LCD Sees a Structural Shift
According to Young, LCD capacity will shrink more quickly than expected, because of COVID‐19. Although in the past, DSCC saw LCD capacity rising in both 2020 and 2021, it now sees it declining 1 percent in 2020 and 2 percent next year. There will be $3.6 billion in new capital investment in LCD in 2021 and $1.3 billion in 2022, “and then that's it,” he says.
He adds that DSCC may be “a little optimistic” by showing just a 2 percent decline in 2021 as he expects to see a slower ramp of LCD capacity this year. When COVID‐19 first hit in the growing display manufacturing hub of Wuhan, China, Young assumed there would be an initial three‐month delay in installing new production equipment in Wuhan from virus‐related restrictions. Now he expects a four‐to‐six‐month delay in Wuhan and a three‐month delay throughout the rest of China.
With Korean manufacturers shutting down most of their LCD capacity this year, Hsieh says the industry could experience a “scary balance” between supply and demand, with both declining simultaneously. Omdia gauges supply growth by looking at the total display area's capacity growth rate. In 2019, this rate was 8.6 percent compared to demand growth of around 4 percent. For 2020, the capacity growth rate is forecast to be 1.2 percent, compared to a demand growth rate of 0.9 percent.
“When you take the whole year in total, we forecast supply and demand reaching a remarkable balance, with the supply growth rate and the demand rate being similar,” says Hsieh. “The problem is Q2. The TV makers are actually delaying their purchase to the second half because they don't know what the new demand will be after the COVID‐19 impact.”
While the extent of the current downturn and timing of a COVID‐19 vaccine remain unclear, Young is optimistic that the decline will be short‐lived for the display industry, as an improved balance between supply and demand should result in higher prices than previously predicted.
“Because this downturn occurred after two down years, it's going to lead to more consolidation and restructuring and tighter supply,” he says. “But we think there's potential for price increases and improved profitability for the next few years, which this industry badly needs.”