Taiwan's FPD Production Value Drops 18.1% in Q3, 2011
2012/01/10 | By Quincy LiangTaiwan's flat-panel display (FPD) industry turned out NT$353.6 billion (US$11.8 billion) worth of products in the third quarter of 2011, down 1.4% quarter-on-quarter (QoQ) and 18.1% year-on-year (YoY), according to the Industrial Economics & Knowledge Center of the Industry & Technology Intelligence Services (IEK-ITIS).
FPDs, a category that includes both large (over 10 inches) and small/medium-sized thin film transistor-liquid crystal display (TFT-LCD) panels, organic light-emit diode (OLED) panels, TN/STN (super twisted nematic) panels, and others, accounted for NT$242.4 billion (US$8.08 billion) in production value, a 0.3% QoQ increase but a 16.7% YoY decline. FPD parts and components (color filters, polarizers, glass substrates, and backlight units) contributed NT$111.2 billion (US$3.71 billion) to total production, a 5.1% QoQ drop and a -21.0% YoY decline.
Large-sized TFT-LCDs contributed NT$191.3 billion (US$6.38 billion) to overall production value (down 0.4% QoQ and 21.2% YoY), while small- and medium-sized TFT-LCDs contributed NT$45.4 billion (US$1.51 billion), up 5.1% QoQ and up 11.0% YoY; TN/super twisted nematic (STN)-LCDs NT$3.92 billion (US$130.7 million), down 12.3% QoQ and down 25.3% YoY; and organic light-emit diode (OLED) NT$1.71 billion (US$57 million), down 5.1% QoQ and 14.1% YoY.
The production of color filters was valued at NT$25.7 billion (US$855.7 million), down 5.4% QoQ and 16.6% YoY; polarizers at NT$20 billion (US$668 million), down 4.2% QoQ and 2.8% YoY; glass substrates NT$35.4 billion (US$1.2 billion), down 7.8% QoQ and 18.3% YoY; and backlit modules NT$30.1 (US$1 billion), down 2.0% QoQ and 34.7% YoY.
Minor Decline
IEK-ITIS says that the production value of large TFT-LCD panels slipped modestly in the third quarter, which is traditionally a high season, mainly because of uncertainties resulting from the debt crises in the United States and Europe. Slow demand from system makers drove panel suppliers to reduce their capacity utilization rates so as to slow the decline in panel prices. As a result, panel shipments in the traditional high season were cool and panel prices, especially for TV sets, were declining.
Thanks to the rapidly rising penetration of smartphones and tablet PCs, Taiwan manufacturers' shipments of small/medium TFT-LCD panels have been increasing, with growths of 5.1% QoQ and 11.0% YoY in the third quarter. Rising demand is motivating all local panel makers to turn to small/ medium panels, especially second-tier players Chunghwa Picture Tubes (CPT) and the HannStar Display Corp.
Economic risks in Europe and the United States led to relatively weak demand for consumer-electronics products in the third quarter, however, including even the hot-selling smartphones and tablet PCs. The smartphone market, while enjoying a high-speed growth in demand, is developing a low-price trend that drives display panel suppliers to cut prices. The tablet PC market enjoyed skyrocketing growth for a time, but fierce competition between old and new players has driven some prominent brands to withdraw from the business. The combination of all these factors led to the relatively small growth in shipments of small/medium-sized panels.
Shipments of OLED panels in Taiwan were affected by the weak global demand for consumer electronics products, leading to a QoQ decline of 5.1% and a YoY drop of 14.1%. Local panel makers are not yet ready to turn out active-matrix OLEDs (AMOLEDs); so they are focusing on passive-matrix (PMOLED) products, especially monochrome and area-color panels, both of which are mature items with relatively low prices.
The overall turnover in the TN/STN panel sector in Taiwan continued to drop 12.3% QoQ and 25.3% YoY in the third quarter, partly because there were more workdays in the second quarter. IEK-ITIS says these types of panels are in less demand due to shrinking cellphone applications, as more TN/STN panels were being replaced by amorphous silicon (a-si) TFT-LCDs, low temperature poly-silicon (LTPS) TFT-LCDs, AMOLEDs and touch panels.
Key Parts
The value of color filter production declined 5.4% QoQ and 16.6% YoY in the third quarter due mainly to shrinking shipments of large-sized panels.
The production value of polarizers dropped 4.2% QoQ and 2.8% YoY in the third quarter, due mainly to weak demand for consumer electronic products stemming from economic uncertainty. Tablet PC and smartphone panels generated stronger demand, but demand from the TV, notebook PC and monitor panel sectors was stagnant.
Glass-substrate production dropped 7.8% QoQ and 18.3% YoY in the traditionally high season of the third quarter, as panel makers cut back on their capacity utilization to minimize the impact of declining panel prices. Most panel makers reduced their utilization rates on sixth-generation (6G) and -lower production lines so as to maintain normal operation on newer-generation lines.
The production of backlight units dropped 2.0% QoQ and 34.7% YoY in the third quarter, as demand for large-sized panels shrunk and demand for light-emitting diode (LED) backlights for TVs was weaker than expected, though demand from suppliers of tablet PCs and Ultrabooks (ultra-slim and -light notebook PCs) remained stable.
Major Event in Q3
Rumors circulated in the market in June of 2011 that several major companies in Japan would try to partner in the small- and medium-sized display (SMD) business. Then, on August 31st, Innovation Network Corporation of Japan (INCJ), Hitachi Ltd., Sony Corp., and Toshiba Corp. announced the signing of a non-binding Memorandum of Understanding (MOU) to integrate their SMD operations, run by subsidiaries of Hitachi, Sony and Toshiba, in a new company (Japan Display K.K.) to be established and operated by INCJ.
All the shares and assets of the SMD subsidiaries of Hitachi, Sony, and Toshiba will be transferred to the joint venture, with INCJ, a public-private partnership, providing financial, technological, and management support for next-generation business. INCJ plans to invest 200 billion Japanese yen for a 70% stake and voting rights in the new firm, with Hitachi, Sony, and Toshiba holding 10% each.
IEK says that the formation of this joint venture by four Japanese companies engaged in the SMD panel business reflects the importance of benefit-sharing—not only in markets and customers, but also in the synergistic integration of R&D resources for next-generation display technologies. The venture, IEK adds, provides a good example for global counterparts in turning the unfavorable business climate to advantage by readjusting R&D and operating strategies for further development.
The short-term impact of the Japanese SMD venture, according to IEK, will be less room to maneuver for Taiwanese suppliers of medium- and high-end LCD panels.
Of the companies joining in the venture, Sony specializes in AMOLED and provides own-brand products including cellphones, palm-top game console PSPs, and digital cameras, among other products. TMD is a seasoned maker and developer of high-end LTPS TFT-LCD panels, as well as a major supplier of SMD panels for Apple iPhones. Hitachi Displays owns patents for its IPS (In-Plane Switching) wide-viewing-angle technology. Integration by the three companies can achieve both technological synergies and production-capacity sharing.
All three of the Japanese companies focus on higher-end SMDs for mobile devices, especially LTPS TFT-LCD panels, IEK says, while their Taiwanese counterparts are more specialized in medium- and low-end a-Si TFT-LCD products and supply only a small portion of LTPS products. Most TFT-LCD panel makers are now trying to refocus on SMDs by utilizing sub-4G capacity while simultaneously strengthening shipments of LTPS panels.
IEK notes that while several companies in Taiwan are striving to mass-produce AMOLED panels, including Chimei Innolux Corp., AU Optronics Corp. (AUO) and Wintek Corp., only the Chi Mei EL Corp. (CMEL), a unit of Chimei Innolux, has managed to ship products to Kodak in the U.S., with AUO having once tried to supply such panels for BenQ cellphones. Taiwan, with its very limited production and shipment experience, lags far behind Japan and South Korea in AMOLED equipment and material supply-chain capacity, the center says.
The proposed Japanese venture, IEK says, will enable Japan to integrate SMD R&D resources to develop business and technologies for the next-generation display market. This constitutes a wake-up call for Taiwan, and it may have put the writing on the wall for the next industrial transformation and upgrading.
Outlook
IEK-ITIS predicts that in the fourth quarter of 2011, shipments by panel makers in Taiwan will still see a minor decline due to the weak global economic climate.
The production value of Taiwan's FPD industry for the whole of 2011 will drop by an estimated 15.4% to about NT$1.4 trillion (US$46.7 billion), from a peak of NT$1.66 trillion (US$55.33 billion) in 2010, IEK-ITIS says. Of the total, FPDs are forecast to account for NT$953.8 billion (US$31.8 billion), a 16% YoY decline from NT$1.13 trillion (US$37.8 billion) in 2010, while FPD parts and components are expected to contribute NT$452.4 billion (US$15.1 billion), down 14.0%.
Production Value of FPD Products in Taiwan | |||||||||||
Category |
| Q4'10 | Q1'11 | Q2'11 | Q3'11 | QoQ | YoY | Q4'11(e) | 2011(e) | YoY | |
FPDs | Panels | TFT-LCDs (>10") | 214.3.0 | 193.68 | 192.0 | 191.3 | -0.4% | -21.2% | 180.9 | 758.0 | -20.7% |
TFT-LCDs (<10") | 39.85 | 38.65 | 43.20 | 45.4 | 5.1% | 11.0% | 44.4 | 171.6 | 14.5% | ||
TN/STN LCDs | 4.96 | 4.36 | 4.47 | 3.92 | -12.3% | -25.3% | 3.8 | 16.5 | -21.2% | ||
OLEDs | 1.91 | 1.84 | 1.80 | 1.71 | -5.1% | -14.1% | 1.6 | 7.0 | -11.6% | ||
Others* | 0.10 | 0.10 | 0.10 | 0.10 | -5.9% | -13.6% | 0.1 | 0.4 | -10.5% | ||
Sub-Total | 261.12 | 238.63 | 241.6 | 242.4 | 0.3% | -16.7% | 230.9 | 953.5 | -16.0% | ||
Key Parts | Color Filters | 27.64 | 25.37 | 27.13 | 25.67 | -5.4% | -16.6% | 25.1 | 103.3 | -15.6% | |
Polarizers | 20.50 | 20.37 | 20.91 | 20.04 | -4.2% | -2.8% | 19.5 | 80.9 | 13.3% | ||
Substrates | 42.19 | 39.79 | 38.40 | 35.4 | -7.8% | -18.3% | 32.6 | 146.2 | -14.3% | ||
Backlight Units | 32.21 | 29.48 | 30.72 | 30.1 | -2.0% | -34.7% | 31.8 | 122.1 | -24.5% | ||
Sub-Total | 122.54 | 115.01 | 117.2 | 111.2 | -5.1% | -21.0% | 109.1 | 452.4 | -14.0% | ||
| Overall | 383.66 | 353.63 | 358.8 | 353.6 | -1.4% | -18.1% | 339.9 | 1405.9 | -15.4% | |
Source: IEK-ITIS, Nov. 2011 | |||||||||||