Since LCD TV market growth stalled in 2012, panel makers, particularly in Taiwan, have been developing new TV panel sizes, in the hope of stimulating growth. These new sizes, such as 28”, 29”, 39”, 50”, 58” and 65,” are changing the LCD TV landscape and product mix, first adopted by Chinese TV makers, followed by global TV brands. The 39” made by AUO and Innolux in Gen 6 fabs at a relatively low cost, has replaced 37” and is competing with the 40” of Samsung Display and 42” of LG Display, as has 50” panels from Taiwanese Gen 7 fabs. As we reported in the Quarterly Large-Area TFT LCD Product Roadmap Report, Korean panel makers are reacting with 48” and 49” made on Gen 8 fabs, followed by Chinese panel makers like BOE and ChinaStar.
In recent research with Chinese TV companies and the European TV supply chain, we learned about additional new sizes, particularly from Innolux in Taiwan. To further optimize glass substrate efficiencies, the company is now promoting its 39.5”, made in its Gen 6 fab that had been making 37” and 39” and which is being marketed as 40”.
The background we analyzed as:
- As reported in Monthly Large-Area LCD and PDP Pricing Report, there have been significant panel price reductions for 40” and 42”; the 40” open cell price in China is less than $10 more than 39”. Excess supply of 42” panels has caused prices to drop by more than $20 from April to September.
- Production efficiency of 39” (38.5”) on Gen 6 fabs (1500×1850 mm) is 94%, while for 40” (39.5”) it can be as high as 97%.
- As Gen 6 is mostly fully depreciated, the fixed cost is very low for these fabs, leading to economic production. With 40” panel prices $10 higher than 39” on average, a small increase in screen size can bring significant incremental revenues.
- 40” (39.5”) gives the Taiwanese panel makers a new weapon to compete with 40” and 42”, which as shown in the table, address bigger global markets, and have been dominated by Korean panel makers.
39”/40”/42” LCD TV Panel Shipment (Million Units)
According to the Quarterly Large-Area TFT Panel Shipment Report, the average diagonal size of LCD TV panels is 37.5” in 2013, compared to 36.4” in 2012. If 40” (39.5”) replaces 39” (38.5”), it will contribute to further increase in the average diagonal size.
Panel makers have started to promote this new size to Chinese TV makers, as well as some customers in Europe. However, while 40” (39.5”) is attractive for panel makers, it also faces some obstacles in production and mass market adoption.
- With small design rules and high glass substrate efficiency, it might be a challenge to mass-produce at high yield rates. LCD TV makers have expressed concern about sufficiency of supply of the 39.5” panel.
- The LCD TV set designs will have to be changed from 38.5” to 39.5.” One set of modeling or tooling is about 30K per month and the lifetime is less than 2 years. With more than 16M units per year, there are already more than 500 tool sets prepared by the TV brands or OEMs in their factory. Set makers will have to figure out what to do with their 39” tool sets if they adapt 40,” and how to deal with the cost of the new sets.
- While it’s always better to switch products during a panel shortage, rather than an oversupply, LCD TV panels are in over-supply and are not likely to achieve balance until Q1’14, as panel makers gradually reduce capacity utilization.
- The product marketing of TV brands will have to revamped and re-positioned if they shift from 39” to 40”.
- This will further spur further competition in the 39”-42” segment. Pressure to reduce prices will continue, as Korean makers are now using Gen 7 and 8 lines to compete with the Taiwanese Gen 6 production.
It is a good thing for panel makers to drive increased LCD TV sizes, as it increases LCD capacity utilization, and encourages consumers to adopt more features with the larger-size sets. From a technical perspective, producing 40” (39.5”) on Gen 6 is an achievement, but whether the market will switch from 39” (38.5”) to 40” (39.5”) will have to be tested by the time and also the attitude of the LCD TV brands.