With demand for LCD panels dropping sharply and vendors such as Sharp Electronics Corp. floundering, LG Display Co. Ltd.’s (LGD)
reported 126 percent revenue growth in Q2 is exceptional. So what is LG doing that other display makers aren’t?
Among other moves, LGD is taking a big risk in transitioning a large portion of its amorphous-silicon liquid crystal display (a-Si LCD) fab to manufacture low-temperature polysilicon (LTPS) LCD panels, according to IHS. The conversion will result in an 80 percent loss in yield, the research firm reports. Despite the capacity loss, the G6 LTPS LCD line will give LG Display access to a larger and more efficient LTPS fab to service the high-end, high-ASP smartphone panel market.
It also doesn’t hurt to have a customer like Apple Inc. (Nasdaq: AAPL). Thanks in large part to shipments of the iPad, LGD’s tablet panel revenue reached $610 million in Q2 from $270 million in Q1:
“LGD can credit Apple for its outsized presence in the market for small- and medium-sized display panels, defined as those sized less than 10.x inches, and used in products like smartphones and digital still cameras, in addition to tablets,” said Vinita Jakhanwal, director for small and medium displays at IHS. “The company started volume shipment for the higher resolution, new iPad panels -- the third iteration of Apple’s best-selling media tablet device -- during the second quarter, IHS believes, on top of furnishing panels for the older iPad 2 version. This amplified LG’s presence in the Apple supply chain, in addition to the company already supplying tablet panels in the first quarter to other tablet players such as Amazon, Barnes & Noble and Research In Motion.”
The current conversion plan will keep 60 percent of the G6 fab capacity dedicated to making a-Si LCDs for tablets, mobile phones, or other such applications, IHS says. All told, the LGD fab conversion move could prove prescient: LG Display will likely be competing with Sharp and the Japanese joint venture Japan Displays in supplying panels for Apple’s new iPhone, says IHS. By initiating its fab conversion, LGD will not only be able to support Apple but participate in the high-growth smartphone panel market:
The G6 LTPS LCD line will also prove beneficial as Apple continues the evolution of the iPhone display, and as other smartphone original equipment manufacturers also keep improving the display resolution specifications. Given current manufacturing and performance guidance, more than 60 million 4.1-inch LTPS LCD panels can be produced in a year from a G6 LTPS LCD fab.
LTPS LCDs can also be used as backplanes for organic light emitting diode (OLED) displays, IHS says, and LG Display has the option of adding its converted G6 LTPS line to active matrix organic light-emitting diode (AMOLED) capacity if it elects to do so.
Sharp, by comparison, invested heavily in the world’s first (and reportedly largest) 10G thin-film-transistor (TFT) LCD fab in 2009. Although TFT LCD is the dominant technology in the display market, prices and demand have both dropped in recent months. Other LCD makers such as Samsung, Toshiba, and Sony have consolidated their operations to save costs and compete on price. Sharp reportedly is considering selling two of its LCD factories; one in China, and one in Mexico.
The LGD fab conversion is expected to take place in stages over a so-far-unspecified number of quarters, according to IHS, but its effects will most likely be seen starting in the second half of 2013, at the earliest.