BOE takes the lead as Chinese panel manufacturers expand on the market

At the same time, the COVID-19 pandemic generated a massive demand for WFH and distance learning, leading to an increase in IT product shipments. As a result of these developments, the market share of Chinese monitor panel manufacturers rose to 38% in 1H20. Chinese panel manufacturers stepped up their efforts to capture shares in the monitor panel market as CSOT’s shipment surged in 1H20 BOE began mass producing TV panels at its second Gen 10.5 fab in Wuhan while strategically shifting some of its Gen 8.5 production capacity from TV panel manufacturing to monitor panel manufacturing, in turn allowing the company to ride the momentum of the pandemic-induced stay-at-home economy. As well, SDC’s announcement of its exit from the LCD panel manufacturing business is expected to create an outlet for BOE’s production capacity, pushing BOE’s monitor panel shipment up to 20.2 million pieces in 1H20, a 19% increase YoY. CSOT’s monitor panel shipment fell short of 300,000 pieces in 1H19, but as the company aggressively pursued the curved VA monitor market in 1H20 following SDC’s exit, CSOT was able to quickly raise its shipment to 2.2 million pieces, a 633% YoY growth. Owing to consistent panel demand from its sister company TPV, a major monitor ODM also under China Electronics Corporation, Panda registered a 4% YoY increase in shipment. This growth also took place due to Panda’s long-term efforts in growing its clientele of PC brands. On the other hand, with HKC’s Gen 8.6 production lines in Chuzhou, Mianyang, and Changsha starting to supply monitor panels between 2Q20 and 2021, Chinese panel manufacturers are projected to become more proactive in seizing shares in the monitor market going forward. As LGD remains the sole Korean panel manufacturer, Taiwanese companies look to stabilize profitability via optimizing their product portfolios SDC announced that it will stop supplying LCD panels from Korea by the end of this year, with further plans to divest its Gen 8.5 fab in Suzhou, meaning LGD’s Gen 8.5 production line in Korea may remain the sole Korea-based source of panel supply next year. Given the current massive influx of Chinese panel manufacturers in the market, Korean companies are expected to face further difficulties in maintaining their cost-competitiveness. Taiwanese panel manufacturers have turned their emphasis away from fab construction in recent years. As they have been effectively adjusting their current panel capacities, Taiwanese manufacturers are no longer looking to maximize their shipments as the primary goal. Case in point, Innolux’s management strategy is chiefly focused on product profitability, which involves limiting its supply of small-sized (such as 21.5-inch) monitor panels and raising their prices, as well as adjusting its production allocation of various application types, including TV panels, NB (notebook computer) panels, and monitor panels. Also benefitting from SDC’s exodus is AUO. The company is expected to see a strong panel demand from redirected orders for curved VA monitors in 2H20. Furthermore, with the cyclical peak sales season in the European and American markets occurring at the end of 2020, the corresponding panel shortage is projected to serve as an upward momentum for AUO’s panel prices. TrendForce analyst Jeff Yang indicates that, from the perspective of capacity expansion, the impending growth of Chinese panel manufacturers appears unstoppable. SDC and Panda’s recent divestment efforts for their panel fabs in Suzhou and Nanjing/Chengdu, respectively, are projected to cause large-scale changes in the market supply of monitor panels in the future. Panel manufacturers will likely consolidate in advance via capacity reduction, M&A, or fab acquisitions, leading to a more comprehensive and well-integrated panel industry going forward. Monitor Panel Shipment, 1H20 (Million pcs)

Region	Panel Manufacturer	1H19	1H20	YoY Growth
China	BOE	17	20.2	19%
China	CSOT	0.3	2.2	633%
China	Panda	5	5.2	4%
China	HKC	-	0.3	-
Korea	SDC	7.7	9.1	18%
Korea	LGD	15.5	15.7	1%
Taiwan	Innolux	12	10.2	-15%
Taiwan	AUO	12.6	11.3	-10%
	Total	70.1	74.2	6%