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China is expected to jump the first big panel production needs to guard against disorderly expansion of production capacity

Number of visits: Date:2017年6月1日 09:09

In 2016, China’s display panel industry experienced the most fiery investment, with an average investment of 28 billion yuan per month. This is the figure the 21 Century Economic news reporter obtained from China-Langfang International Economic and Trade Fair which was held recently.


Further data shows that in 2016, there were 12 panel projects were operated, constructed and newly signed in mainland China and it made a total investment of 335.8 billion to them. It is expected that China will become the number one  panel-producer in 2019, exceeding South Korea, Japan and so on.


The “ubiquitous display” in the Internet of things era has opened up a huge space for the panel industry. Thereupon, the panel industry in China has grown rapidly. However, because products have low added value, the industry has a low growth rate of turnover and the upstream business heavily relies on imported materials, and equipments becomes a major short board in this industry.


At present, the sign of disorderly investment in panel industry begins to reveal. The local build the production line blindly, the appearance of lots of non-leading enterprises and the ubiquity of industrial layout are not conducive to the healthy development of industry, which make the panel industry face structural overcapacity; and the fast technology updates also brings new variables for the panel industry development.


China is expected to become the number one panel-producer in 2019.


During the above meeting, Liang Xinqing, the General Secretary of LCD branch of Chinese Optical Optoelectronics Industry Association, told the 21st Century Economic news reporter, “Over the next 3 years, mainland China will continue to grow at a high rate of investment to AMOLED and ultra high generation lines and the new investment will exceed 500 billion yuan.”


Xu Zheng, the professor of Optoelectronic Technology Research Institute of Beijing Jiaotong University believes that there are two reasons for the quick growth of investment in China’s display panel industry. One is Chinese broad market so the investors are extremely optimistic about the future of panel industry; the other reason is the supports for the industry from the local governments.


China is a big producer of TV, mobile phones, tablet PCs, notebooks and other applications, so the demand of panels is huge. With the arrival of IoT era when everything is connected to each other, the prospect of “ubiquitous display” is broad. The panel will be applied to more situations such as the vehicle terminal, intelligent wearable and intelligent home which makes the investors prefer to the display industry.


As the landing of panel industry leads to a large number of investments, local governments are also in favor of this industry. They give a large number of preferential policies such as land, taxation and other aspects, and many of them even make a direct investment to the industry.


Xu Zheng said: “ A panel factory should have an investment of at least 30 billion, and an OLED factory maybe 40 billion. The investment is very large. Therefore, many local governments directly invest to these production lines.”


The report of Intell Consulting Group shows that in 2019 the global panel industry will form three giants which are Chinese mainland, China Taiwan and South Korea and the global supply area of Chinese mainland will reach 35%.


Liang Xinqing says China will surpass South Korea and become the biggest panel-producer in 2019.


It is a remarkable fact that China’s investment of panel industry mainly concentrated in the midstream-factories while the investment of upstream materials and equipment supporting is far below than the panel, which heavily depend on imports. The industrial structure presents “unstable”.


The upstream materials and components of panel industry include liquid crystal materials, glass substrate, polarizer and backlight LED. Xu Zheng thinks that this part is the short board of panel industry. One of the reasons is that the foreign countries started earlier than China in this area and they have been ahead of the layout in the development of patent; the other reason is the insufficient investment to the products research. “As there is very few enterprise willing to invest money to technological research, almost everyone would like to wait for the off shelf technology.”


Be vigilant that disorderly investment leads to overcapacity.


What Liang Xinqing worries about is that the panel industry is showing a sign of disorderly investment.


On one hand, some enterprises blindly build production lines without considering the technology, capital and technical personnel; It’s obvious that few enterprises promote to build production lines by making use of industrial policies and all kinds of resources provided by the local government; On the other hand, in order to enter the display industry, many enterprises bought the old production line from the other country under the unqualified conditions, and transferred the foreign backward capacity to domestic, increased the risk of investment.


Liang Xinqing says: “Disorderly investment will probably lead to structural overcapacity, even overall surplus; It also will cause market chaos and vicious competition such as price war. If all of the industry in pursuit of low cost, this will definitely affect the normal profits of enterprises, and will cause industry stagnation.”

Xu Zheng says there is a lot of discussion about the panel production is too dispersive. This is a high technology-intensive, capital-intensive industry, and only the concentrations of investment and region are conducive to the thrive of this industry.


       Xu Zheng believes that investment should mainly focus on supporting several large leading panel factories. In addition, he doesn’t recommend to increase a large number of other investments. However, the reality is that a lot of non-leading enterprises have rushed into the panel field.


       He says: “Some small factories lack the most basic industrial technology and can’t even build the factory, but they poach talents by high payments. Some factories rely on poached talents to do technology, which is not conducive to the healthy development of the whole industry.”


Liang Xinqing says that there are many panel manufacturers in China at least twelve, or thirteen, while the main competitors of China, South Korea only has two. Therefore, how to integrate a more competitive group like South Korea is the mainly problem now.


Xu Zheng points out that geographically, the panel production has a significant economic radius of transportation, needing a number of supporting enterprises around it. However, it’s necessary to set up supporting enterprises only when the capacity reaches a certain extent and has scale effect.


The development of technology is bringing new variables to the panel industry.


    During an interview, Xu Xiaolan, the vice chairman and Secretary General of China’s Electronics Association, told the 21st Century Economic news reporter, that the advent of LED in the display panel field directly led to the sudden termination of CRT display. We should pay more attention to the development of forward-looking technology in this field, and be wary of the tremendous impact that some disruptive technologies have on the industry.


Liang Xinqing introduces, at present, new technology mass production level such as low-temperature polysilicon(LTPS) and oxide semiconductor is rising. The technology of active matrix organic light emitting diode in small size has been widely used in the high-end market, ultra high generation line will meet the demand of TV in large size and high resolution in future, and the technologies of narrow border and touch display integration (in-cell/on-cell) have grown mature. All of them will provide a new development space for the panel industry.


Liang Xinqing says that the original single scale competition will change to the competition of technical systems or diversity among groups through the integration of resources. In the technology sector, we should pay great attention to the speed for AMOLED to replace the current LED. The industry's leading enterprises need to speed up the ripening of new display technology’s marketed application, keep the gap by the technology progress.

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