Market Insight

[Display Dynamics] Samsung Display proceeds with its LCD fab shutdown plan in South Korea

April 07, 2020

David Hsieh David Hsieh Senior Director, Displays

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Key Findings

  • Samsung Display has officially informed its LCD TV panels’ and LCD monitor panels’ customers at the beginning of April 2020 about its latest decision to restructure.
  • Samsung Display’s early restructuring of its LCD fabs in South Korea may prevent panel prices to plummet.

Makers in South Korea are now exiting the liquid crystal display (LCD) market and shifting to the organic light-emitting diode (OLED) market as fast as possible.

Samsung announced on October 10, 2019 that it will invest ₩13.1 trillion ($10.9 billion) over the next five years in “next-generation displays,” which are the quantum displays. Quantum displays include quantum dot (QD) OLED and the upcoming quantum dot nano emitting display (QNED). Even so, it is committed to produce only 30,000 substrates of QD OLED per month, and future expansion is dependent on the success of phase 1. The total project investment of phase 1 is assumed to be ₩2.5–3 trillion ($2.2–2.6 billion).

COVID-19 did not change the plan of LCD fab restructuring in South Korea. On the other hand, Omdia analyzed that the shutdown will begin in the fourth quarter of 2020 (4Q20) for Gen 7 and Gen 8 fabs in South Korea.

As analyzed in “LG Display and Samsung Display shift from LCD to OLED with LCD fab restructuring and conversion” by Omdia Display Dynamics (please refer to the first link in “Further Reading” section), Samsung Display and LG Display are expected to either reduce their capacity utilization or restructure their old Gen 7 and Gen 8 amorphous silicon (a-Si) thin-film-transistor liquid-crystal display (TFT-LCD) TV in South Korea, which will decrease the revenues of their LCD panel businesses.

Samsung Display will focus on the mobile red, green, and blue (RGB) organic OLED and QD OLED TV from now on. Samsung Display is now considered an OLED company, and its OLEDs accounted for 74% of Samsung Display’s revenues in 2019. The critical point is profitability. Samsung Display is facing deficit in its LCD business while its mobile RGB OLED business continues to be lucrative, which affected its LCD business. For the company’s overall profitability and development in the long term, Samsung Display will have to terminate its LCD business.

Originally, in 2020, Samsung Display will restructure more Gen 8.5 capacities in South Korea; it may also restructure another Gen 7 LCD fab (L7-2) in South Korea. The shutdown will reduce the supply of LCD TV panels from 2020 onwards. After the shutdown, Samsung Display will become an OLED (including RGB OLED and QD OLED) manufacturer.

The following shows Samsung Display’s LCD fab restructuring plan in the beginning of 2020.

The original plans are below:

  • L7-1 (Gen 7 a-Si TFT-LCD) shut down in December 2016.
  • L7-2 (Gen 7 a-Si TFT-LCD) reduces the capacity in 2020 but continues to make LCD TV and monitor panels.
  • L8-1 (Gen 8 a-Si TFT-LCD) converted 90,000 per month capacity to 30,000 per month QD OLED in the third quarter of 2019 (3Q19). The remaining of a-Si TFT LCD capacity continues to make LCD in 2021; it will be converted to QD OLED fab in 2022–23 with new 90,000 per month QD OLED capacity.
  • L8-2 (Gen 8 a-Si TFT-LCD) converted 35,000 per month capacity to support the new QD OLED in the fourth quarter of 2019 (4Q19). The remaining of a-Si TFT LCD capacity continues to make LCD TV panels in 2021.

However, Samsung Display decided to proceed with the shutdown in 4Q20 and to restructure more of its LCD fab in South Korea. Samsung Display has officially informed its LCD TV panels’ and LCD monitor panels’ customers at the beginning of April 2020 on its latest decision to restructure.

“By Q4 2020, Samsung Display will stop the LCD TV panel and LCD monitor supply to external customers.” This was the message delivered to the clients.

Samsung Display will continue supplying to its captive customer of LCD TV panels and LCD monitor panels—Samsung VD—after the shutdown in South Korea, from its Suzhou LCD fab.

However, according to “The consolidations of Chinese display makers may occur” by Omdia Display Dynamics (please refer to the second link in “Further Reading” section), Samsung Display is intending to find other solution for its Suzhou Gen 8 a-Si TFT LCD fab.

The following shows the Omdia analysis of Samsung Display’s new plan to restructure its LCD fab in South Korea.

The new plans are as follows:

  • L7-1 (Gen 7 a-Si TFT-LCD) shut down in December 2016.
  • L7-2 (Gen 7 a-Si TFT-LCD) reduces the capacity in 2020 and will shut down in 4Q20. The fab space and construction will be reserved for the future OLED expansion.
  • L8-1 (Gen 8 a-Si TFT-LCD) converted 90,000 per month capacity to 30,000 per month QD OLED in 3Q19. The remaining of a-Si TFT LCD capacity continues to make LCD in 2020 but will shut down in 4Q20. Further conversion to QD OLED or QNED TV panel in 2022–23 is to be confirmed.
  • L8-2 (Gen 8 a-Si TFT-LCD) converted 35,000 per month capacity to support the new QD OLED in 4Q19. The remaining of a-Si TFT LCD capacity continues to make LCD TV panels in 2020 but will shut down in 4Q20. Further conversion to QD OLED or QNED TV panel in 2022–23 is to be confirmed.
  • Samsung Display’s Suzhou Gen8 LCD fab will continue in the first quarter of 2021 (1Q21); any further decision depends on the situation in the industry or any other available alternatives.

In other words, Samsung Display will shut down all its LCD fabs in South Korea by the end of 4Q20. Thus, there will be a huge decline in the supply of LCD TV panels and LCD monitor panels. In the meantime, QD OLED for large-area displays still have some marketing and technical challenges, as reported in the “Samsung Display shifts to QD OLED – Scenario and risk analysis” by Omdia Display Dynamics (please refer to the third link in “Further Reading” section). Samsung Display may also develop QNED, as described in Variation of Quantum Dot Displays (please refer to the fourth link in “Further Reading” section).

Samsung Display’s LCD fab restructuring in Korea by 4Q20 will have the following impacts:

Samsung Display enters the OLED market

Samsung Display will enter the OLED market, which includes RGB OLED for mobile, QD OLED for large-area displays, and QNED for high-end displays, as reported in the Omdia Variation of Quantum Dot Displays (please refer to the fourth link in “Further Reading” section). 

Samsung Display’s LCD monitor panel shipments in 2019

According to the Omdia Large Area Display Market Tracker (please refer to the fifth link in “Further Reading” section), Samsung Display shipped 16.5 million of the LCD monitor panels in 2019, which accounted for 11% of the global LCD monitor panel shipments in 2019. Samsung Display’s LCD monitor panel customers are Dell, HP, Lenovo, TPV (including AOC and Philips), and Samsung VD based on the Omdia Monitor Display & OEM Market Tracker (please refer to the sixth link in “Further Reading” section). Samsung Display is planning to produce 22.9 million of LCD monitor panels aggressively in 2020, which is certainly not a goal any company can achieve easily.

Samsung Display’s LCD TV panel shipments in 2019

As reported in the Omdia Large Area Display Market Tracker (please refer to the fifth link in “Further Reading” section), Samsung Display shipped 32.3 million of LCD TV panels in 2019, which accounted for 11% of the global LCD TV panel shipments in 2019. Samsung Display’s LCD TV panel customers are Samsung VD, Sony, TCL, Hisense, Haier, Changhong, Konka, TPV, Vestel, and smaller original design manufacturers (ODMs)/ODM TV makers, as described in the Omdia TV Display & OEM Intelligence Service (please refer to the seventh link in “Further Reading” section).

New opportunities for Chinese panel makers

Brands and original equipment manufacturers (OEMs) will have to buy from other panel makers, mostly from China, when Samsung Display stops supplying LCD monitor panels. Additionally, Samsung Display is downsizing its LCD TV panel shipments to 18.3 million units in 2020. Therefore, there will be new business opportunities for new panel makers in China, such as ChinaStar, HKC, and CEC Panda.

Samsung Display’s LCD monitor panel productions in Tangjong fabs

Based on the Omdia Large Area Display Production Strategy Tracker (please refer to the eighth link in “Further Reading” section), Samsung Display is making 23-, 23.6-, 23.8-, 24-, and 27-inch LCD monitor panel in its Tangjong L7-2 Gen 7 fab. Samsung Display is also making 27-, 29-, 32-, 34-, 43.4-, and 49-inch large-size monitors in its Tangjong L8-2 Gen 8 fab. After the shutdown, the supply of these panel sizes will decrease.

Samsung Display’s LCD TV panel productions in Tangjong fabs

According to the Omdia Large Area Display Production Strategy Tracker (please refer to the eighth link in “Further Reading” section), Samsung Display is making 40-, 75-, and 82-inch LCD TV panels in its Tangjong L7-2 Gen 7 fab. Samsung Display is also making 32-, 55-, 65-, and 98-inch LCD TV panels in its Tangjong L8-1 Gen 8 fab. Additionally, Samsung Display is making 46-, 49-, and 55-inch LCD TV panels in its Tangjong L8-2 Gen 8 fab. After the shutdown, the supply of these panel sizes will decrease.

Samsung’s Suzhou Gen 8 fab

Samsung’s Suzhou Gen 8 fab is producing 32- and 65-inch LCD TV panels mainly and a small amount of LCD monitor panels. It may continue until early 2020, when Samsung Display finds an alternative strategy for Suzhou capacity.

Panel demand affected in 2Q20

As analyzed in the Omdia Large Area Display Price Tracker (please refer to the ninth link in “Further Reading” section), TV panel demand will be affected from the second quarter of 2020 (2Q20) because COVID-19 hurt consumption. The risk of cutting orders in 2Q20 is highly possible because of the impact of COVID-19 on supply/demand as it spreads globally, the weak consumer electronics market owing to the city’s lockdown, and the slowdown in the economy. However, the reduction on panel supply and capacity will be bigger than the reduction on demand purchases in 2020. Samsung Display and LG Display are retreating from LCD TV open cell supply and the withdrawal may be earlier and bigger than planned because of COVID-19. LCD TV set demand is reduced by 8–10%, but LCD TV panel supply is reduced by 10% year-over-year (YoY).

Samsung Display’s early restructuring

It has been expected that there will be a tight supply in 2020 despite COVID-19. While COVID-19 is affecting TV set demand, it has not affected TV panel purchases, yet. Samsung Display’s early restructuring on its LCD fabs in South Korea may prevent panel prices to plummet.

Research by Market
Displays
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