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China’s FPD industry: status quo and strategy
Publish time:2013-09-29
News Source:www.fpdisplay.com

    At the FPD International China 2013/Beijing Summit held recently, global FPD leaders from Japan, South Korea, etc. showcased their latest products.
    The forum attracted a large number of international giants. On the one hand, they have set eyes on China’s enormous market. On the other, they have started to keep up with the moves of their Chinese competitors as the global market share of Chinese FPD makers has increased and a number of competitive Chinese enterprises such as
BOE, CSOT and Tianma are emerging. In 2012, the output of China’s FPD industry exceeded RMB 70 billion, accounting for 11.2% of the global total. It means that China overtook Japan to be the world’s No.3. In the first half of this year, the output of China’s FPD industry registered nearly RMB 50 billion, showing strong growth momentum.
Investments in LCD production lines are expected to reach RMB 350 billion by 2015; coupled with investments in materials and devices, the total investments in China’s
FPD industry will exceed RMB 400 billion.
    After overcoming numerous difficulties in transformation and upgrading,China’s FPD industry is expected to embrace a “turning point” and regain the confidence in rapid development. Although the external environment has improved greatly and the country has introduced a package of preferential and support policies for the industry, the   upstream and downstream segments are still underdeveloped, heavily relying on imports for such necessary materials as glass substrates, liquid crystals and optical devi-ces, crippling the advance of China’s FPD industry in the global market.
    According to industry experts, the alleviated “shortage of panels” only suggests improvements in the supply of panels but the whole industry is still largely dependent on imports. In addition to the continued support of the government and competent authorities, enterprises themselves should strengthen collaboration and integrate resources to maximize the benefits of economies of scale while intensifying efforts in R&D and promoting technological innovations, so as to build up synergy across the industry.
Innovation in liquid crystals to be enhanced
    Liquid crystals are key to the manufacturing of LCD panels. Although they only make up 3% of the total costs, liquid crystals are among the most important materials for making LCD panels.
    As China has rolled out policies to promote liquid crystals in recent years, a turning point has emerged in the localized production of thin film transistor (TFT) liquid cryst-als. Yet due to the late development and limited technological capacities of domestic enterprises, China’s liquid crystal industry is still unable to meet the needs of the devi-ces sector in terms of overall capacity and technological competence, let alone the notable disadvantages compared with its advanced international counterparts.
    Take a look at the sale and use of TFT-LCD in China in 2012. Based on TFT-LCD production lines in operation, the domestic demand for TFT-LCD is estimated at about 90 tons if in full capacity; considering product transfer, activation and other factors, the actual purchase volume should be around 70 tons. “But two major domestic liquid
crystals suppliers, Shijiazhuang Chengzhi Yonghua and Jiangsu Hecheng, only registered shipments of about six tons, accounting for just 8.5% of domestic market; Germ-any’s Merck and Japan’s JNC and DIC dominated the market”,  said Wang Kui, General Manager of Chengzhi Yonghua, during an interview with China Intellectual Prope-rty News.  According to him, the low market share of domestic liquid crystals results from multiple reasons, and a prominent technological bottleneck is that domestic enter-prises are still weak in R&D and have few proprietary products. Moreover, domestic TFT-LCD makers are not enthusiastic about using homemade liquid crystals.
    To increase the market share of domestic liquid crystals in the TFT-LCD industry, Chinese enterprises should strengthen R&D and improve product competitiveness
while the government should lend strong policy and financial support. Experts believe that the government should attach strategic importance to the localized production of TFT-LCD, give strong funding support to manufacturers of materials, and adopt policies encouraging TFT-LCD makers to use domestic liquid crystals.

Insufficient R&D in glass substrates
    
Glass substrates, a basic component of LCD devices, also represent a weakness in the segments of China’s LCD industry. Although they only make up 17% of the total costs of LCD panels, glass substrates are fragile, and their transportation is costly; in addition, their output directly affects the production of such components as color filters in production lines of Gen 5 and higher generations.
    However, most of glass substrates used in China are imported and there are very few enterprises specializing in the manufacturing of glass substrates.
By the end of 2012, China had 30 glass substrate production lines in operation, under construction or under planning, including three Gen 4.5 production lines, 17 Gen 5
and 5.5 production lines and 10 Gen 6 production lines. In 2012, the total area of supplied glass substrates in China was less than 13 million m2. If all in full operation,
these production lines are expected to basically meet the demand of China for panels of Gen 6 and lower generations around 2015. However, they are still difficult to meet the needs for LCD panels since China’s LCD panel production lines will be mostly Gen 8.5 lines in the future. As Liang Xinqing, Secretary General of China Optics and
Optoelectronics Manufacturers Association LCB, told China Intellectual Property News, Chinese glass substrate manufacturers should focus on improving their competitiv-eness in five aspects: pass rate of products, cost, technology, quality and patent.
    Among domestic manufacturers, IRICO and Tunghsu Group are two major glass substrate suppliers, but they still need to improve product quality, increase the pass rate of products and reduce costs to make their products more competitive.
    Now China’s glass substrate industry is still in its early stage. According to Gao Hongjin, professor of Tsinghua University and Honorary Chairman of China Optics and
Optoelectronics Manufacturers Association LCB, when reaching a certain scale, enterprises should seek to increase their market share so as to secure their position in the market, or they may lose what they have achieved in the fierce competitions. In the current stage, it is imperative for Chinese glass substrate manufacturers to control their
investment impulse properly.

Manufacturers of optical components still in infancy
    As a core part of LCD panels, optical components mainly include polarizers, color filters and optical films. Now the world has more than 15 major polarizer manufacturer-s with over 80 production lines, which are clustered in Japan, South Korea and Taiwan. Among them, Japan has a marker share of more than 50%, apart from its monopol-y in other raw materials of polarizers. Gao Jinhong points out that China has long depended on imports of polarizers due to its underdeveloped production in this regard.
    Color filters are key components to colorize FPD. The mainland’s color filter industry was born in 2003 when Shenzhen Laibao Hi-tech Co., Ltd. introduced an old Gen
2.5 production line from MICRO of Japan. Now the demand and supply of TFT-LCD color filters are basically in balance, but the main materials for producing color filters
are largely imported.
    In addition, the materials of TFT-LCD also include backlight modules, driver IC, wet chemicals, targets and ultra-pure gases, but in these aspects, domestic enterprises
also have no outstanding advantages compared with their foreign counterparts.
    “Patent disputes in the global FPD industry has spread from upstream segments to other segments of the industry, with intellectual property barriers concentrating on key materials, devices and new techniques”, said Liang Xinqing. As the Chinese FPD industry develops, patent frictions may grow increasingly fierce. Chinese enterprises
should attach great importance to the development of core technologies and build a sound system to protect their patents.
    How can China’s FPD industry deal with the situations? In the opinion of Liang Xinqing, the key to the FPD industry’s core technology lies in devices, materials and proc-essing techniques; having patented technology is not only important to promote the transformation and upgrading of the FPD industry but also crucial to that of the whole
electronics industry. The government should put related policies in place to steer enterprises toward integrating resources, and work together with the enterprises to adva-nce the progress in core technologies and promote the development of the industry.

China to rank first in Gen 8.5 production lines
The powerful growth of China’s LCD industry is attracting worldwide attention. According to the latest data, China will be the world’s largest LCD panel maker by Gen 8.5
production lines in 2015. Industry experts believe that boosting the domestic LCD industry is of vital importance and enterprises should follow the development trends of
the industry and speed up efforts to build China into a competitive player in the global LCD industry through technology innovation.

China’s Gen 8.5 production lines make large-sized displays
    “China has become one of the world’s largest manufacturers of electronics products, with more than half of the world’s display devices made in China”, said Wang Dongsheng, BOE Chairman and Chairman of China Optics and Optoelectronics Manufacturers Association LCB at FPD International China 2013/Beijing Summit held recently.
Based on data obtained at the forum, the mainland now has 21 panel production lines in operation and under construction, making displays for various devices such as
mobile phones, tablets, notebooks, desktops and TVs. With annual output of hundreds of billions of yuan, they have greatly driven the growth of related segments such as glass substrates, liquid crystals, polarizers, optical films and touch screens.
    According to DisplaySearch, the market share of Chinese panel makers grew from 6% to 9.9% in 2012, making China the world’s third largest display producer. The
country is expected to double its market share to 18.6% in 2014. That will make China the world’s only region with continuous growth in this respect.
    Over the past decade, China has built an enormous LCD panel industry starting from scratch. In particular, BOE has made itself the world’s top five within less than 10
years. “With our next-generation display technology, BOE will capture the high ground in the new display field, and is expected to become the world’s No.3 soon”, said
Wang Dongsheng.
    According to Ouyang Zhongcan, member of the Chinese Academy of Sciences, Chinese LCD makers have alleviated the “shortage of panels” through technological pr-ogress over the past ten years. It is worth noting that China used to import all large-sized displays larger than 32-inch, but such a situation has been changed as BOE’s
Gen 8.5 TFT-LCD production line, the first of its kind in the mainland, came into operation in June 2011.
    By 2015, the mainland will have nine Gen 8.5 LCD panel production lines, becoming the world’s largest producer of Gen 8.5 LCD panels, and this will change the landscape of the global LCD panel market.

Will there be overcapacity? 
    In response to concerns about overcapacity, Ouyang Zhongcan expressed his optimism for the LCD panel industry. He said that information consumption had proved a success in the field of mobile phones, and the soaring demand for mobiles phones had led to enormous demand for small and medium-sized LCD panels.
    He also indicated that large-sized LCD panels would have a broad prospect. By 2020, China will realize the transition from analog TV to digital TV, pushing the domestic demand for LCD TVs to a new level and heralding a boom in the FPD industry.
    According to BOE Vice President Zhang Yu, China’s imports of LCD panels reached USD 47 billion in 2010 and USD 50.3 billion in 2012. The strong growth in imports, even when domestic panel production lines are increasing quickly, reflects the enormous market demand for LCD panels.
The National Plan for the Development of the Electronic Information Industry during the 12th Five-Year Period proposes to increase the self-sufficiency rate of flat panels
for TVs to more than 80%. Presently the self-sufficiency rate is around 30%, indicating large room for growth.

Homemade panels secure leadership 
    According to DisplaySearch, from 1998 to 2012, investments in devices exceeded USD 120 billion, but the semiconductor display industry has been operating at loss for
years.
    But industry experts believe this is partly because the LCD industry is characterized by heavy investments and long cycles. China’s FPD industry not only shoulders the important mission of industrial transformation and upgrading but also serves as a guarantee for strengthening the basic capacity od the electronic information industry so   we should look at long-term interests. In fact, from mobile phone screens to medical devices and aerospace equipment, LCD panels have played an indispensable role in economic development and daily life. Without strong competitiveness, Chinese LCD panel makers will inevitably be dependent on their foreign counterparts in many aspe-cts.
    Ouyang Zhongcan believes that the Opinions on Promoting Information Consumption and Stimualting Domestic Demand issued by the State Council has great significa-nce in promoting the development of China’s FPD industry. On the one hand, investments in high-generation LCD panel production lines will boost the development of the local economy. For example, BOE invested RMB 32.8 billion in the Gen 8.5 semiconductor display project in Chongqing, which is expected to bring about more than RMB 100 billion benefits.
     On the other hand, as market conditions improve and production lines are enriched, local panel makers including BOE, CSOT and Tianma have all made profits. In the   first half of 2013, BOE’s revenue registered RMB 16.25 billion, up 69.16% year on year, and its net profits reached RMB 860 million; CSOT’s net profits stood at RMB 890 million.

Innovation is the best policy 
    “The price of a standard LCD panel drops by 50% every three years. To keep the price unchanged, the performance of the display has to be doubled at least”, said
Wang Dongsheng. “The cycle is now being shortened. Panel makers must make innovations in ideas, technology and applications”. The semiconductor display market
has experienced four waves of revolutions driven by notebooks, desktops, TVs and mobile Internet. All enterprises in the industry should work together to develop new
applications and promote the new round of application wave. Only in this way can the industry have a bright future.
     According to industry insiders, thanks to sustained innovations in technology, the technological gap between panel makers in the mainland and those in Taiwan and
South Korea has been narrowed down to 1.5 years. Data show that BOE filed 2,686 patent applications in 2012 and it now holds more than 10,000 patents.
    Ouyang Zhongcan believes that to make itself larger and stronger, the mainland’s FPD industry must focus on the development of new display technologies. “New prod-uction lines in the mainland all plan to adopt new technologies, and this is a prerequisite for the development of China’s FPD industry”. The information highway is now
driving the rapid growth of 4K UHD TVs. Japan plans to launch 4K UHD channels in 2014. It is estimated that large-screen UHD TVs will increase by 30% annually and the demand for 4K LCD panels may be an important engine of growth for Chinese panel makers.