WitsView, a division of TrendForce, reports that the LCD panel market during this fourth quarter has witnessed strong demand as consumer electronics brands stock up for their holiday promotions. At the same time, panel makers are facing tighter supply for some upstream components. As upstream suppliers are less willing to make further price concessions, panel makers are constrained in their cost-cutting efforts. In general, the cash costs of LCD panels in the fourth quarter of 2016 have fallen by just 1~2% compared with the prior quarter.
WitsView’s recent survey of the display industry chain finds that color filters for Gen-3.5 and Gen-4.5 panels are in short supply mainly because of a significant increase in the volume of additional orders for LTPS LCD panels used in smartphone displays. As some smartphone brands have been unable to secure sufficient AMOLED panels for their high-end devices, they are falling back to using LTPS LCD. Currently, most of these additional LTPS panel orders are going to Japan Display (JDI), which lacks the capability to produce color filters for its older panel fabs. This surge of demand for JDI panels therefore has generated a rush of orders for dedicated color filter suppliers in the second half of 2016.
Moreover, one of the major providers of color filters for LCD panels – Dai Nippon Printing (DNP) – is scaling back production and will shut down its Gen-6 facility by the end of this November. DNP’s moves are also going to have an impact on the production of LTPS panels in recently built fabs that can manufacture color filters. This is because at the early stages of production, panel makers have to address the quality issues of their color filters (i.e. lens mura). Hence, they would still rely on outside suppliers.
Besides color filters, polarizers for large-size TV panels are seeing strong demand as well. The popularity of 55-inch and 65-inch TV sets has greatly expanded the consumption of Cyclo Olefin Polymer (COP) film, which is a material that made up the polarizers for large-size TV panels. Currently, COP film is exclusively supplied by a Japanese chemical company and demand has outpaced supply. Thus, there is a possibility of a tight supply for polarizer used in large-size TV panels occurring this November.
Also, the supply of driver ICs for LCD is under strain as semiconductor foundries are adjusting their capacity utilization to address demand for other chip products. IC components for fingerprint sensors are especially in competition with LCD drivers for foundry capacity. With fingerprint recognition gradually becoming a standard feature in high-end smartphones, demand for related IC products has soared in the second half of 2016 and is squeezing the wafer capacity for LCD drivers.