Panel Duo Battle Can TCL Technology defeat BOE? TCL Technology's stock price has risen for five consecutive years, and the biggest driving force for its current rise is the transfer of panel production capacity. After divesting its old business, TCL has continued to invest in mergers and acquisitions in the semiconductor field. The successive withdrawals of Korean companies have freed up more opportunities for domestic LCD panel companies. And TCL Technology and BOE, as the two major domestic panel giants, will take most of the shares. Judging from the existing panel shipments, the gap between TCL Technology and BOE is gradually being wiped out, and it is likely to surpass BOE to become the world's largest LCD panel supplier.
On November 6, TCL Technology issued a progress announcement on the company's participation in the public delisting of 100% equity in Zhonghuan Electronics. Behind this is TCL's continuous expansion into the upstream industry this year. Data show that TCL Technology completed a major asset restructuring and delivery in 2019, and divested some of its old businesses. Today, its main business structure is semiconductor display and materials business, industrial finance and investment business, and other three major sectors. Since reorganizing its business, TCL has actively made strategic investments and mergers and acquisitions relying on the semiconductor industry chain.
BOE and TCL Huaxing are China’s two major LCD panel giants. Since 2009, BOE and TCL Huaxing have launched a production capacity expansion competition. After BOE put into production the world’s first most advanced 10.5-generation line in 2017, BOE was fully committed. In order to gain the position of the global LCD panel leader, TCL Huaxing only put into production the first 11-generation line in 2019. Since 2018, panel prices have been declining, and most companies in the industry have suffered losses.
However, in the context of the continued decline in global LCD panel prices in 2018, TCL Huaxing relied on its cost control capabilities to make its net profit this year's decline significantly smaller than that of its competitors, thus making it in the situation of overcapacity of LCD panels. It also maintained the momentum of expansion, and its ranking jumped from fifth to second in the global LCD panel market. As the price of large-size panels continues to fall, at the end of 2019, many Japanese and Korean manufacturers announced that they will withdraw from the LCD market. The global panel industry has ushered in a huge change and also ended the original oversupply situation.
With the improvement of supply and demand, the price of large-size panels has continued to rise this year, and the successive withdrawals of Korean companies have freed up more opportunities for domestic LCD panel companies. In order to catch up with BOE, this year TCL acquired an 80.831% stake in Nanjing CLP Panda’s G8.5 generation line. TCL Huaxing acquired Samsung’s Suzhou plant. Samsung’s Suzhou plant has a 8.5-generation LCD panel production line, which has become the world’s largest TV panel shipments are the second, and it is planned to be consolidated in the first quarter of 2021. The further increase in the production capacity of TCL LCD panels may smooth the gap with BOE. In the fourth quarter of this year, perhaps TCL Huaxing will surpass BOE to become the world's largest supplier of LCD panels for TVs.
According to the three quarterly report released by TCL Technology on October 29, from January to September 2020, based on the same caliber of reorganization, TCL Technology achieved operating income of 48.71 billion yuan, an increase of 18.4% year-on-year, and net profit attributable to shareholders of listed companies was 2.03 billion yuan. After excluding one-time restructuring gains, net profit attributable to shareholders of listed companies increased by 28.9% year-on-year.
Among them, the net profit attributable to shareholders of listed companies in the third quarter was 817 million yuan, a year-on-year increase of 68.5%. The core company TCL Huaxing achieved a net profit of 700 million yuan in the third quarter, and its performance contribution accounted for 85%. TCL Technology’s performance in the third quarter exceeded expectations, mainly due to TCL Huaxing’s capacity advantages. The large-size production lines t1, t2, and t6 achieved full production and sales. The sales area reached 20.71 million square meters, an increase of 44.9% year-on-year, and the sales volume reached 34.48 million. , An increase of 14.9% year-on-year, and the TV panel market share rose to the second place in the world.
TCL Huaxing also gave full play to the high-generation line's production advantages in super-size and high-specification products. The 55-inch market share continued to maintain the world's largest market share, the 32-inch market share was second in the world, and the 65-inch and 75-inch market share increased to the world's largest Third, the 75-inch 8K MLED star screen was mass-produced, and at the same time, it actively expanded the commercial display field, and the 86-inch interactive whiteboard market share was second in the world. Large size is the main driving force for the growth of TV panels. In recent years, global TV sales have remained at 220-230 million units, but the average size has continued to increase.
Large size means more economy and efficiency. Taking the 7.5-generation line and the 10.5-generation line as examples, assuming that the two product lines also cut 65-inch products, the 7.5-generation line can only cut three panel substrates and the utilization rate is only about 64%. The 10.5 generation line can cut 8 panels, and the substrate utilization rate exceeds 80%. At present, according to the plans of various manufacturers, by 2022, BOE, China Star, LG and Foxconn and other panel manufacturers will build seven 10.5-generation plants in various places. These will become the main force of new production capacity for large-size panels in the next few years.
The current turning point of the LCD industry may have come. Under the background that domestic LCD production capacity has increased and the technology has matured, Korean manufacturers have no advantage. In order to reduce losses, LG and Samsung are pushing the product line from LCD to OLED and turning off some LCDs. For the production line, it is planned to gradually switch the 8.5-generation line to OD-OLED TV panels to avoid the coming mass production impact of the domestic 10.5-generation line. The current panel price has bottomed out. Considering the increase in domestic production capacity and the withdrawal of Korean production capacity, LCD prices are ushering in a price increase cycle. In the future, as more Gen 10.5 lines are put into production, domestic production capacity will surpass South Korea and become the dominant global panel industry.
