SDP Guangzhou Zengcheng Panel Plant Mass Production Delay
In 2016, panel resources were very scarce and prices continued to rise. Large-size and high-definition LCD panels were also the general trend. This is the background of Hon Hai’s ambitious investment of RMB 61 billion in Zengcheng, Guangzhou to build a full ecological industrial park for Supervision Sakai 10.5-generation 8K displays. However, since 2018, the prosperity of the industry has begun to decline, and the panel trough cycle has continued until 2019. In the past two years, large-size LCD production capacity has been gradually released, and the global LCD TV panel market has been severely unbalanced in supply and demand, and TV panel prices have continued to dip, resulting in a delay in the mass production of the Zengcheng project.
At the end of 2016, Guo Taiming, who was still at the helm of Hon Hai, was ambitious and invested 61 billion yuan in Zengcheng, Guangzhou to build a full ecological industrial park for Supervision Sakai 10.5-generation 8K displays. However, Zengcheng panel factory, which plans to mass production in 2019, is facing a new situation of delaying mass production.
In fact, the operation of this production line is Sharp’s SDP (Sakai Display Co., Ltd.), which is also an important layout after Hon Hai acquired Sharp. Now the panel park is not only unable to mass-produce at the end of September as scheduled, but also leads to payment disputes with equipment suppliers.
In this regard, recently, SDP issued a statement saying that the company’s investment in Supervision Sakai in mainland China has been delayed by six months to April 2020 due to the mass production schedule (but the trial production date in October 2019 is still as usual. ).
Regarding the payment for goods, SDP stated that 60% of the total purchase amount has been paid for, “about 40% of the total purchase amount has been purchased but yet to be paid, of which Japanese manufacturers account for about 40%, and most manufacturers have agreed to our terms. As for (China) Taiwanese manufacturers, the amount of NT$8.4 billion has not yet been delivered or paid, because (China) Taiwanese suppliers are mostly small and medium-sized enterprises, therefore, Taiwanese suppliers will fully comply with the original purchase contract conditions. Pay work.”
At the same time, Guo Taiming has transferred SDP shares. At that time, SIO International Holdings, which was invested in Guo Taiming’s personal name, held 53.05% of SDP shares.
Sharp, a subsidiary of Hon Hai Group, said on September 12 that Guo Taiming’s shareholding in Sharp’s 10.5-generation line Sakai Plant (SDP) in Guangzhou has been sold. Hideo Taniguchi, deputy president of the representative director of SDP Co., Ltd., said that Guo Taiming has sold SDP shares due to personal factors, so the operation of the Guangzhou Sakai factory has nothing to do with Guo Taiming.
Terry Gou quits, and the story of Hon Hai around Sharp and SDP panel factories will continue. How to move forward is the focus of the industry.
Sales rumors to mass production delayed
Although in April and May this year, the mass production of the Supervision Sakai panel factory in the circle has been postponed. However, on July 31st, the lighting ceremony of the first 65-inch product of the 10.5th generation full ecological industrial park production line in Supervision Sakai was held in the Pang Tie factory.
This is also Hon Hai’s confidence in mass production. At that time, Luo Zhenghao, chairman of Supervision Sakai, said: “On February 14 this year, the first core equipment 8K high-precision exposure machine in the park has entered the array factory. After 168 days Day and night, the first high-resolution 65-inch display was officially lit today.”
Chief Factory Director Zhu Qibao said: “Next, Supervision Sakai will use the industry’s fastest speed to ramp up production capacity and improve yield.”
However, lighting and mass production are still two concepts. According to the plan, the park will become the world’s most advanced 8K LCD panel factory after completion, producing 65-inch and 75-inch panels; the second phase of the project will build next-generation panels and related follow-up products, with an estimated annual output value of 92 billion yuan after mass production.
In August, the situation took a turn for the worse, and news was reported in the industry that the Supervision Sakai LCD panel factory was looking for a buyer.
As for potential buyers, Wit Display analyst Luffy Lin told the 21st Century Business Herald: “BOE and CSOT are impossible to take over, there are already two. Innolux and CLP Rainbow/Panda both lack superlatives. For the high-generation line, if Innolux acquires the 10.5-generation line, it can make up for its shortcomings in the ultra-large-scale market and also help to enhance its foundry business. However, Innolux is still in a state of loss, and the financial pressure is high, and it may not be able to afford it. Under the Guangzhou 10.5 generation line.
CLP Rainbow/Panda originally planned to build a 10.5-generation line, but it has not started. If the Guangzhou 10.5-generation line is directly acquired, many intermediate links can be saved. Huike originally planned to invest in the construction of the 11th generation line in Zhengzhou, but due to the obstruction of the centralized regional investment policy, Huike currently does not have too much capital to acquire the Guangzhou 10.5th generation line. “
At present, there is no definite acquisition decision, but for a panel factory that has not yet mass-produced and invested heavily, selling itself is not easy. And from the perspective of the general environment, the oversupply of LCD panels is still very serious. What’s more, now its mass production time continues to be delayed, and the payment for goods still needs to be paid, facing uncertainty.
Luffy Lin believes that there may be three reasons why Sharp’s Guangzhou Zengcheng 10.5-generation panel factory did not mass-produce as scheduled. First, at present, Sharp’s panels do not have enough exports to the sea, and they already have a large amount of panel inventory. If Guangzhou’s 10.5-generation panel is promoted Line mass production will only increase inventory; second, the panel market is very sluggish, prices continue to decline, and competitors are reducing production to insure prices. If Guangzhou 10.5-generation line mass production is promoted, it will also face losses; Subsidy commitments put Sharp’s Gen 10.5 line under financial pressure.
How to break the domestic and foreign difficulties?
Why did Hon Hai invest so much in the panel industry? In fact, Hon Hai has entered the panel field for a long time, and its other company, Innolux, is engaged in the production of LCD panels. Then Hon Hai ushered in the key acquisition of Sharp, and took Sharp into the bag. Hon Hai has great ambitions to revitalize the Sharp brand. LCD panel technology has been leading the way.
The Sharp brand itself is also an export to the sea. Re-operating the Sharp TV brand in China, taking back the Sharp North American brand authorization from Hisense overseas, and strengthening the consumer electronics brand have always been Hon Hai’s wish. Building a panel factory in Guangzhou can provide production capacity for the domestic market and reduce costs. The planned US factory also lays the foundation for overseas markets.
At the same time, in 2016, panel resources were very scarce, prices were also rising, and large-size and high-definition LCD panels were also the general trend. Therefore, the panel armament was stepped up, and it was expected that panels could expand new profit points for Hon Hai.
However, the original plan was disrupted. On the one hand, the Guangzhou Zengcheng panel factory was postponed, and the American factory also encountered difficulties. Previously, Hon Hai invested 10 billion US dollars in Wisconsin to build an LCD panel factory, and then the original 10 ．The 5th generation LCD factory will be changed to the 6th generation, and the scale of the factory will be further reduced. A number of people close to Hon Hai told the 21st Century Business Herald reporter that the biggest problem is that they cannot recruit local employees, and skilled technicians are even more difficult to find and can only be solved slowly.
On the other hand, starting from 2018, the prosperity of the industry began to decline, and the panel trough cycle continued until 2019. In the past two years, large-size LCD production capacity has been gradually released, and the global LCD TV panel market has a serious imbalance in supply and demand, and TV panel prices have continued to bottom out.
Sigmaintell’s report shows that with the release of the 10.5-generation production capacity, the supply capacity of 65 inches and 75 inches has been greatly improved. Although the brand has vigorously expanded its 65-inch market share in the terminal market, the growth rate of demand is far less than the growth rate of panel production capacity, and the supply and demand are seriously unbalanced. The price decline of 65-inch panels in the second quarter expanded, and the overall decline in the first half of this year reached 14%.
“As the prices of mainstream-sized panels have fallen below production costs, panel manufacturers are under enormous operating pressure. Since the first quarter of 2019, panel manufacturers have suffered losses in their main business. In the next two years, there will still be many new production capacities. Mass production, the supply area maintains a growth trend. On the demand side, the market capacity is saturated and the purchasing power of consumers is declining.” Sigmaintell predicts: “In the case that panel manufacturers do not control production capacity, the gap between supply and demand will be reduced. Continuing to expand, the panel market may face the risk of persistent oversupply for a long period of time. The industry may accelerate reshuffle, and the survival of the fittest will be inevitable.”
As Korean factories LG and Samsung continue to withdraw from LCD production and turn to OLED, Chinese manufacturers continue to invest in the field of LCD panels, and the big players of LCD will be concentrated in China in the future. Where will the new exits be? The traditional TV is obviously not the best choice. Recently, Huawei has brought the smart screen of the color TV industry. When the reporter visited the offline store, he observed that although the appearance of the new TV products has not changed much, consumers are not aware of the intelligent functions of the TV. The interest is quite strong, and the new intelligent interaction can become a selling point in the future. In addition, LCD has grown rapidly in the B-end commercial market.
In this round of shuffling and iteration, Hon Hai faced a lot of challenges. After Guo Taiming’s withdrawal, how to operate better is a key issue for the new leadership team.