have very strict and special requirements for the displays to be incorporated into their PCs, and in many cases, those displays are custom-made instead. This poses a challenge for the new display makers in China.
  • Taiwanese makers’ competitiveness: Taiwanese TFT LCD makers, AUO and Innolux, have been using the old Gen 5 fab and Gen 6 fab for IT displays but this has greatly affected the technology, efficiency, and costs. AUO and Innolux are very intimate with the IT industry, not only in terms of displays, but with the whole IT ecosystem as well, including gaming hardware. This has helped AUO and Innolux remain highly competitive in the PC display market while the China newcomers continue to struggle with market penetration.
  • Gaming as a new value-added application: Gaming applications have been rapidly growing, as was previously analyzed by IHS Markit in High Performance Displays for Gaming PC - 2019. Gaming has successfully raised the value of PC displays to a new level, particularly the display specifications which are now defined as high-end. Panel makers are rapidly developing new IT displays for gaming, including the mini-LED backlights and HDR1000, as shown in the figure below. This new momentum in gaming displays is stabilizing the IT panel market.

More capacities shifting to PC displays

As of late, more capacities are shifting to PC displays. However, shutting down the fabs or reducing the capacity utilization would not be the best choice for panel makers when they are facing the severe oversupply of LCD TVs. IHS Markit analysis shows that the current trend is that more TFT LCD capacities are being deviated to the PC display applications, which might induce an oversupply in 2020. The following are the latest happenings:

  • Samsung Display and LG Display are restructuring their LCD TV fabs, especially the Gen 8.5 fabs in Korea. However, for the IT panel capacities of the Gen 8.5 fabs and Gen 7 fabs in Korea, Samsung Display and LG Display are continuing to operate those with no plans yet for restructuring, as was earlier analyzed in [Display Dynamics] LG Display and Samsung Display shift from LCD to OLED with LCD fab restructuring and conversion.
  • Innolux have started a series of capacity reforms since the third quarter of 2019 (Q3 2019), including the Gen 5 Fab 3 increase of its photo alignment IPS capacity for notebook applications and monitor applications, the Gen 7 Fab 7 shift from 50” TVs to 23.8” monitor products, the Gen 5.5 Fab 4 increase of its IPS for the PC display capability, and the Gen 6 T2 allocation of more capacity for notebook panels.
  • CEC Panda in China has been manufacturing notebook PC panels with oxide technology at their Nanjing Gen 8.5 fab and it intends to increase production by reducing the input for TVs. CEC Panda also plans to boost the LCD monitor panel production at the Gen 8.5.
  • China Star is an up-and-coming player for LCD Monitors, as was previously analyzed by IHS Markit in [Display Dynamics] ChinaStar aggressively targets at the public display, digital signage, and gaming monitor markets.
  • China Star, Tianma, AUO, JDI, and Innolux are planning to shift some of their LTPS TFT LCD capacities, which were originally targeted at mobile applications, to the LTPS TFT LCD notebook PC panels, as was analyzed in [Display Dynamics] Huawei MateBook Pro notebook with 13.9 inch LTPS TFT LCD panel.
  • Taiwanese panel makers do not intend to restructure or shut down the old Gen 5 fab and Gen 6 fab, which are currently manufacturing notebook PC panels and LCD monitor panels. On the other hand, Taiwanese panel makers are continuing to push those old fabs to their limits by adding new technology, such as mini-LED backlights, in order to keep up with the high-end PC display market.
  • As was also analyzed by IHS Markit in Touch Taiwan - 2019: Display Exhibit, AUO and Innolux are making good progress in the LCD panels with mini-LED backlights, especially for the PC applications. This has enabled AUO and Innolux to compete in the high-end segment of the PC display market.

The biggest impact can be seen in the Gen 8 and Gen 8.5. The glass substrate input for PC displays (notebooks, LCD monitors, and tablet PCs) worldwide is expected to keep increasing from Q3 2019 to the second quarter of 2020 (Q2 2020) and may further increase through 2020, as described in the Large Area Display Production Strategy Tracker

BOE, CEC Panda, China Star, and Samsung Display are increasing their PC display production at their Gen 8.5 fabs.

On the other hand, when comparing the area base capacity, regardless of the fab generations, it is clear that the IT panel capacity input has increased from late 2019 to 2020.

The IT panel input is forecast to grow from 3,562 thousand square meters per month in the first quarter of 2019 (Q1 2019) to 3,846 thousand square meters per month in the first quarter of 2020 (Q1 2020), and from 3,769 thousand square meters per month in Q2 2019 to 4,085 thousand square meters per month in Q2 2020.

With the panel makers shifting more capacity to IT, whether in terms of the glass substrate input or the area input, this move will cause an oversupply as the 2020 IT display demand has been stagnant since 2019. The following figure shows the IT display demand forecast from 2018 to 2020, based on the Display Long-Term Demand Forecast Tracker.

The oversupply of PC displays may lead to the following effects:

  • Panel makers will endure severe competition in terms of the customers’ panel allocations, panel prices, and panel costs.
  • For LCD monitors, the competitiveness in coming up with new features will be much more intense, such as with the curved monitor with view angle (VA) technology and the high-resolution wide color gamut IPS VA technology.
  • The IPS for notebooks will move from being high-end or middle-end to being mainstream. According to the Large Area Display Market Tracker, IPS or fringe-field switching (FFS) will account for 55% of notebook PC panels. Further, from 2020 onward, panel makers will compete harshly in terms of IPS capability and cost.
  • Chinese makers and Samsung Display intend to produce more VA monitor panels, some with the curved form factor, while IPS is dominating the LCD monitor panel market. According to the Large Area Display Market Tracker, the IPS or FFS will comprise 58% of the LCD monitor panel market but VA share has increased from 16% in 2018 to 19% in 2019. In 2020, there will be fierce competition among panel makers to see if IPS or VA will have higher production.
  • More panel makers will be busy with the high-end segment, including oxides, LTPS, and mini-LED backlights, in order to increase the value added.
  • The a-Si twisted nematic (TN) market will face severe competition as the new display manufacturers are using entry models to make an impact.
  • More custom-made sizes and resolutions will emerge as the display makers and PC makers both need to stand out. The new Microsoft Surface is a good example of uniqueness and differentiation, as was analyzed in Microsoft New Surface Display - October 2019.

 

Research by Market
Displays
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