Text | Dong Gui talked about science and technology
Editor's note:
Some time ago, I talked about a topic, Alibaba, why is it not as good as coal stocks? There is a very important factor behind this is the "competitive landscape".
Afterwards, some friends came to discuss, and we found that over the years, many industries have experienced fierce competition, and the pattern has also changed a lot. So, I plan to start a small series and systematically talk about how the competitive landscape of some industries is formed and how it will change in the future. The series doesn't focus too much on the story and the technical details, but more on "what is shaping the competitive landscape".
When it comes to the panel, many people may feel unfamiliar, but when it comes to the screen, it is a common product. The screen is produced based on the panel, and the quality of the panel determines the display effect of the screen.
It can be said that the panel is a national-level consumer product that has a huge impact on our lives. And we are able to "use the screen freely", thanks to the development of the mainland panel industry, which has experienced from "overseas comprehensive dominance" to "domestic turbulent rise". According to Omdia data, in the field of LCD panels, Chinese mainland started from 0, and now the production capacity has accounted for 70% of the global share, firmly occupying the first position.
However, such a "great credit" panel industry has been given a completely different title by small and medium-sized investors, called "value crusher". This title has two meanings:
On the one hand, judging from historical data, panel listed companies have more financing, less profits, and fewer dividends. Taking BOE as an example, from 2000 to 2021, it has raised about 92 billion yuan through equity financing (including the participation amount of major shareholders), achieved a cumulative net profit of 58.5 billion yuan, and accumulated cash dividends of 19.1 billion yuan.
On the other hand, from the perspective of capital market performance, it is difficult for panel companies to expect with the standard of value investment, with large fluctuations in performance and stock prices, and often "roller coaster" situations occur, and the holding experience is poor.
Of course, it is unfair to judge the value of a company or an industry by the performance of stocks.
For example, TCL Technology (holding Huaxing Optoelectronics, hereinafter referred to as TCL), another leading company in the panel industry, has achieved a net profit of 36.8 billion yuan through equity financing of about 28 billion yuan (including the participation of major shareholders), exceeding the financing amount, and the cumulative cash dividend is also 12.2 billion yuan, and the return is not bad.
Moreover, still taking BOE as an example, the reason for its low dividend is that the early stage of R&D investment is large, and it is difficult to have dividends in the research stage. However, since 2015, BOE has also begun to distribute dividends on its profits, and the dividend ratio is basically more than 30% of the total net profit.
From the perspective of market share, dividends and other indicators, there seems to be a conclusion: Chinese mainland panel companies have become the world's leading and can enjoy the leading dividends of the leader. However, is this really the case?
If it is described as a war of liberation, it should now be "there is no war in Jiangbei, and there is still a fierce battle in Jiangnan", that is, the pattern of the LCD field has been determined, and the OLED field is still involuted.
So, how did this war situation come about? We can still start from the dimension of the competition pattern and analyze it along the elements that shape the global competition pattern and the domestic competition pattern.
Demand (1): The hunger and limit of vision
Humans are visual creatures, and 80% of the information in their daily lives is obtained through vision. The strong visual demand has led to the formation of two product trends:
First, there are more and more "screen-based" devices.
From radio to television, from landlines to smartphones, from printed billboards to electronic display screens, from paper offices to computer work, from gasoline vehicles to electric vehicles, and the XR devices being developed by tech giants including Apple, are all increasing the proportion of screens in life. Therefore, it is often said in the industry that the earth is round and the world is screen.
Second, the screens are getting bigger and the resolution is getting higher.
Whether it is a home appliance or a mobile phone, the screen size is being expanded as much as possible to bring users a better visual experience. For example, in the field of television, a new large-size order of magnitude is formed every two years. From 2004 to the present, the size of LCD TVs has doubled, and some flagship products have also entered the 100-inch level.
There is even a saying that the size of the elevator is the first limit to the size of the TV, and the size of the living room is the second limit.
On the mobile side, the iPhone also shouted the slogan "bigger than bigger" in 2014, and the screen size of the iPhone 15 series was nearly double that of the first iPhone product.
The demand for multi-screen and large-screen has an impact on the industry, which makes companies in the industry "like a donkey grinding".
On the one hand, demand has always been and is growing, and the outlook is not to be worried. But on the other hand, the growing demand, like a carrot hanging in front of you, is not easy to eat and eat comfortably. Because, the size upgrade also requires the production line to be expanded.
The panel production line can be simply divided into two links: first manufacturing a large panel, and then cutting into multiple small panels for electronic products.
This production process, like selling fried rice, is obviously not as cost-effective as frying a large portion and then dividing it into smaller portions. At the same time, the panel also involves the problem of cutting efficiency, and it is easier to make full use of the area with a large size. Therefore, the panel industry has a strong "high intergenerational hunger in the production line".
The manifestation of "hunger and thirst" is economic, coercive, and cruel.
Compared with the small-size production line, the cost per unit area is lower, which is the economy and initiative to upgrade the production line.
Each production line has a size limit, and once the screen size required by the downstream product exceeds the upper limit of the production line, a new production line needs to be built, which is forced to upgrade the production line.
However, the production line is often tens of billions of yuan, and the investment is huge, if you are unlucky to catch up with the rapid change in demand, then the construction will be completed and you will fall behind, and throwing money is wasted. Forget about spending money, you have to earn less money when you spend money. Each upgrade will also lead to a decrease in the price of the panel. This is the brutality of upgrading the production line.
The high intergenerational hunger and thirst of the production line is a unique attribute of the panel industry, and it is also the reason why it is "criticized" for not making money. Not to mention that compared with industries such as liquor, which hardly require more capital expenditure, compared with other areas of the manufacturing industry, it is also quite "spending". For example, in the automotive field, although the model will change, a single production platform can support multiple products, and there will be no frequent large-scale upgrades.
The various characteristics of demand have led to the players in the panel industry being "in a dilemma", reluctant to demand profits in front of them, for fear that their opponents will make a lot of money, and their previous investment will be wasted, and they are unwilling to withdraw gloomily;
Therefore, compared with "focusing on prospects", the panel industry is also paying special attention to "who can't stay up and wants to quit".
The panel needs to be much like a big tree. When the rain and sunlight are right, a tree will grow into a forest, but no matter how tall a tree is, it will not grow into the sky. This means that the trend of multi-screen will not change, but there is an upper limit to the increase in screen size and resolution. After all, there is an upper limit to the size of a human hand, and there is also an upper limit to the recognition of colors by the human eye.
Therefore, looking ahead, in the end, there is a high probability that there will be a stage where the size of the production line will not be improved, and the capital expenditure caused by the size will be greatly reduced. However, there is still a constant demand for thinner, more high-definition, softer and other functions.
Demand (2): Forced entry of domestic products
British economist David Ricardo put forward the "theory of comparative advantage" in the field of international trade, arguing that countries can trade and achieve mutual benefit because of their different production efficiency and thus mutual advantages in different products.
This is also the theoretical basis of "it is better to buy than to build" in many countries. Before 2008,The panels required for the production of color TVs in mainland China also basically rely on overseas imports,The annual import amount is as high as 100 billion yuan。
However, contrary to the theory, capital is profit-seeking, not for the public good. In particular, some companies will be greedy for advantages after they have advantages in certain products. For example, in the field of panels, from 2001 to 2006, six companies including South Korea's Samsung, LG, and Taiwan's AUO held 53 meetings to control panel shipments and prices.
This greed was even more evident in 2009. The outbreak of the financial crisis in 2008 has sharply increased the operating pressure of panel companies in Taiwan, China. At that time, the mainland was implementing the policy of sending home appliances to the countryside, and the purchase of panels was also relatively large, so at the beginning of 2009, the mainland organized home appliance companies to negotiate panel procurement in Taiwan.
Originally, it was a "win-win" thing, the mainland bought a wholesale price, and Taiwan also solved the overcapacity, but unexpectedly, Taiwanese companies failed to make an appointment and sold the panel to a South Korean company. Subsequently, South Korean companies joined forces to increase panel prices by 30% in five months.
Due to the lack of corresponding panel production capacity in the mainland,Color TV companies have to pay a high price、Accept reality。 Due to lack of capacity, domestic panel companies also missed the policy dividend of home appliances going to the countryside at that time.
After experiencing the painful lesson of "goodwill into wealth", the demand for independent domestic panel technology is more urgent and more consensus. In that year, the National Development and Reform Commission and the Ministry of Industry and Information Technology jointly issued the "2010-2012 Tablet Industry Development Plan", which listed "independent construction of TFT-LCD" as a development priority.
Then it opened a vigorous domestic road of "knowing that there are tigers in the mountains and biasing towards the tigers", which also accelerated the changes in the global competition pattern of panels.
This is one of the opportunities and fuses for the development of the panel industry. If you understand this background, you can understand some business behaviors and big accounts in the industry.
Technology: LCD depends on boiling, OLED relies on fighting
At present, the mainstream of panel technology is LCD liquid crystal technology, the technical principle is to change the direction of the liquid crystal through voltage, so as to control the passage of light, and then control the display or closure of the corresponding pixels (RGB red, green, blue), and finally combine to display various color patterns.
The technology was originally invented in the United States, but developed and expanded in Japan. Japan has not only accumulated a large number of technical patents, but also formed a comprehensive layout in the field of panel upstream materials. At its peak, Japan's panel sales accounted for 94% of the world's share, dominating the world.
Although the principle of LCD liquid crystal technology is simple, before 2000, it was not easy for panel latecomers to achieve commercialization. On the one hand, it will involve patent restrictions, and it is difficult to develop new routes and technologies by itself, and on the other hand, it is necessary to have large-scale production capacity and ensure high yield, which requires the accumulation of technology and know-how.
Therefore, in terms of technology, in order to accelerate development, domestic panel companies have also followed the path of "introduction-digestion-re-innovation" in addition to self-research.
For example, in January 2003, BOE completed the acquisition of the TFT-LCD (thin-film transistor liquid crystal display device) business of Hynix Display Technology Co., Ltd. (Hynix) for 380 million US dollars, including production line equipment, intellectual property rights, etc., and then technology research and development began to accelerate. More than ten years later, at the end of 2017, BOE took the lead in putting into production the 10.5 generation LCD panel production line with independent property rights, which is also the first in the world.
For example, TCL reached a technical cooperation agreement with Samsung of South Korea in 2007 and accumulated relevant experience in cooperation. In November 2009, TCL and the Shenzhen Municipal Government established a joint venture Huaxing Optoelectronics, and soon the company attracted more than 200 Taiwanese engineers to join, bringing rich production experience. Today, TCL's self-developed HVA technology has also become the technical pillar of the company's products.
For another example, Yoshihiro Morimoto, the core technician of Shanghai Hehui Optoelectronics, has also worked in the Japanese company Sanyo and the Taiwanese company Tongbao Optoelectronics for 28 years. He joined the company in 2017 as the chief technologist.
The route of "introduction-digestion-re-innovation" is not exclusive to the mainland panel industry.
For example, South Korea's Hyundai Group introduced LCD technology and a complete production line from Japan in 1990; Samsung not only obtained a technology license from an American company, but also set up a research and development organization in Japan and hired a large number of Japanese engineers.
The development of Taiwan's panel industry also stems from the authorization of Japanese panel companies. After the Asian financial crisis in 1997, Japanese panel companies encountered operating pressure, and had to sign a TFT-LCD technology transfer contract with a Taiwanese company to earn patent fees, and then the growth of Taiwan's panel industry, once occupied 40% of the global share in 2003-2009.
Lu Feng also has detailed statistics on this in the book "Light Change".
So, is it feasible to take the road of independent research and development without introducing technology? Of course, it is feasible, but it will take longer and more money. This is a very big survival challenge for enterprises.
Nowadays, based on factors such as industrial development, personnel flow, and multiple patent authorizations, as well as the fact that LCD technology itself has not changed greatly, it can be said that LCD basically does not have much technical barriers in China. But technological change hasn't stopped.
The current technology contest is on the OLED route. Compared to LCD, OLED eliminates the backlight and uses an organic material that emits its own light. In contrast, OLED screens are thinner, have clearer colors, are more responsive, and are more flexible, making them more suitable for wearable devices, such as XR virtual/augmented reality products.
In the field of OLED, there are also two trends in technology competition: First, Korean companies are still ahead. Samsung accounts for 43% of the small and medium-sized sizes, while LG has 10% of the share, making a total of half of the share, while the large-size segment is monopolized by Korean companies.
Second, Chinese companies are catching up at an accelerated pace. At the end of 2019, Samsung dominated the small and medium-sized field, with a share of 88%, and the total proportion of Chinese enterprises was only 3%, but now, the total proportion of Chinese enterprises has reached 30%, ten times in four years, and the growth is significant. In March 2024, BOE laid the foundation stone for the first 8.6 generation AMOLED production line in China, continuing to accelerate the pace of large-scale development.
However, it should be admitted that in the field of materials upstream of the panel, we still have a large gap with Japanese companies, which is also a potential "bottleneck" factor affecting the competitive landscape. At present, the material side is still market-oriented, and the self-research of domestic materials has also made progress.
Looking ahead, as LCD technology matures, capital expenditures will gradually decrease, but the barriers to entry are also decreasing. OLED technology is still in a fierce race, continuous investment, the technology generation gap between mainland enterprises and Korean enterprises, is smaller than LCD at that time, and it also has the ability to compete head-on.
In general, the panel industry is still in the window period of technology switching, and it is still not at the stage of "lying down and reaping dividends".
Cycle (1): Multiple sources, alternating power
Cycle is an important attribute of the panel, which plays a great role in shaping the competitive landscape of the industry. There are three sources of cycles:
The first source is the explosion and silence of demand.
Most of the downstream panels are consumer electronics, such as color TVs, mobile phones, notebooks, etc., which have strong explosiveness.
New products emerge and are explosive, just like smartphones, like current XR devices, etc. The emergence of new functions may also bring explosiveness, such as mobile phones, screen-based fingerprint recognition, which will also bring a large wave of replacement. In the explosive phase, the penetration rate of new products will quickly achieve from 0 to 60%. This explosive stage can be called the "innovation cycle".
There are also big innovations and small innovations in the innovation cycle, and the market space brought by different innovation efforts is also different.
When the innovation cycle starts, it corresponds to the rapid growth of revenue and profits, and after the penetration rate increases, the growth rate will decrease significantly, and then show a cyclical nature of switching between high and low.
Every panel company wants to seize the wave of innovation, however, from the perspective of actual operations, it is difficult to predict the consumption cycle. Therefore, the practice of most panel companies is to become the supplier of head consumer electronics, not to predict, but to follow.
The second source of the cycle is the upgrading of supply and following the trend.
The survival of the fittest with normal supply is no longer the main factor for the panel industry, and the cyclicality comes more from the switching of production lines.
On the one hand, the industry as a whole continues to upgrade production lines, resulting in the elimination of the old and the new; on the other hand, when some companies in the industry release high-generation production lines, other companies have to follow, thus further increasing the impact of switching between the old and new production lines, resulting in an increase in the price decline of the old production line products, and the impact on corporate profits.
It's like running, take a break.
The third source of the cycle is the mismatch between demand and supply.
Demand is fast-bursting, but supply takes time. As a result, there is often a shortage of supply when demand bursts, and a decrease in demand when new supply begins to be released. Between supply and demand, from insufficient to excessive, to balanced, and then to insufficient, alternate. This characteristic will basically be reflected in those downstream fields that have strong explosiveness and are heavy assets, such as the memory chip industry.
Insufficient demand, overcapacity, and mismatch between supply and demand sometimes occur at the same time, sometimes in a single occurrence. In terms of the operation of the corresponding enterprises, the embodiment of the cycle is: the fluctuation of profitability, and the fluctuation of the utilization rate (which can be understood as capacity utilization).
When the demand of the industry is strong, the utilization rate increases, the profit increases, the supply begins to increase, and even the new capital expenditure increases; when the supply exceeds demand and the profit deteriorates, the overall utilization rate of the industry decreases, the supply is reduced, and the bottom is gradually found.
In terms of the average gross profit margin of the leading enterprises, it fluctuates up and down, and the amplitude is very large, often falling from 15% to around 0%, and the cyclical nature is very significant.
After the outbreak of the epidemic in 2020, the demand for online office increased and the sales of notebooks increased, which drove the demand for panels. However, at this time, factory production was affected, logistics were also blocked, and supply exceeded demand. Therefore, after 2020, the profitability of the panel industry began to improve. In 2021, BOE's gross profit margin increased from 19.7% to 28.8%, and its net profit also increased by 400% year-on-year to 26 billion yuan.
However, with the end of the epidemic, in 2022, BOE's gross profit margin will be reduced by half, leaving only 11.7%, and its net profit will also drop to 7.5 billion yuan, a decrease of nearly 70%. TCL Huaxing's net profit also plummeted 88% from 15 billion yuan in 2021 to 1.5 billion yuan. The extent of the tragedy can be seen.
Such a drastic fluctuating cycle can't help but remind people of the "three-body civilization" in the science fiction novel "The Three-Body Problem", which develops painfully in the alternation of mild and harsh climates.
Looking ahead, the innovation cycle is the first factor affecting the industry, and new products that can be comparable to color TVs and mobile phones have not yet appeared, and they still need to wait.
A large-scale mismatch between supply and demand like the epidemic is hard to come by, and small fluctuations in supply and demand cannot change the pattern. The impact of factors such as inventory fluctuations is getting smaller and smaller.
In terms of supply cycle, the LCD field has matured, and the innovation elimination of OLED technology is still underway, but it is also being ironed out by continuous investment.
Cycle (2): Counter-cyclical is an opportunity for latecomers
Difficulties are not all obstacles, especially the difficulties of the industry as a whole, which often become the benefits of the leader. Just like many years ago, after the "melamine" incident in dairy products, the overall sales of the industry declined, and small and medium-sized manufacturers closed down one after another, but the leading companies survived the bottom and became bigger and bigger after the demand recovered. This condition can also be called a "beneficial difficulty."
The panel industry also has similar characteristics, but the difference is that the leading enterprises that become bigger do not rely on "boiling" out, but by "smashing": at the bottom of the cycle, they still invest heavily, so that the opponents who are ready to lie flat lie in the pit.
For example, 1995-1996 was the recession cycle of the LCD panel industry, followed by the 1997 Asian financial crisis, and all LCD companies were facing huge losses.
Different from the contraction of Japanese companies, Samsung and other Korean companies have adopted a "counter-cyclical" investment strategy, and continue to spend money to build the 3.5 generation line despite losses, realizing the overtaking of Japan's 3rd generation line. And it has also continued to reduce product prices, which eventually forced Japanese companies to withdraw from the panel field one after another. Subsequently, in the panel recovery market, South Korea became the first in the industry.
From 2001 to 2003, Taiwan's panel companies also adopted the method of contrarian expansion, squeezing out Japan and becoming the second in the industry. From 2009 to 2010, panel companies in Chinese mainland also expanded against the trend, and after constantly increasing the size, they squeezed out Taiwan, China, and South Korea. After 2021, Korean companies have closed and sold LCD production lines one after another.
The countercyclical expansion is effective for many asset-heavy industries with dual attributes of manufacturing and technology. This is also true in the field of chip manufacturing, for example.
In 2004, TSMC and SMIC spent almost the same level on R&D (just $400 million apart), but in the ensuing industry trough, they made different plans. TSMC has increased R&D and SMIC has contracted, and the technology gap between the two sides has gradually widened. During the global financial crisis in 2008, TSMC still maintained investment, and in 2010, it increased its efforts, thus establishing a stable position as a big brother.
Countercyclical investing also has limitations. First, long-term demand is growing steadily, and weakened demand will recover soon. Second, there is a generation gap in the production process, and the latecomers invest heavily in the leading process, so as to realize the product advantages after recovery, which is also the key for the latecomers to achieve transcendence.
Perhaps more than ten years ago, players were not confident in the prospects of the panel, unfamiliar with asset-heavy gameplay, and did not dare to invest counter-cyclically, but now, this style of play is well known. As a result, the industry's style of play has changed from "counter-cyclical investment" to "always investing", and there is no cycle and creation cycle to bring down opponents.
Since this style of play is so effective, why did Japan lose its first, second, and third thrones instead of countercyclical expansion? The reason is simple: the United States suppressed it.
From 1980 to 2000, after the Japanese economy was sanctioned by the United States, it first experienced currency appreciation, soaring stock markets, and leverage. Then, after experiencing the collapse of the stock market and the economy, the industry was no longer powerless. This history is recorded in detail in the "Rise and Fall of the Japanese Electronics Industry", and will not be repeated.
So, looking forward, will there be other countries in the future to seize the status of China's panel industry through countercyclical investment?
Theoretically, of course. But in reality, it's hard. On the one hand, from the perspective of industrial scale and technology, the achievements we have made are not achieved overnight, but also after more than 20 years of ups and downs, and the accumulated advantages are still relatively large.
In addition, from the perspective of capital, a single production line is becoming more and more expensive, and the 10.5 generation line of LCD technology requires 300-40 billion yuan, which also means that the cost of trial and error is getting higher and higher, and there may not be so many new players who are willing and able to bear large losses.
This also responds to the often saying in the business world, make mistakes early, and the opportunity cost is small.
If these existing domestic players hope to complete the change in the competitive landscape through counter-cyclical, there are still opportunities, and the key to the competition is "financing ability".
Financing: Money comes from the locality
Panels are a highly capital-intensive industry, and the importance of money is self-evident. Whether it is Japan, South Korea, or Taiwan, China, the mainland, behind every panel company, the financial support of the government is indispensable.
From an overall point of view, if the government does not pay, it will be very difficult for latecomers to surpass in the panel field. In addition, as mentioned earlier, the panel is even called a "value destroyer", and the difficulty of survival can be imagined.
However, the panel has played a great role in the development of consumer electronics. If there is no rise of domestic panels, what will be the outcome of domestic mobile phones being "stuck in the neck",I believe that the home appliance industry has felt it in 2009。 In addition, each local government that invests in it also gets taxes, jobs, industrial ecology, and so on. That's the big score.
In the process of government-enterprise cooperation, it is inevitable that there will be some investment impulses (of course, there is no doubt that no one will say that their expansion is blind), and on the whole, local government funding is an important factor in shaping the panel competition pattern. Now several traditional giants do not mention, for example, the industry's "dark horse" Huike shares, is an example.
Founded in 2001, Huike's main business is the sales of TVs and mobile phones, and in 2017, the company officially entered the LCD panel. This year, domestic panels have not only completed the localization of substitution, but also surpassed South Korea in sales and become the world's first.
At this time, it is not necessary to enter the panel, and it is LCD rather than OLED, from the perspective of the industry. From the perspective of the company's feasibility, LCD product technology is mature, the barriers are low, which is good for the company; the company's main business is TV, mobile phone sales, has downstream advantages; however, from the perspective of competition, the industry has formed a pattern of double leaders, the pressure is not small.
However, Huike still announced the LCD investment in 2017, and subsequently received financing support from the local government, running out of the "Huike speed". In 2021, in the field of TV panels, Huike shares are in the third position in the domestic industry, occupying 14.7% of the market share, not far from the second place TCL Huaxing Optoelectronics's 16.1% share.
This is the effect of banknote capacity when the technical barriers are not high and the industry as a whole is upward. However, when the LCD industry has matured, the strategic significance of local government investment has decreased a lot. Looking ahead, in the case of the gradual reduction of local government funding, the concentration of the domestic panel industry will gradually concentrate.
Customer: Important, but not the first element
Having good customers is naturally important. Just like TCL Huaxing relies on TCL Group's color TV business, it can digest most of the production capacity. Huike shares, relying on their own channel advantages, can also rise as a dark horse. OLED products can get orders from Apple, Huawei and other mobile phone manufacturers, and it will also accelerate product promotion.
However, on the whole, the importance of customers in shaping the competitive landscape of panels is not high. Because the downstream customers of the panel include home appliances, mobile phones, notebooks and other industries, they are relatively scattered; in addition, panel products, especially the current mainstream LCD, are also relatively standardized, and the differences between them will not be so significant; at the same time, the certification period of LCD products is not long, and the cost of customer switching is not high.
Judging from the data, in 2022, the top five customers of TCL Huaxing will account for 30%, the top five customers of BOE will account for 41% (the first largest customer will account for 15%), the top five customers of Rainbow will account for 47%, and the top five customers of Shenzhen Tianma will account for 31%. The whole is in a relatively scattered state.
Barriers to entry: Gradually elevated
If it weren't for the sudden emergence of Huike shares in 2017, then the panel industry would basically be considered to be a stage of "high entry barriers". For example, high capital intensity, and the production line has to spend more and more money, high volatility attributes, making a wave of losses and a wave of high requirements for business capabilities, high technical threshold, although LCD is mature, but OLED has high requirements for R&D capabilities and process level.
However, the case of Huike shares still shows that when the industry technology is very mature, money can still rush out of the sky. This phenomenon has also appeared in the battery field, and second-tier manufacturers have increased their marketing efforts to seize the market share of the leader. However, it is easy for second-tier manufacturers to take the lead, and sustainable development will face a test:
The first is whether the thickness of the banknote can survive the cycle, especially in the case of tightening financing in the capital market; and the second is whether the technical reserves can catch up with the next wave, especially when the new technology has patent protection and needs to find a new route, the second line is the most likely to fall behind.
Looking ahead, in the LCD field, South Korea and Taiwan, China have withdrawn or stopped expanding, giving up their shares to the mainland, and it is a high probability that the overall share of mainland enterprises will continue to increase, and the concentration within the industry will also increase.
However, due to the slowdown in the improvement of LCD production line technology and the deceleration of enterprise capital expenditure, each company can get a respite window or guard its own small world, and the speed of increasing concentration within the industry is not expected to be very fast.
In the field of OLED, there is still a test of technical route selection, and there may be R&D losses caused by betting on the wrong route. The fighting is fierce and the barriers to entry are high.
Why is panel manufacturing inferior to chip manufacturing?
The value distribution of the panel industry chain is more in line with the smile curve, with high gross profit at the upstream material end and downstream application end, and low gross profit margin at the midstream manufacturing end.
However, on the same manufacturing side, chipmaker TSMC embodies a different side. The gross profit margin is good, and the net profit margin of sales is far ahead in the industrial chain, which is higher than that of material suppliers and mobile phone manufacturers. It also spends a lot of money every year to invest in high-generation production lines, and it is also OEM for customers, why is TSMC so fragrant?
There are three reasons for this. First of all, TSMC is a leader in the manufacturing field, and the position of the first brother is difficult to shake, and it has good pricing power internally, upstream and downstream.
In the field of LCD, domestic panel manufacturers have completed the transcendence and squeezed out Korean enterprises, basically setting the pattern, but then in the field of OLED, as a challenger to tackle key problems, the success is still unknown.
Secondly, TSMC also has an ecological position in the industrial chain. It is not a simple manufacturing company, it not only works with upstream equipment manufacturers and software developers to do new production lines and new technology research and development, but also can drive downstream customers' product design through manufacturing technology improvement, and even mobile phone manufacturers need to "say good things" if they want TSMC to OEM.
In the field of domestic panels, upstream materials are still dominated by overseas companies, and domestic panel companies often have to look at the face of the upstream, so it is naturally difficult to have a high net profit margin.
Finally, the chip production line is upgraded, and the performance and value of the chip itself are also greatly improved, so after the construction of TSMC's new production line, the gross profit margin of the production line will be significantly improved, thereby improving the income from R&D investment. The expansion of the panel production line does not bring much improvement in product value.
To borrow Stephen Chow's lines to summarize, "One sentence is good, your pattern is really bad".
If in the next five years, domestic panel companies will also become the first in the industry in the OLED field, and the concentration of players will be further improved, and the competition pattern will improve, then the profit situation of panel companies will continue to improve, rather than a cyclical short-term improvement.
If panel companies are also involved in upstream domestic materials, or join hands with material companies to form an alliance and jointly complete domestic substitution, then the industrial chain status of panel manufacturing will also be adjusted.
At that time, panel manufacturing companies, like the current TSMC, will become the sweet and sweet spots for countries and companies to compete for, where will they be called "value destroyers".
Looking forward to that day.