The panel industry is in a "low cycle dilemma" to see TCL's coping strategies

Since last year, the global panel factory has been affected by the continued downward trend of panel prices and sluggish demand, which has intensified the situation of panel manufacturers' dilemma and pattern change. The whole industry has entered the bottom of the “liquid crystal period”. Most panel makers have poor performance in the first half of the year, but After the completion of the restructuring, the TCL Group handed over a bright semi-annual report.

On the evening of August 12, TCL Group disclosed its interim results for 2019. The announcement shows that in the first half of the year, TCL Group achieved operating income of 26.12 billion yuan, a year-on-year increase of 23.9%, and net profit of 2.64 billion yuan, a year-on-year increase of 69.9%. The net profit attributable to shareholders of listed companies was 2.09 billion yuan, a year-on-year increase of 42.3%.

The next day, TCL Group held a media exchange meeting at TCL Huaxing. TCL head Li Dongsheng said: In the face of the low cycle of the industry cycle, TCL Group further improved its business strategy through restructuring, optimized organizational processes, and improved operational efficiency and competitiveness. At the same time, TCL Huaxing Optoelectronics Co., Ltd. By promoting the ultimate efficiency and cost control, strengthening product technology capabilities, and taking product technology innovation as an important driving force, TCL Huaxing's business operation efficiency and efficiency level still maintain industry leadership.

Even if the performance is good, the overall efficiency is better than the peers, but today TCL Group's share price has risen by no more than 1%, which makes Li Dongsheng very puzzled. Li Dongsheng asked the media at the performance briefing. Why is TCL Group and its peers lower than the stock price? TCL Group PE has only one-third of its peers, and its dividend rate is three times that of its peers. Its operating indicators are superior to its peers. I just can't think why the TCL Group's stock price will be so low?

Perhaps this is most relevant to the "low cycle dilemma" of the current "liquid crystal cycle."

The inventory and price of the “low cycle dilemma” affect the overall situation

For the panel industry, the "low-cycle dilemma" is not the "accidental event" of this year. It is the normal change of the liquid crystal cycle fluctuation. The low cycle of this round panel is bound to reduce part of the production capacity, and the panel industry is reshuffling, accompanied by With the introduction of new technologies and the expansion of new application scenarios, the head enterprises will further increase their market share.

According to IHS Markit's latest Display Production and Inventory Tracking Report, the overall capacity utilization of the display plant in the third quarter is expected to reach 84%, up from 83% in the second quarter. Compared with the first half of 2019, this data improved slightly, and the utilization rate lags far behind the level of 2018. Specifically, capacity utilization in the first quarter of 2019 was close to 82%, compared with 83% in the second quarter, down from 88% and 87% in the first quarter of 2018 and the second quarter.

The reason is that suppliers cut production in the first half of this year to cope with the slowdown in market demand and the accumulation of stocks carried over in 2018. With the decline in inventory and price declines, panel makers are expecting large LCD panel prices to rebound.

Industry observers said, “The imbalance between supply and demand and panel price pressure is expected to continue for some time, but TCL Huaxing Optoelectronics as the “seed player” of the industry, in the long run, its strategic route based on lean management and industrial chain ecological layout It is conducive to building competitive barriers and stabilizing business operations."

Full layout, flexible AMOLED panels are about to be mass-produced

According to the semi-annual report of TCL Group, TCL Group invested a total of 2.67 billion yuan in research and development and submitted 1,056 international patent applications in PCT, maintaining a leading position in the field of new display technologies and materials. On the whole, TCL Huaxing Optoelectronics is currently the only semiconductor display company in China covering the upstream and downstream of the industry chain through independent innovation, covering display materials, OLED printing processes, panel manufacturing, and modules.

In terms of large-scale production process, TCL Huaxing Optoelectronics independently develops the world's latest HVA2 technology, which has natural advantages over IPS in high contrast, high refresh rate fast response, narrow side width and borderless applications; leading double copper process and COA and PFA process applications have been stably supplied to high-end and high-quality products in Japan and South Korea.

In the view of TCL Group, the implementation effect of Mini-LED is not weaker than OLED in many aspects. At present, TCL Group is actively deploying high-end 4K/8K products, accelerating the development of Mini-LED on TFT technology and products, and enhancing the high-end market share. In terms of printing display, Guangdong Juhua has launched 31-inch UHD (4K) top-emission printing H-QLED display prototype, which realizes blue OLED illuminant and red and green QLED illuminants by printing technology. It is the world's first combined electro-optical QLED materials and OLED materials have dual advantages.

In terms of small-scale production process, TCL Huaxing has accelerated the development of new technologies in the field of folding, full-flexibility, and screen-down imaging of AMOLED. TCL Huaxing Optoelectronics' LTPS technology has reached the international first-class level in the research and development of COF narrow bezel and under-screen fingerprints. The world's mainstream mobile phone manufacturers have included TCL Huaxing in the list of key suppliers. At the same time, the high-end products such as the screen camera and folding screen of the flexible AMOLED panel will be mass-produced.

Shuffle refactoring to speed up product technology iteration

Relying on the accumulated and comprehensive layout of TCL Group's patented technology, TCL Huaxing Optoelectronics has established an important driving force represented by product technology innovation, as well as technical barriers built around semiconductor display and materials business, which is conducive to continuous strengthening of product competition. Force to broaden the "track" of enterprise development.

It is understood that TCL Huaxing currently has two 8.5-generation and one-generation LTPS production lines full of production, the world's highest generation 11-generation line has been put into production, the 6-generation AMOLED production line has been lit, and another positioning is 8K The 11th generation line of large-size AMOLED has been started. With the continuous production of various production lines, TCL Huaxing will have a compound growth rate of 17% in the next five years, and the medium and small size is expected to reach a compound growth rate of 26%. The growth rate is in the forefront of the industry, and the market share of LTPS-LCD products. It has reached the second place in the world, and the competitiveness of flexible AMOLED will increase rapidly. It will be mass-produced in Q4 this year, which will bring about continuous growth of performance.

With the growth of scale, TCL Huaxing has rapidly expanded into fast-growing emerging markets such as commercial display, in-vehicle and e-sports, and the product market is more evenly distributed. According to Li Dongsheng, TCL Huaxing Optoelectronics is one of Huawei's 65-inch TV product panel suppliers. Huawei and Xiaomi are also our main customers.

According to Li Dongsheng, the profit of Huaxing Optoelectronics has contributed a lot to the small-sized panels. TCL Huaxing's LTPS technology has reached the second place in the world in terms of COF narrow bezel and under-screen fingerprints, and accounted for more than 80% of the world's top six brand mobile phone manufacturers. On the basis of continuous improvement of product strength, TCL Huaxing's business operation efficiency and efficiency level still maintain industry leading.