According to reports, the panel giant Innolux's Nanjing module park is planning to close, with equipment to be transferred to the Ningbo factory, and employees are being laid off in batches, affecting 2,395 people. Innolux is committed to the research and development of TFT-LCD technology and product manufacturing, and the Nanjing factory was once the world's largest manufacturing base for small and medium-sized TFT panels.

On April 10th, this news was confirmed in a media announcement by Innolux Optoelectronics. Innolux Optoelectronics stated that the company is committed to enhancing production configuration and overall operational efficiency, adjusting some production lines and products at the Nanjing factory, while optimizing and regulating the human resource structure to strengthen the group's development.

Recently, media reports have revealed that, in light of the sluggish liquid crystal panel business, Japan's Sharp has decided to suspend the production of some large liquid crystal panel products at its Sakai Display Product (SDP), a 10th generation panel factory in Sakai City.

Over the past few decades, the competitive landscape of liquid crystal panels has been constantly changing. In recent years, with Korea and Japan exiting the LCD field, mainland China's competitive advantage in this area has become increasingly evident.

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01

The Rise of Liquid Crystal Display Technology

Certain substances, after melting or being dissolved by a solvent, lose the rigidity of solid materials but gain the fluidity of liquids, while retaining the anisotropic orderly arrangement of some crystalline substance molecules, forming an intermediate state that has some properties of both crystals and liquids. This oriented ordered fluid that exists during the transition from solid to liquid is called a liquid crystal.

In the late 19th century, scientists discovered the existence of liquid crystals. It wasn't until 1960 that an American company began to use liquid crystals in display technology. In 1962, Helmer, a doctoral graduate from Princeton University who was then serving as a part-time assistant researcher at the research center of the Radio Corporation of America (RCA), invented the liquid crystal display technology.Not until 1968 did RCA Corporation create the world's first liquid crystal display (LCD) model, and held a press conference in New York, which was attended by Japanese companies. This event marked the beginning of their awareness of the new technology developed by the Americans. In order to achieve mass production, RCA established a dedicated LCD business unit, with the main work being handled by Klein and his team from RCA's semiconductor division. Their research focused on almost every production aspect of LCD manufacturing, including the development of new processes for manufacturing liquid crystal materials at room temperature on a larger scale, as well as improving the technology for filling and sealing display devices.

Although RCA Corporation invented the liquid crystal display technology, the display speed was too slow, and the colors were too monotonous, far from the color television that could be watched. Over time, RCA abandoned the continued development of this technology. Subsequently, other American companies also gave up the development of liquid crystal display technology for similar reasons.

02

Defeating European and American enterprises, the rise of the Japanese LCD industry

The Japanese who saw the new technology at RCA's press conference became very interested in liquid crystals. The first to act were the Japanese watch company Seiko. Seiko launched the world's first digital LCD watch with a 6-digit display (06LC) in 1973. In 1975, they introduced the world's first multifunctional electronic watch with a digital LCD display.

With continuous investment, the liquid crystal technology became more and more mature, gradually solving problems such as slow display speed and single color. After that, the rise of Japanese companies was unstoppable, and they quickly defeated the American companies that invented the liquid crystal display technology. By 1988, companies such as Sharp, Toshiba, and NEC had the technology to produce large-sized LCD screens. In 1990, 90% of the world's LCD screens were produced in Japan; in 1991, Sharp was the first to start a production line for large-sized LCD screens. In 1992, IBM introduced the ThinkPad series of laptops, with its first product, the 700C, featuring a 10.4-inch color LCD display. After that, the LCD display market was ignited. Japanese companies such as Sharp, NEC, and Fujitsu responded to market demand and built the second generation of LCD production lines to produce laptop displays.

By the mid-1990s, 95% of the world's LCD production capacity was in Japan, almost monopolizing the entire industry chain. After that, European and American companies withdrew from the competition after failing to compete.

03

Counter-cyclical investment - The emergence of Korean companiesAfter Japan monopolized the LCD industry, the application of LCD gradually became widespread. With the maturity of the notebook market, the LCD industry ushered in a new wave of climax. But what followed was the crisis of overcapacity. In 1993-1994, LCD production entered the first cycle - prices fell and profits dropped sharply. Japanese companies cut production due to losses. In this process, a large number of industrial chains and talent reserves were sold or unemployed, and South Korea seized this opportunity to pry open various barriers. A large number of Japanese engineers were hired by Korean companies. When South Korea mastered the relevant technology, counter-cyclical investment became a stunt to defeat Japan. As Japanese companies' willingness to invest declined, South Korea took advantage of the situation during the Asian financial crisis to hit the panel industry hard, and the more losses it made, the more it invested. In 1995, Samsung and LG built their own LCD production lines respectively. In 2001, Samsung and LG gritted their teeth and invested in the fifth generation production line. After production, Korean companies completely surpassed Japanese companies such as Sharp. Samsung and LG have the world's first and second market shares, respectively, with a share of nearly 50%, becoming the new overlord of panels, and Japanese companies are unable to resist. The Korean chaebol model gave companies a strong financial background, so South Korea was able to put into production larger production lines and continuously impact the LCD panel market. When larger and clearer panels were launched, they activated a lot of market demands that had never existed before, allowing South Korea to be in the competition. Although Japanese companies later took measures to skip the 5th generation production line and directly put into production the larger 6th generation production line, it was too late. Later, in 1998, Japanese companies that failed in the capacity competition set their sights on Taiwan, China, which was the least affected by the financial crisis, and turned to support Taiwanese companies, signed technology transfer contracts with Taiwanese manufacturers, charged high patent fees, and used Taiwan's cheap production capacity to snipe South Korea. As expected, Taiwan's panel industry rose rapidly and became one of the four pillar industries. However, there are unexpected events. When the financial crisis passed in 2008, Taiwanese panel factories suffered a critical blow, downstream demand was sluggish, and upstream had production but no sales, which brought down the Japanese panel industry. In 2009, NEC closed the LCD panel factory in Kagoshima. Two years later, Sony sold its LCD panel business to Samsung, and Mitsubishi Electric also withdrew from the panel business. In 2016, Sharp was also acquired by Foxconn. 04 Chinese companies enter the LCD market and break the monopoly Relying on its strong financial strength, South Korea defeated Japanese companies with counter-cyclical investment. The huge amount of funds for LCD panels has deterred other latecomers. However, with the improvement of China's comprehensive national strength and the rise of its economic strength, new variables have emerged in breaking the Korean monopoly. The earliest domestic companies began to enter the industry by introducing foreign LCD production lines and importing LCD products. In January 2003, BOE officially announced that it would acquire a liquid crystal production line from Hyundai in South Korea for US$380 million. At the same time, they also wanted to build a 5th generation liquid crystal production line in Beijing. After 2009, BOE started to build the first 8.5-generation TFT-LCD production line in mainland China that was independently designed and built, with a total investment of 28 billion yuan. In the same year, Huaxing Optoelectronics independently launched an 8.5-generation TFT-LCD production line. Many domestic panel companies have embarked on the road of independent innovation, and my country's panel industry has expanded rapidly.In 2015, domestic high-generation production lines such as BOE Chongqing B8, CSOT Shenzhen T2, and Panda Nanjing C2 were put into operation, resulting in a significant increase in the supply of LCD panels. Faced with the expansion of mainland China's LCD capacity, Korean manufacturers like Samsung and LG reduced part of their LCD capacity and instead expanded their OLED capacity. In 2016, Samsung/LG exited a production capacity of 3.98 million square meters per quarter (equivalent to 240K/M of 8.5-generation lines, approximately equal to the capacity expanded by Chinese enterprises). After 2018, BOE Hefei B9, BOE Wuhan B17, CSOT Shenzhen T6, CSOT Shenzhen T7, and Sharp Guangzhou 10.5 have also been successively put into production.

With the continuous efforts of mainland China's panel manufacturers, who have been investing in production lines and increasing investments, manufacturers such as BOE, Hikvision, and China Rainbow have been catching up rapidly. Currently, the global market share of mainland China's panel capacity is nearly 70%.

In 2020, CSOT took over Samsung's Suzhou factory and subsequently acquired Samsung's LCD patents in the United States and South Korea; BOE acquired the 8.5-generation line capacity of China Electronics' CED Panda.

In 2021, BOE's revenue was 219.3 billion yuan, with a net profit of 25.831 billion yuan, a year-on-year surge of 412.96%; another panel manufacturer, CSOT, had a business income of 163.5 billion yuan, with a net profit of 14.96 billion yuan, a year-on-year increase of 195.3%. Even the second-tier manufacturer, Visionox, also achieved outstanding performance, with revenue growth as high as 32.32%.

With the explosion of performance, after nearly 30 years of fierce competition with Japan and Taiwan, the Koreans have exited this brutal game. According to market research firm Omdia, last year's LCD TV panel shipments were 258.27 million units, with Chinese manufacturers accounting for more than 60%. The shipments of China's largest panel manufacturers, BOE, CSOT, and HKC, were 60.18 million units, 48.4 million units, and 39 million units, respectively. In contrast, LG Display was only 13.34 million units.

05

Japan, South Korea, and Taiwan gradually exit LCD, with South Korea fully shifting to OLED

With the rise of China's LCD panel industry, the LCD industries of Japan, South Korea, and Taiwan have gradually declined.

South Korean media outlet The Asian Economic Daily published an article stating that the "LCD battle" initiated by the rise of Chinese display manufacturers has come to an end. Following Samsung Display's exit from the LCD business, LG Display has also begun to consider selling its last remaining LCD TV panel production line.In fact, after 2008, the panel industry began to decline, with some South Korean manufacturers starting to reduce their capacity investments in LCD. Panel manufacturers in Taiwan were also impacted. In March 2010, Innolux Corporation merged with Chi Mei Optoelectronics and HannStar Display, marking the largest merger in the history of the panel industry.

In 2022, Samsung's 8.5th generation factory completed its final wafer production and ceased operations, ending 30 years of liquid crystal panel business. In the first quarter of 2023, LG Display was rumored to be intending to sell its last Guangzhou 8.5th generation LCD production line. Additionally, Japan Display Inc. (JDI) and Panasonic Corporation also announced the cessation of LCD panel production. On August 2, 2023, Panasonic Corporation released its financial report for the first quarter of the fiscal year 2024, announcing the liquidation of its LCD panel business subsidiary PLD (Panasonic Liquid Crystal Display Co., Ltd.). On the same day, JDI announced that it would cease LCD panel production at its Tottori factory in Japan by March 2025.

With the complete disappearance of South Korea's LCD supply chain, Korean companies that failed in the LCD field have chosen to bet on the OLED industry, shifting their focus to OLED (Organic Light Emitting Diode) panels.

According to media reports, by 2026, Samsung Electronics will invest $3.14 billion in the production of advanced organic light-emitting diode displays for tablets and laptops, betting on the future of these devices. Currently, Samsung Display is the first and only company in the industry to invest in the 8th generation OLED. From the current progress, Samsung Display's investment pace in the 8th generation OLED production line has significantly accelerated. In April 2023, Samsung Display announced at a new investment agreement ceremony held at the Asan campus in South Korea that it would invest 4.1 trillion won (approximately 21.5 billion RMB) to build an 8.6th generation OLED panel production line, which will become the world's first 8.6th generation OLED production line for IT use. In June, after a period of stagnation, negotiations between Samsung Display and Japan's Canon Tokki for the price of the 8.6th generation OLED evaporation equipment accelerated again. Samsung Display plans to finalize the supply contract as soon as possible and establish a pilot (test) production line at the earliest.

Samsung Display Vice President Choi Kwon-young stated that Samsung Display plans to focus investments on small and medium-sized OLED panels for IT devices and high-value flexible OLED panels, in order to enhance the company's profitability.

Liquid crystal panels enter the stock market, potentially leading to a wave of bankruptcies.

Starting from the second half of 2021, with the slowdown in the growth rate of display panel consumption and the concentrated release of new production capacities on the supply side, the demand for LCD display panels cooled down, and prices also fluctuated and declined. WitsView data shows that in 2022, the global shipment of large-sized LCD panels was 888 million pieces, a year-on-year decrease of 9.71%; the global shipment area of large-sized LCD panels was 219 million square meters, a year-on-year decrease of 5.70%.

With the upgrade of consumption and the increasing demand for high-end TVs, the shipment of high-end LCD panels such as Mini LED is expected to grow rapidly. With the development of display technology and the enhancement of user demands, the commercialization of OLED display technology in emerging electronic consumer products such as wearable devices, curved screen phones, and VR devices continues to improve, injecting new development momentum into the flat panel display industry. In recent years, with process improvements, OLED display panels have continuously improved in performance while effectively controlling costs, which has further enhanced the market competitiveness of OLED products, leading to a continuous increase in market share.Currently, LCDs are at a clear disadvantage compared to OLEDs in terms of display quality, power consumption, thickness, and flexibility. LCD panels are facing intense market competition and the challenge of technological transformation. This is also a major reason why South Korean companies are turning to OLED technology. The LCD market has now entered a period of saturation, and with the monopolization by giants and market contraction, industry players may face a wave of bankruptcies in the future.

Although the heyday of LCDs is over, Chinese companies such as BOE are also focusing on new display technologies like OLED. According to capacity data from Omdia, the capacity share of South Korean factories in the OLED market has dropped from around 84% in 2018 to around 60% in 2022, indicating that OLED capacity is accelerating its shift towards Mainland China.