ROUNDTABLE: Display vendors augment Gen 7 and 7.5 fabs

Electronics Asia discussed the trends in the display industry with Hsuan-bin Chen, Vice Chairman and CEO, AUO Optronics Corp.; Jau-Yang Ho, Chairman, Chi Mei Optoelectronics; and Wei Shan Lin, Chairman, Chunghwa Picture Tubes Ltd. Excerpts:

How’s the current state of the display market and what’s your forecast for next year?
Chen: The display panel market in 2007 is quite healthy; the high market demand in Q3 made up for the oversupply in the early part of this year. Learning from the oversupply problem in the past, panel manufacturers are now more cautious. Based on market forecasts that we get, the demand for displays is expected to increase in 2008. Flat panel display technologies will also continue to evolve.
Lin: Due to the booming handheld device market and the growing popularity of high-end panels, TFTLCD will soon replace TN/STN LCD. CPT’s small and medium TFT-LCD panel shipment in Q1 07 was up by 305.7% compared to Q1 06. We estimate the demand for TFTLCD to grow by 100% in 2008. This forecast reflects on our shipment plan for the next year as we will ramp up production from 13 million to 26 million units.
Ho: Display panel manufacturers are more watchful in controlling their shipments to avoid oversupply. They are also considering moving to the next generation process, Gen 8, for best cost advantage. Big-sized panels over 40” account for only 8% of our sales, but we are optimistic about this market segment.

What are your investment plans for next year?
Lin: Our strategy is to strike a balance between making profit and pushing technology forward. Next-generation panel process requires extremely high capital investment, so we are looking for alliances in our technology development to reduce risks. But before this plan materializes, we are focused on supplying the right panel sizes and optimizing our existing manufacturing resources.
Ho: Our main target for capital investment is to reinforce our Gen 7 production line. Building close relationships with LCD-TV makers is also complementary to our goal. Our capital investment ranges from $2.1 billion to $2.3 billion this year. In 2008, we plan to cut down 10% to 20%. We don’t have a clear roadmap for Gen 8 yet. Our priority is to optimize our existing manufacturing resources. We are expanding our production line with the construction of Gen 7 fabs in Hainan and Ninbo.
Chen: We plan to cut down capital investment from $2.9 billion to $2.0 billion in 2008. We plan to reinforce the capacity of our Gen 7 and Gen 7.5 fabs, but our main investment is for Gen 7. The reason for focusing on Gen 7 is that we have a strong demand for 40” and above LCD-TVs. It is estimated that the total shipment of display panels will increase by 20% next year. In 2009, the new Gen 7.5 fab will ramp up capacity to 40,000 units per month.

What flat-panel display sizes are in demand in the market today and what will be in demand next year?
Chen: Fueled by the vigorous consumer electronics market, small and medium panel displays grew about 20% this year. The demand for 19” monitors increased more than we expected. The main reason for this is that OEMs are adopting 19” modules for TV sets, which make up 20% of our 19” shipments this year. We also see a future demand for 42” full HD display. On the other hand, a bigger chunk of display manufacturers’ revenue still comes from small and medium size panels.
Ho: Our sales in H1 07 came from TV, DT, NB, and small/medium size panels (44%, 41%, 11%, and 4%, respectively). In terms of panel sizes, the 26” and 32” displays account for 80% of our total shipment. From this data we observe the overwhelming impact of LCD TVs replacing CRT TVs.
Lin: Our focus is on small and medium size panels. The strong demand for small size panels mainly come from consumer electronics such as portable devices, DVD players, and GPS devices. It won’t be an exaggeration to say that small size panels will remain a cash cow for panel vendors in the next couple of years because so far supply has not been able to catch up with demand. We plan to cut down the shipment of 17” panels and boost our capacity to providing 2.4” and 2.8” panels for mobile phones and MP3 players.

How do you plan to grow business and advance your product offerings?
Ho: We will strengthen our market advantage from two aspects – vertical integration and optimization of manufacturing resources. For vertical integration, recently we formed a strategic alliance with TPV technology, the largest PC monitor maker in the world. The alliance will provide CMO a stable market for panel output, and provide TPV a sustainable long term supply of key components.
Chen: We will continue to focus on Gen 7 for a couple of years more to make profit, as capital investment for Gen 8 is still too huge to consider right now. In terms of technology advancement, we are exploring on integrating touch panels with LCDs, such as resistor- and capacitor-based technologies.
Lin: To broaden our investments we will focus on vertical integration with flat-panel display, Proview, and backlight module manufacturers. We are looking for strategic partners that we can closely work with to develop value-added features such as resistor- or capacitor-based panel technologies.