According to relevant data, the cost of LCD panel cost reduction is expected to slow down due to tight supply of display panel materials and components including driver integrated circuits (ICs), glass substrates and polarizers.
The latest report from IHS Markit shows that the supply of driver ICs is expected to tighten in 2018, exceeding demand by 4%. Manufacturing plants have thus reduced the production capacity of inexpensive driver ICs, while increasing the production of high-margin integrated circuits and large-scale integrated circuits (LSIs), primarily to meet orders for the production of the Internet of Things (IoT) and automotive technology industries. In addition, large-size panel driver ICs are mainly used for 8-inch wafer production. Currently, no foundries will invest further in the production of these wafer sizes, but instead invest in 12-inch wafers.
According to Tadashi Uno, senior analyst at IHS Markit, “Panel manufacturers seem to be able to ensure the supply of driver ICs by offering higher prices.”
In the first half of 2018, the average price of driver ICs rose by about 10%. The tight supply of driver ICs has also affected the price of IT panels, such as desktop monitors, laptops and tablet panels, and since the third quarter of 2018, this effect has also extended to the price of TV and smartphone panels.
Since the third quarter of 2018, the supply of glass substrates has also begun to be tight. The supply and demand surplus in the third quarter has been below 5% (5% is considered the critical point of supply tension). Uno pointed out: “The main glass manufacturers are investing in glass melting ponds in China, but the glass consumption of Chinese panel makers is getting higher and higher, which means it is more than twice the glass production capacity of the country. China's panel makers also import related products from Japan, South Korea and Taiwan, but they also face delays in production and delivery of glass."
At the same time, since the third quarter, the supply of polarizers has also been tense. Just in July this year, due to heavy rain in Japan, film makers such as Dai Nippon Printing and Nitto Denko stopped operating for more than a week. Although the production facilities were not directly damaged, damage to infrastructure such as roads, waterworks and power facilities resulted in delays in the delivery of related goods.
Even if the business has recovered, related logistics problems still exist. Irene Heo, senior principal analyst at IHS Markit, said: "Non-TAC polarizers, especially acrylic polarizers, are in short supply, and recent floods have made things worse." In the third quarter of this year, the excess supply and demand ratio of polarizers is expected to be 4%, below 5% of the benchmark.
Compared to 2017, the cash cost of a typical 32-inch high-definition (HD) open circuit battery is expected to decline by 1.4% in the third quarter of 2018. Uno said: "The main reason for the cost reduction is the rise in the price of driver ICs. However, the price of glass substrates and polarizers is relatively stable."