Popular TCL technology: After the “last battle” of the LCD industry, where is the way to go in the next decade?
After disclosing the semi-annual performance forecast of more than sevenfold the net profit forecast, TCL Technology’s 12 billion yuan fixed increase plan has also made new progress, and recently received feedback from the Securities Regulatory Commission.
It is reported that in April 2021, TCL Technology disclosed an announcement that it plans to raise an additional 12 billion yuan, of which 9 billion yuan will be used for the 8.6th generation oxide semiconductor new display device production line project (i.e. the “t9 project”), which has a total investment of 35 billion yuan, mainly produces and sells medium-sized high-addition. Value IT display (including Monitor, Notebook, tablet), professional displays such as car display, medical, industrial control, aviation, and commercial display panels.
Since the second half of 2020, the “home economy” caused by the epidemic has driven the explosive growth of medium-sized IT products around the world. BOE and TCL Technology have also made a lot of money in 2020 and the first half of 2021. Against this background, TCL Technology’s heavy investment in the t9 project is intended to further expand LCD production capacity, matching the development trend and market capacity of high-value-added IT and commercial display products worldwide.
However, it is worth noting that Samsung, LG and other large international factories have withdrawn from the LCD field since 2020, focusing on higher positioning OLED and QD-OLED technologies. BOE has also stopped building new LCD production lines, and has spent hundreds of billions of yuan to increase OLED projects in recent years.
In the field of display panels with fast technological renewal and high competitive pressure, TCL Technology’s size IT field in the 10 billion fixed increase code can not only be regarded as the feat of launching the “last battle” of the LCD industry, but at the same time, its risk of lag behind in the OLED field cannot be ignored.
The last “clean up”
In the past decade or so, the word “lack of core and few screens” has highly summarized the pain points of China’s electronic information industry, and TCL is a latecomer in the long LCD panel war.
According to public information, TCL Group was founded in 1981 and mainly focused on telephone, television and other household appliances in the early days. After the reform and opening up, color TV has entered thousands of households, and nearly a hundred manufacturers have quickly emerged in China. However, due to backward technology, the display panel with the highest proportion of the TV unit can only rely on imports.
For a long time, Japanese, South Korean and Taiwanese enterprises holding core technologies have not only blocked China’s technology, but also controlled market supply with monopoly status. Domestic color TV enterprises have faced many constraints and are in a difficult situation.
In 2006, Skyworth Group (00751. Wang Dianfu, chairman of the board of directors, said sadly and frankly in an interview: “We are all working for upstream Japanese, South Korean and Taiwanese LCD panel manufacturers.”
The best way to get rid of the constraints is to develop technology and build its own production line, but a major problem facing major enterprises is that the panel industry has typical high investment and heavy asset characteristics. Building a production line often requires billions of dollars, and it will take 2-3 years from construction to production.
Take BOE as an example. Its predecessor, Beijing Electronic Tube Factory, is one of the earliest enterprises in China to carry out research and development of LCD technology. As early as the 1990s, it laid out the field of flat panel displays. In 2003, BOE bought the TFT-LCD business of Korea Hyundai Display Technology Co., Ltd. for $380 million, and invested 10.3 billion yuan to build the first fifth-generation TFT-LCD production line in Beijing. Two years later, it was officially mass-produced, ending the “era of independent technology LCD screens” in mainland China.
However, behind the hot-blooded narrative, from 2005 to 2006, BOE lost nearly 3.4 billion yuan. In 2007, it barely relied on equity transfer and government subsidies to make profits. From 2008 to 2010, it continued to lose about 4.3 billion yuan, once carrying the stigma of “losing money”.
Under various background factors, TCL technology did not rush into the panel field at first, but invested 315 million euros to acquire the color TV business of Thomson, the world’s top 500 companies, in 2004, and formed the world’s largest color TV company TTE. It is reported that Thomson mainly engages in traditional CRT color TVs and back-projection color TVs, with more than 36,000 patents, second only to IBM in number.
Unfortunately, however, this acquisition, which is regarded as the symbol of the globalization and expansion of China’s manufacturing industry, eventually brought only two consecutive years of losses and *ST caps to TCL in 2005 and 2006 – at the end of 2004, the global color TV industry entered a technological inflection point, and LCD quickly replaced CTR as the mainstream of the market. Thomson’s patent was outdated and TTE continued to suffer huge losses. Finally, it filed for bankruptcy liquidation in 2007.
After thinking about the pain and realizing the importance of LCD LCD technology, in the second half of 2005, TCL technology Lalai Skyworth, Konka and Changhong formed a “Julong” alliance, and jointly funded the establishment of Julong Optoelectronics Company with Shenzhen SASAC, intending to jointly build a production line of more than six generations.
Due to the lack of self-built production line ability and intellectual property rights, Julong Optoelectronics has hired BOE as technical support. It was originally planned to start construction in September 2006 and achieve mass production by the end of 2007. However, the parties to the joint venture have been unable to reach a unified opinion on issues such as the sixth generation line or the 7.5 generation line. In addition, Sharp, Japan took the opportunity to disrupt. Bureau, the project eventually miscarried.
The Julong Alliance collapsed, but TCL did not give up the introduction of technology. In 2007, TCL signed a cooperation agreement with Samsung to build an LCD module factory with its technical support. This module factory was originally for Samsung, but TCL technology gathered a group of talents. After touching the threshold of LCD technology, it had the idea of building its own production line.
Soon, the opportunity came. In the second half of 2008, the financial crisis led to the collapse of global LCD panel prices, and the industry entered a loss cycle. Samsung and LG slowed down the construction of 8-generation lines. Domestic enterprises saw an opportunity to accelerate catch-up.
In 2009, BOE took the lead in expanding against the trend, investing tens of billions of yuan in the sixth generation line of Ma Hefei and the 8.5 generation line in Beijing, starting an industrial counterattack.
In the same year, TCL also aimed at the opportunity and set up Huaxingdian into the panel field in a joint venture with Shenzhen Super Technology. In November of that year, Huaxingdian’s first 8.5-generation line was put into operation in Shenzhen, and it took only 18 months to go into production. According to Tonghuashun iFinD data, in 2012, Huaxingdian achieved revenue of 7.237 billion yuan, accounting for about 10.55% of the total revenue of TCL Group.
Since then, every one to two years, BOE and TCL have invested tens of billions of yuan in new production lines to start construction. With the gradual rise of the domestic “panel twins”, more manufacturers have also joined the production expansion process. Until 2019, mainland China surpassed South Korea to become the world’s largest panel manufacturing base. In the same year, TCL Group completed Major asset reorganization, divestment of terminal business such as household appliances, fully shifted to the semiconductor display field, and renamed TCL Technology.
Greater production capacity means higher pricing power. BOE and TCL Technology have expanded their production crazily in the past decade, gradually lowering the price of LCD panels. With the decline in the profit margin of LCD production line, Samsung and LG chose to reduce production capacity and gradually withdraw from the LCD field.
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In August 2020, TCL technology Huaxing acquired 60% of Suzhou Samsung Electronic LCD Technology Co., Ltd. and 100% of Suzhou Samsung Display Co., Ltd. for 1.08 billion US dollars (about 7.6 billion yuan), and pocketed Suzhou Samsung 8.5 generation line into the LCD TV panel shipment this year. The area jumps to the second place in the world.
According to the 2020 annual report and the 2021 semi-annual performance forecast, TCL Technology has five large-scale LCD panel production lines, of which t1, t2 and t6 production lines are fully sold, Suzhou Samsung t10 production lines are officially merged in 2021Q2, and the production capacity of t7 production line climbs; small-size fields, t3 production The shipment volume of online LTPS mobile phone panels is among the top three in the world. The first phase of the t4 flexible AMOLED production line is full, and the equipment of the second and third phases have been moved in one after another. In the field of medium-sized IT, the t9 production line, which is fixed to be increased by 10 billion yuan, has been officially put into construction.
Regarding the t9 project with a total investment of 35 billion yuan, some media analysts said that this is the “last war” of the LCD industry initiated by TCL Technology, which is intended to eliminate the remaining backward production capacity of Japan, South Korea and Taiwan of China in the LCD industry with the advantages of high-generation production line technology, efficiency and production capacity, and complete the IT industry chain from Japan. The transfer of South Korea and Taiwan, China to mainland China.
OLED technology and production capacity dispute
As mentioned earlier, the technology of the panel industry is updated quickly and the competitive pressure is great. While TCL Technology is attacking the city and strategically in the LCD field, Samsung and other South Korean manufacturers have turned their attention to the OLED field with higher product positioning.
In 2010, Samsung took the lead in using AMOLED panels in high-end mobile phones, and has since started the commercialization process of OLED. After withdrawing from the LCD field in 2020, it has increased its investment in OLED panels, and it still occupies a dominant position in the market.
At the end of 2019, Chen Yanshun, chairman of BOE, also publicly said that he would stop investing in LCD production lines and focus more on OLED and other fields.
Compared with LCD screens, OLED can not only greatly reduce power consumption, but also have more delicate colors and faster response speed, and can effectively prevent Blu-ray. Nowadays, most mobile phones on the market have been replaced with OLED screens. Since 2020, some laptops such as Asus have also begun to be equipped with OLED screens.
At present, there is more and more discussion about OLED replacing LCD in the field of small and medium-sized panels. Against this background, TCL Technology’s t9 project, which has invested a total investment of 35 billion yuan, mainly produces LCD medium-sized IT products, which is also questioned. The Securities Regulatory Commission once gave feedback on the rationality of the new production capacity scale of the project. As well as relevant market space, industry competition and other situations, TCL Technology is required to make supplementary explanations.
On the other hand, in addition to the risk of technology iteration, the growth of demand for medium-sized IT products since the second half of 2020 is mainly driven by the epidemic. With the gradual control of the epidemic and the balance between supply and demand, how long can this round of high growth last? In response, China Science and Technology News Network wrote to TCL Technology to ask whether the medium-sized IT display screen mainly produced by its t9 project has the risk of overcapacity in the future. As of press time, there has been no reply.
It is worth mentioning that TCL technology is not too late to lay out OLED technology research and development. At the beginning of 2014, Huarui Optoelectronics, a wholly-owned subsidiary ofTCL technology Huaxing, was officially established, which is committed to the independent development and industrialization of OLED materials. At the end of the year, TCL Huaxing and Tianma Microelectronics jointly invested 100 million yuan to establish Guangdong Juhua, mainly researching high-performance small molecular printing OLED materials, among which TCL Huaxing holds 49.24% of the shares are controlling shareholders.
It is understood that the mainstream OLED production technology mastered by Samsung and other enterprises is evaporation plating technology, while the printing technology studied by Guangdong Juhua has higher material utilization rate and lower production cost compared with evaporation technology, which has the advantage of cost reduction and efficiency improvement.
According to the official website information, at the beginning of 2020, the 31-inch inkjet printing winding flexible prototype jointly developed by TCL Huaxing and Guangdong Juhua was launched, which is also the world’s first windable flexible OLED prototype based on printing technology.
According to 36Kr, at CES 2021, TCL Huaxing also showed two products, the 6.7-inch AMOLED cloud scroll screen and the 17-inch printed OLED scroll screen. Among them, the inkjet printing technology used in the scroll screen is expected to reduce the cost by 20% compared with the traditional evaporation and plating process.
However, so far, there is no mass production news of the above products.
In June 2020, TCL Technology invested in JOLED Co., Ltd. for 30 billion yen (about 2 billion yuan). According to the announcement, the two sides will carry out three-year joint research and development in the field of inkjet printing OLED, establish a deep patent cooperation alliance in intellectual property rights, and carry out large-scale inkjet printing. The design, development and manufacturing links of brush OLED equipment cooperate to realize the industrial large-scale production of inkjet printing OLED.
According to the 2020 annual report, TCL technology has printed more than 30 core patents for OLED materials, and the number of public patents in the field of quantum dot electroluminescence ranks among the top two in the world.
Overall, in terms of technology, TCL Huaxing’s inkjet printing process may have certain advantages.
However, in terms of production capacity, TCL technology is much behind its peers.
At present, only the first phase of TCL technology’s t4 project (the 6th generation flexible AMOLED production line) is in full capacity, and the second and third phases are under construction. Compared with its peers, BOE has invested in the construction of three sixth-generation flexible AMOLED production lines in Chengdu, Mianyang and Chongqing since 2011, with a total investment of 139.5 billion yuan. Up to now, the production capacity of Chengdu and Mianyang production lines has climbed, and the Chongqing production line is expected to be put into production within the year.
China Science and Technology News Network noted that TCL Technology said in the announcement that after the technical demonstration of the t9 project is mature, the company will build an 8.5th generation flexible windable OLED display panel production line (i.e., the “t8 project”), mainly producing and selling 32-95-inch 4K/8K ultra-high definition large-scale printing. It can be coiled around OLED TV, IT and high-value-added commercial display products.
The problem is that the construction cycle of the t9 project is 24 months. While Samsung and BOE are accelerating the OLED process one after another, the t8 project of TCL Technology may not start until two years later. In this way, is there a risk of the company falling behind?
In response, China Science and Technology News Network wrote to TCL Technology to inquire about the specific situation of the above-mentioned t8 project, as well as the joint research and development progress of the company and JOLED, the large-scale production plan of printing OLED industrialization, etc. As of press time, there has been no reply.
Compared with Samsung of South Korea and BOE, which has long been leading, TCL technology, which has become a monk on the way, has almost created a miracle of China’s display panel industry in the past decade. This 10 billion fixed increase has started the “last battle” of the LCD industry. However, the technology is always upgrading, and the future is still worth asking. Whether TCL technology can continue to replicate its previous success in the field of OLED in the next decade remains to be answered by the market.