As a pillar enterprise of the global LED upstream industry chain, especially the new MICRO LED display in mainland Taiwan, Ennostar threw out such a blockbuster information as selling the factory at the beginning of the new year in 2024, which shocked the industry.
As a new emerging display technology, the future halo of micro LED is infinitely brighter. Especially when the industry expects that micro LED may double in 2024 in the large-screen direct display market, relying on the two major packaging technologies of COB and MIP, Ennostar's "selling factory" is particularly conspicuous. What's the secret behind it?
The "rich" reason for losing money and selling factories
According to media reports, Ennostar will sell the Zhunan plant to Polaris Biomedical Co., Ltd. for NT$670 million. In addition, in 2023, Ennostar recognized an asset impairment of RMB3.45 billion in accordance with IAS 36. The loss mainly included RMB3.142 billion of goodwill obtained by Epistar during the integration of Guanggallium and RMB308 million of impairment of disposal of idle assets arising from the integration of the plant.
It is reported that the Zhunan plant was originally planned to be used for micro LED capacity expansion. Now, Ennostar has sold the factory on three grounds, including "accelerating the integration between group companies, revitalizing assets, and optimizing the financial structure", and claims that Epistar will concentrate the space through production as a micro LED factory - so there is no need to build a new plant, only need to optimize the equipment, and at the same time save capital expenditure, it can also achieve "micro LED expansion".
However, such a statement is obviously not self-consistent logic: didn't Ennostar and Epistar know that other factories could accommodate micro LED production capacity? Losing the space of a factory, in any case, is theoretically a big limit to the future capacity expansion space. ——That is, the sale of empty factories may not only be explained by "space optimization and intensive application", but will inevitably affect the long-term production capacity layout in the future.
The development of Micro LED has not been as expected, resulting in a delay in the expansion of production
In fact, as for the reason for selling the factory, Ennostar tried its best to say that it would not affect the "micro LED" expansion plan, but it also admitted the fact that the micro LED market is not developing as expected.
Ennostar said that 1. In addition, due to the poor global economy and weak consumer demand, the capacity utilization rate of the blue light wafer business in the Taiwan plant of Epistar is low-that is, the existing LED capacity has been overcapacity;2. Fan Jinyong, chairman of Jingdian, expects that Micro LED will have "symbolic revenue" from this year, which clearly symbolizes that the turnover is about 2027, and the initial capacity demand for Micro LED is still small, so the company's plan for new production capacity is slightly postponed - that is, the micro LED market is developing slowly, the demand is delayed, and the factory does not need to expand for the time being.
For the slow development of micro LED, the main statement is caused by two factors: first, Samsung and other micro LED direct display large screen and color TV, expensive, difficult to promote; second, vehicle, handheld and wearable and other small and medium-sized application markets, product technology is not mature enough, including Apple, which was greatly optimistic about micro LED, has repeatedly postponed the introduction of products.
"New markets have not been developed, and there is both low capacity utilization." In this context, accelerating the expansion of production is certainly not a rational choice. However, yes or no, the short-term, current market difficulties are worth selling the empty factory? In fact, there are long-term factors behind it.
Geographical competition in the industry may be the "real henchman" of Ennostar
Unlike Ennostar's current "cautiousness" for further expansion, relevant enterprises in mainland China are still in the cycle of rapid capacity expansion:
According to incomplete data, in 2023 alone, the total investment in new projects in the field of Mini/Micro LED in mainland China will be as high as more than 20 billion yuan. These include, for example, in February, Qingdao Fusion Microelectronics, in Qingdao Wangtai to build a MiniLED display chip project, with an investment of 6 billion yuan; in March, Meyadi Optoelectronics invested a total of 4 billion yuan in outdoor full-color screen and MiniLED display project, signed a contract with Hubei Huangshi Guangdong-Hong Kong-Macao Greater Bay Area Industrial Investment Promotion Conference; in June, Chenxian Optoelectronics the world's first TFT-based Micro The LED display production line was officially signed in Chengdu with a total investment of 3 billion yuan, and in October, the high-end RGB small-pitch MiniLED and Micro LED display product manufacturing project of MLS was officially signed in Jinggangshan, with a total investment of 2 billion yuan...... and other "giant" projects.
In fact, in 2023 (including investment projects in previous years), the total investment of "started and under construction" mini/micro LED projects in mainland China will exceed 40 billion yuan, and the total investment of "completion, production, and through" projects will be more than 20 billion yuan - continuing the industry project planning in 2023, including four years including 2020, the mainland has formed a planned investment capacity of nearly 70 billion yuan in the mini/micro LED industry chain.
"A round of new production capacity 'tsunami' will be formed in 2024-2026!" industry insiders pointed out that the industrial chain intensity, product coverage, technology types and total scale of mini/micro LED investment in mainland China have a tendency to crush "foreign". In this context, the future market competition changes may rely more on the "scale value chain" rather than simply "technological innovation".
In 2023, some of the capacity utilization rate of Ennostar's subsidiary Epistar will be insufficient, mainly due to the stronger competition from similar companies in mainland China. Especially in the context of the continued sluggish global lighting demand, the accelerated diffusion of LED direct display and backlight technology, and the continuous growth of cost competition pressure, the "scale market advantage" of enterprises in mainland China is amplifying. For example, for the application of mini LED backlight, most mainland Taiwanese companies choose to cooperate with Korean and other regional color TV brands. This is completely different from the mainland China, which is the color TV manufacturing center, but also the LED manufacturing center, and has a number of local color TV brands.
The demand for LEDs is a typical international market. In particular, the production capacity of mainland Taiwan depends more on overseas markets to digest. In this context, it is worth pondering whether Ennostar's "selling factories" and "delaying production expansion" are more due to the challenges of "regional competitors".
The focus of the LED industry chain in the mainland is obvious
Ennostar's predicament is more the result of the global LED industry chain further focusing on the mainland and mainland China, which in turn has brought "marginal pressure" to the LED industry chain in Taiwan, which has been leading before. Industry experts pointed out that at present, the global share of the mainland LED industry chain is nearly 8%. It is the largest manufacturing base, the peak of innovation and the world's largest demand market.
For example, in the LED lighting market, from 2021 to early 2023, Chinese mainland LED lighting patent applications accounted for 73% of the total global LED lighting patent applications. For another example, the output value of the mainland's LED industry has grown rapidly from only about 9 billion yuan in 2003 to 777.3 billion yuan in 2021.
For example, in 2022, the penetration rate of LED in automotive headlights has reached 72%, and the penetration rate in new energy vehicles has exceeded 92%. For another example, the combination of mini LED backlight and liquid crystal display has greatly improved the quality of liquid crystal display, and the global production capacity of LCD panels in mainland China accounts for more than 65%.
"Supply, demand, and innovation" are all concentrated in mainland China. This is a dimensionality reduction blow to the corresponding enterprises and industrial chains in other regions. Especially since 2022, the global consumer product market has been sluggish, the demand side of LED lighting, backlight, and direct display is not strong enough, and the supply side continues to expand.
Demand, supply, innovation and regional competitiveness will be the market variables that LED industry enterprises need to attach great importance to in the future. As one of the representatives of Taiwan's LED industry, Ennostar has actually vigorously deployed the mainland market through its subsidiary Epistar, not only downstream partners but also upstream production capacity. ——The 10.5/11th generation LCD panel line, which has the strongest capital in Taiwan's display industry, has long lagged behind Guangzhou, and it is worth paying attention to whether emerging displays such as micro LED will go out of the same path in the future.