Changes in the sale of LGD's Guangzhou 8.5th generation line

LGD's Guangzhou 8.5th Generation Line Sale Delayed, Surrounding the Sale, Chinese and South Korean Enterprises Engage in Multi-Party Game Theory.

The rise in liquid crystal panel prices in the first half of this year has led to an increase in the performance of the main listed companies in the panel category, and has also introduced variables into the sale of LGD's Guangzhou 8.5th generation liquid crystal panel production line. Recently, there have been rumors that LGD wants to pause the sale, and there are also rumors that TCL Huaxing has a higher chance of winning in the acquisition.

However, the price of LCD TV panels fell again in July. Whether LGD, which is eager to turn losses into profits, will completely withdraw from the liquid crystal panel business, and whether BOE or TCL Huaxing can take over LGD's Guangzhou 8.5th generation line, is closely related to the next trend of panel prices.

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The rise in panel prices has led to an increase in the performance of listed companies. In the first half of 2024, the prices of global LCD TV panels, OLED mobile phone panels, and IT product panels have risen significantly, allowing the main panel-listed companies in China's A-shares to welcome a rebound in performance after the "industry winter" in 2023.

According to the performance forecast, BOE's net profit attributable to the parent company in the first half of this year will reach 2.1 billion to 2.3 billion yuan, a year-on-year increase of 185% to 213%; the net profit excluding non-recurring gains and losses is 1.45 billion to 1.65 billion yuan, while the same period last year was a loss of 1.58 billion yuan. In response, BOE stated that the prosperity of the semiconductor display industry increased in the first half of the year, the industry pattern continued to optimize, and the company's operating conditions improved year-on-year.In the field of LCD (Liquid Crystal Display) panels, the first half of 2024 has seen a benefit from the holding of large-scale sports events and e-commerce promotional activities, which have driven the demand for terminal customers to stock up in advance, especially for TV panel demand. By the end of the second quarter, the peak phase of stockpiling ended, and downstream demand has become more conservative. The prices of TV products rose significantly in March and April, and then the increase gradually narrowed; the prices of some IT products have gradually started to rebound. Large-size is an important reason for driving the growth in demand for large-size LCD panel area, and BOE (Jingdong Fang) insists on "production on demand", flexibly adjusting the utilization rate of production capacity.

In terms of OLED panels, BOE's flexible OLED panel shipments maintained growth in the first half of the year, continuously deepening the high-end OLED panel market such as folding screens. Faced with the increasing depreciation pressure in the short term, BOE said it will continue to improve its technical level.

TCL Technology's net profit attributable to the parent company in the first half of this year is expected to reach 950 million to 1.05 billion yuan, a year-on-year increase of 180% to 210%; the net profit attributable to the parent company after deducting non-recurring gains and losses is 500 million to 600 million yuan, compared with a loss of 600 million yuan in the same period last year. Among them, TCL's subsidiary, TCL Huaxing, has improved its business performance through the high-endization of large-size panels and the improvement of small and medium-size panel business. The net profit of the display panel business in the first half of the year is expected to be 2.58 billion to 2.88 billion yuan, an improvement of more than 6 billion yuan year-on-year, of which the second quarter is expected to achieve a net profit of 2.04 billion to 2.34 billion yuan.

Another panel company, Shenzhen Tianma, is expected to have a net loss attributable to the parent company of 420 million to 560 million yuan in the first half of this year, a significant reduction from the loss of 1.424 billion yuan in the same period last year. The main reason is the obvious improvement in profits from the smartphone panel business, the repair of the average price of OLED panels, and the improved profitability of the Wuhan OLED production line. The business of automotive display panels and other businesses has also started to scale up.

Weishengnuo, which takes OLED panels as its main business, is expected to have a net loss attributable to the parent company of 1.1 billion to 1.45 billion yuan in the first half of this year, achieving a reduction in losses compared with the loss of 1.634 billion yuan in the same period last year. The reason is that the industry's prosperity is gradually recovering, the demand for OLED mobile phone panels is strong, and the price has risen. Weishengnuo's revenue in the first half of the year is expected to be 3.8 billion to 4.1 billion yuan, a year-on-year increase of 41% to 52%.

As one of the leading panel companies in South Korea, LGD's profits in the first half of 2024 are also expected to increase, and the operating losses in the second quarter have decreased. LGD originally planned to sell its Guangzhou 8.5-generation LCD panel production line this year to turn losses into profits as soon as possible, but recently there have been rumors that LGD has postponed the sale of the Guangzhou 8.5-generation line. "LGD's current operating pressure has been significantly reduced, and the schedule for the sale of its Guangzhou 8.5-generation line has been postponed," a senior panel analyst said to the reporter of the First Financial Daily.

The uncertainty and game behind the sale of LGD's Guangzhou 8.5-generation line

Behind the postponement of the sale of LGD's Guangzhou 8.5-generation line, there is a game between the Chinese and South Korean display industry chains.

According to Huang Dan, a senior research manager at Aowei Ruiwo (AVC Revo), after 2019, South Korean display panel companies further shifted their business focus to OLED panels, and the share of mainland Chinese panel factories in the global LCD (liquid crystal) TV panel market increased. With the preparation for the sale of LGD's Guangzhou 8.5-generation line this year and Sharp's preparation to stop production of the Japanese 10th generation line, the share of mainland Chinese panel factories in the global LCD TV panel market next year will return to more than 70% from this year's 69%.LGD is currently a major global supplier of large-sized OLED TV panels. Korean TV brands have relied on their advantages in OLED TV panels to dominate the global high-end TV market in the past. However, this situation is now being disrupted by Chinese companies.

In the first half of 2024, in the Chinese TV market, data from AVC (Aowei Yun Network) showed that the sales volume and sales revenue share of Mini LED backlit LCD TVs reached 8.6% and 19.9% respectively, becoming the fastest-growing category; the sales volume and sales revenue share of OLED TVs fell to 0.2% and 0.9% respectively. Mini LED backlit LCD TVs are expected to enter a period of market popularity in the next three to four years. RUNTO Technology predicts that global sales of Mini LED TVs will surpass OLED TVs for the first time in 2024.

The position of OLED TVs in the global high-end TV market is being challenged. The main suppliers of Mini LED backlit LCD TV panels are Chinese panel factories. Potential buyers for LGD's Guangzhou 8.5th generation LCD line include BOE, TCL CSOT, and Chinese TV OEM company Zhaoxin Shares. If LGD sells its Guangzhou 8.5th generation line, Korean panel factories will completely exit the liquid crystal panel market, and Chinese panel factories will further enhance their say in the global liquid crystal panel market, and Korean TV brands will rely more on the supply of Chinese panels. This is one of the reasons for LGD's hesitation.

The rise in liquid crystal panel prices in the first half of the year allowed LGD's Guangzhou 8.5th generation line to "breathe a sigh of relief". However, in July, the prices of LCD TV panels began to fall again. According to the TV panel price trend indicator from Sigmaintell in late July, the prices of LCD TV panels declined moderately in July, with a 1-dollar drop for 32-inch panels and a 2-dollar drop for 50, 55, 65, and 75-inch panels.

While the Chinese and Korean display panel industries are competing, companies within the Chinese display panel industry are also competing. In the bidding process for LGD's Guangzhou 8.5th generation line, BOE was previously considered to have a greater chance of winning, but recent rumors suggest that TCL CSOT has a higher chance of winning. A panel industry expert speculates that TCL CSOT may have increased its bid in the bidding process.

In addition to the bidding between BOE and TCL CSOT, the opinions of LGD's Guangzhou 8.5th generation line customers are also an important influencing factor. Currently, the liquid crystal panel customers of LGD's Guangzhou 8.5th generation line mainly include Korean companies such as Samsung Electronics and LG Electronics. Samsung Electronics is now ranked first in global TV sales. Public information shows that Samsung Display, a subsidiary of Samsung Electronics, currently holds a 12.33% equity stake in TCL CSOT.

BOE and TCL CSOT are now the world's largest and second-largest suppliers of LCD TV panels. If BOE acquires LGD's Guangzhou 8.5th generation line, the gap between TCL CSOT and BOE will further widen; if TCL CSOT acquires LGD's Guangzhou 8.5th generation line, the status of TCL CSOT and BOE in the global LCD TV panel market may change.

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