Flat-panel display (FPD) equipment spending this year will reach its highest level since 2011, according to IHS Inc. (NYSE: IHS), the leading global source of critical information and insight. Driving this growth are two trends: In South Korea there is a rush to expand capacity to produce high volumes of flexible active-matrix organic light-emitting diode (AMOLED) panels for smartphone applications; while in China, supported by a wide variety of local government incentives, panel makers are continuing to build new factories to produce a varied portfolio of flat panel display technologies and panel sizes, IHS forecasts that FPD equipment spending will reach $11.2 billion in 2016, rising to $11.6 billion in 2017 - almost four times the sum spent in 2012.
Now that Samsung Display has made rigid AMOLED displays highly cost competitive with liquid crystal displays (LCD), many leading smartphone brands are showing strong interest in adopting the technology. Although plastic based flexible AMOLEDs are still more expensive than rigid AMOLED displays, they offer the extra benefits of being more rugged, thinner and lighter than glass based panels. Combined with better image quality and design flexibility, both glass and plastic based AMOLED displays are expected to rapidly gain market share in the high-end smartphone market. The FPD supply chain is reacting to this technology shift, adding enough capacity to produce more than 300 million additional flexible AMOLEDs per year by 2018.
“Thanks to direct investments, technology subsidies, low interest-rate loans, tax exemptions and other government-sponsored support mechanisms, ten different companies will be building 15 new factories in China over the next two years,” said Charles Annis, senior director at IHS Technology. “Chinese FPD producers are targeting panel self-sufficiency for the country's enormous consumer electronics industry.”
Based on the latest IHS Display Supply Demand & Equipment Tracker, 60 percent of 2016 equipment spending will be used to build LCD-dedicated fabs and 40 percent will be invested in AMOLED or AMOLED-LCD dual use facilities. By 2017 the ratio of LCD to AMOLED fabs will reach parity. China is forecast to account for about 70 percent of total equipment spending in 2016 and 2017, and South Korea will account for most of the remainder.
The volatile FPD equipment industry is in the midst one of its highest up-cycles in years, which is a sharp contrast to the quickly deteriorating panel market that is already suffering from oversupply and severe price declines. This is not an unusual situation, due to the long lead-time required to build new factories, while market conditions can change much more rapidly.
“A major industry concern in this cycle is the market may be slow to rationalize itself,” Annis said. “Chinese government policies insulate Chinese panel makers from some financial concerns and investment in flexible AMOLED is not really related to the supply-and-demand issues. If this slow rationalization depresses panel maker profitability much longer, it eventually will negatively affect not only panel makers, but their suppliers as well.”
