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Global flat panel display (FPD) market revenue is expected to shrink by 6 percent year over year in 2016 to $120 billion. While revenue has been declining for some time, this year it will reach its lowest level since 2012, according to IHS Inc. (NYSE:IHS), a global source of critical information and insight.

“The industry has begun to question whether the 2016 Summer Olympics in Brazil will spur panel demand, as Brazil’s domestic situation and economy are worsening,” said Ricky Park, director of large display research for IHS Technology. “The prolonged decline in oil prices and the resulting economic downturn in oil-producing countries, together with the economic slowdown in emerging markets, continue to adversely affect display demand. There is also growing concern about China’s sluggish domestic market, and the free fall in panel prices that began last year is also hampering market growth.”

Due to the panel oversupply situation, panel prices declined more rapidly in the second half of 2015 than during any other year since 2008. In December of 2015, for example, the average price for open-cell 32-inch liquid crystal displays (LCDs) tumbled nearly 41 percent since the previous year.

According to the IHS Display Long-term Demand Forecast Tracker, stronger demand for large ultra-high definition (UHD) and 8K panels could slow declining average selling prices. Overall global display demand could also pick up after 2016, if the global economy improves as expected. Furthermore, as the demand for large TV panels rises, FPD shipment area is expected to grow at a compound annual growth rate of 5 percent, from 2015 to 2020.

FPD_Demand_Chart

Liquid crystal display (LCD) manufacturer inventory adjustments and continued slowing demand are causing TV and information technology (IT) display prices to fall, further eroding panel makers’ profitability. TV and IT display shipments in the first quarter (Q1) of 2016 are expected to decline 8 percent compared to the same period last year, to register just 196 million units. This is the first time since 2009 that panel shipments have declined in the first quarter year over year, according to IHS Inc., a global source of critical information and insight.

Although unit shipments of LCD display also declined last year, shipment area increased thanks to the growing popularity of large-screen TV sets, which sustained the display industry. Large-area TFT LCD shipment area increased by 5 percent in 2015 year over year, while unit shipments declined 4 percent, reaching 694 million units, according to the IHS Large Area Display Market Tracker. “Due to global currency exchange issues and slower demand from emerging markets, global TV display demand in 2015 was lower than initially forecast,” said Yoonsung Chung, director of large area display research for IHS Technology.

“TV panel demand in early of 2016 will continue to falter, because of excess panel inventory carried over from last year,” said Linda Lin, senior analyst, large displays, IHS Technology. “To control the deficits caused by overproduction of IT and TV panels, panel makers will have to reduce fab utilization early this year, since average selling prices are nearing manufacturing costs.”

Notebook PC panel shipments are expected to experience the most serious year-over-year decline, falling 14 percent to reach 40.9 million units in Q1 2016. OLED TV panels will be the only display segment forecast to experience growth in Q1.

TV_IT_LCD_Shipment_Forecast

The oversupply in LCD TV panels is forecast to continue into the first quarter, according to the latest IHS TV Display Supply Chain Tracker – China. The leading six TV manufacturers in China expect to lower their panel purchasing by 37 percent quarter over quarter and 15 percent year over year. Meanwhile, Samsung Electronics and LG Electronics will slightly reduce panel purchases in Q1.

“Leading display manufacturers have not dramatically reduced fab utilization in the fourth quarter of last year, but the situation will change in the first quarter of 2016, as they will be pressed to reduce the loading,” Lin said. “The Chinese New Year holiday, planned fab maintenance and repairs, and the transition to thinner glass will also reduce output. BOE, ChinaStar, CEC-Panda and other leading Chinese manufacturers that are ramping up new Gen8 fabs will have to reduce their capacity utilization in the first quarter to fight declining panel prices and shipments.”

Neon shortage coming


February 18, 2016

The current Neon demand is growing in “stealth mode” – hidden from the layman’s view because of significant factors only analysts fully versed in lithography, OLED/FPD and semiconductor device trends would catch. The traditional method of using historical data to predict future Neon demand will grossly underestimate future usage.

“Those who are basing their thinking on projections of historical Neon growth are in for a big surprise,” said TECHCET’s President/CEO, Lita Shon-Roy.   “Even with the recovery of the Neon supply chain, Neon conservation actions, and new sources in China, we predict that Neon demand will grow faster than Neon supply,” she added.

The largest and most rapidly growing Neon demand drivers are Lasik, OLED/FPD (displays) and DUV lithography. However, Neon gas consumed by DUV excimer laser gases is growing at a faster pace and represents more than 90% of world’s Neon consumption.

Semiconductor lithographic use of Neon is increasing more rapidly than expected for several reasons including the delay of EUVL while demand for finer line width patterning is increasing. In addition, new consumer related markets drive increased usage of legacy device processing. Each increase in the number of lithographic steps increases the need for more DUV lithography tools, and drives up the volume demand for Neon. This is true for V-NAND process flows, as well as DRAM and Logic devices dependent on multi-patterning.

Currently, the installed base of DUV lithography tools is ~ 4,400. In contrast, there have only been a dozen or so EUVL tools shipped through the end of 2015.

“The continued growth of DUV tools will push up demand for NEON beyond which supply can support,” cautioned Shon-Roy.

More details can be found from TECHCET’s latest Critical Materials Report on NEON Supply & Demand. Information will also be presented at the CMC Conference, scheduled for May 5-6, in Hillsboro, Oregon – this is the open forum portion of the Critical Materials Council meetings. For more information go to http://techcet.com/product/neon-a-supply-alert-report/ For more information on the CMC Conference please go to www.cmcfabs.org/seminars/

CMC Fabs is a membership based group that actively works to identify issues surrounding the supply, availability, and accessibility of semiconductor process materials, current and emerging, “Critical Materials.” CMC Fabs is managed by TECHCET CA LLC, a firm focused on Process Materials Supply Chains, Electronic Materials Technology Trends, and Materials Market Analysis for the Semiconductor, Display, Solar/PV, and LED Industries. The Company has been responsible for producing the SEMATECH Critical Material Reports since 2000.

Flat-panel display (FPD) equipment spending this year will reach its highest level since 2011, according to IHS Inc., a global source of critical information and insight. Driving this growth are two trends: In South Korea there is a rush to expand capacity to produce high volumes of flexible active-matrix organic light-emitting diode (AMOLED) panels for smartphone applications; while in China, supported by a wide variety of local government incentives, panel makers are continuing to build new factories to produce a varied portfolio of flat panel display technologies and panel sizes, IHS forecasts that FPD equipment spending will reach $11.2 billion in 2016, rising to $11.6 billion in 2017 – almost four times the sum spent in 2012.

Now that Samsung Display has made rigid AMOLED displays highly cost competitive with liquid crystal displays (LCD), many leading smartphone brands are showing strong interest in adopting the technology. Although plastic based flexible AMOLEDs are still more expensive than rigid AMOLED displays, they offer the extra benefits of being more rugged, thinner and lighter than glass based panels. Combined with better image quality and design flexibility, both glass and plastic based AMOLED displays are expected to rapidly gain market share in the high-end smartphone market. The FPD supply chain is reacting to this technology shift, adding enough capacity to produce more than 300 million additional flexible AMOLEDs per year by 2018.

“Thanks to direct investments, technology subsidies, low interest-rate loans, tax exemptions and other government-sponsored support mechanisms, ten different companies will be building 15 new factories in China over the next two years,” said Charles Annis, senior director at IHS Technology. “Chinese FPD producers are targeting panel self-sufficiency for the country’s enormous consumer electronics industry.”

Based on the latest IHS Display Supply Demand & Equipment Tracker, 60 percent of 2016 equipment spending will be used to build LCD-dedicated fabs and 40 percent will be invested in AMOLED or AMOLED-LCD dual use facilities. By 2017 the ratio of LCD to AMOLED fabs will reach parity. China is forecast to account for about 70 percent of total equipment spending in 2016 and 2017, and South Korea will account for most of the remainder.

The volatile FPD equipment industry is in the midst one of its highest up-cycles in years, which is a sharp contrast to the quickly deteriorating panel market that is already suffering from oversupply and severe price declines. This is not an unusual situation, due to the long lead-time required to build new factories, while market conditions can change much more rapidly.

“A major industry concern in this cycle is the market may be slow to rationalize itself,” Annis said. “Chinese government policies insulate Chinese panel makers from some financial concerns and investment in flexible AMOLED is not really related to the supply-and-demand issues. If this slow rationalization depresses panel maker profitability much longer, it eventually will negatively affect not only panel makers, but their suppliers as well.”

FPD_Equp_Revenue

With the growing popularity of the Samsung Galaxy Edge series and the Apple Watch, display manufacturers are expanding their production capacity of flexible active-matrix organic light-emitting diode (AMOLED) displays. While comprising just 2 percent of all AMOLED panel shipments in 2014, the share of flexible AMOLED panels rose to 20 percent of the total AMOLED display market in 2015, reaching 57 million units, according to IHS Inc., a global source of critical informational and insight.

The unit-shipment share of flexible AMOLED is expected to grow to 40 percent of total AMOLED panel shipments in 2020. Rigid AMOLED panel shipments, by comparison grew 30 percent to reach 233 million units in 2015. Production capacity for flexible AMOLED panels is expected to exceed 1.5 million square meters (24 percent of total AMOLED display production capacity area) in 2016,

“As the demand for flexible AMOLED rises dramatically, display manufacturers are aggressively investing in flexible AMOLED, including the latest foldable and rollable displays,” said Jerry Kang, principal analyst of display research for IHS Technology. “In fact, the growth rate for flexible AMOLED panels is expected to be much higher than for rigid AMOLED panels beginning in 2016.

According to the IHS OLED Technology, Strategy & Market Report, Samsung Display lowered its manufacturing cost for rigid AMOLED panels, to compete with low temperature polysilicon (LTPS) liquid crystal displays (LCDs). Samsung Display’s primacy in the rigid AMOLED market, is now leading other panel makers to skip production of rigid AMOLED displays entirely and proceed directly to flexible AMOLED production.

“Manufacturers feel it’s already too late to compete in the rigid AMOLED market, where Samsung Display is already so far ahead,” said Kang. “Furthermore, a growing number of smartphone manufacturers, including Apple, are looking to thinner and lighter flexible AMOLED displays to differentiate their products, which is leading even more panel makers to rapidly shift their business focus to flexible AMOLED.”

AMOLED_Production_Chart

Shipments of organic light-emitting materials used to produce organic light-emitting diode (OLED) displays grew 12 percent year over year in 2015, reaching 26,000 tons. With the rapid growth of white OLED (WOLED) TV display shipments, shipments of organic light-emitting materials are expected to reach 100,000 tons in 2018, according to IHS Inc. (NYSE: IHS), a global source of critical information and insight. Revenues from organic materials used to produce OLED displays also grew 12 percent year over year, reaching $465 million in 2015. Revenue is expected to amount to $1.8 billion in 2018.

“The market for small and medium OLED displays is stable, and OLED TV shipments are increasing, which is supporting OLED light-emitting materials market growth,” said Kihyun Kim, senior analyst for chemical materials research at IHS Technology.  “Shipments of organic light-emitting materials for WOLED are expected to increase along with WOLED TV shipments, as more manufacturers are planning to adopt the technology. WOLED materials are expected to outstrip fine-metal-mask red-green-blue (FMM RGB) materials in 2017 for the first time.”

Organic light-emitting materials used in the FMM RGB technology, mostly used to produce smartphone displays, dominated the OLED materials market in 2015, with an 82 percent share. WOLED materials, mainly used for TVs, will account for 51 percent of the total OLED materials market in 2017 and 55 percent in 2018, in terms of shipments.

Revenue from WOLED materials, which made up 31 percent of the market in 2015, will account for 55 percent of the total organic light-emitting materials used to produce OLED displays in 2016. The growth in revenue is faster than that in shipments, because WOLED materials are more expensive than FMM RGB materials, because they haven’t yet reached an economy of scale.

OLED_Chemicals_Chart

The ongoing issue of liquid crystal display (LCD) oversupply — exacerbated by China’s aggressive investment in production capacity as well as high fab utilization — will continue well into 2016. The supply of large-area LCD is expected to be 14 percent greater than demand in 2016, up from 12 percent in 2015, according to IHS Inc. (NYSE: IHS), a global source of critical informational and insight.

Chinese LCD suppliers are maintaining high manufacturing targets and expanding capacity, partly thanks to Chinese government subsidies for startup and infrastructure costs. On the other hand, LCD TV demand, particularly in Russia, Brazil and other emerging countries, has not grown as expected, because of currency depreciation and slow economic recovery.

“Panel prices have declined to the degree where the break-even point for manufacturers was reached in the fourth quarter of 2015,” said Yoshio Tamura, displays director for IHS Technology. “Due to declining value of currencies in emerging countries, demand for higher priced LCD TVs will not rebound in 2016. Even so, Chinese panel makers are not planning to lower fab utilization anytime soon to expand market share, which means large-area LCD manufacturers will be in the red in 2016.”

Chinese LCD suppliers are expected to adjust fab utilization in the middle of 2016, according to the IHS Display Supply Demand & Equipment Tracker, and LCD oversupply will be eased in the second half of 2017. “If Chinese manufacturers don’t lower their fab utilization within 2016, there will be an even greater negative impact on global LCD suppliers’ profit margins,” Tamura said.

By Denny McGuirk, SEMI president and CEO

“In like a lion, out like a lamb” is just half the story for 2015.  While initial expectations forecasted a double-digit growth year, the world economy faded and dragged our industry down to nearly flat 2015/2014 results.

However, 2015 will be remembered for a wild ride that fundamentally changed the industry.  In 2015 a wave of M&A activity swept across the industry supply chain — unlike any single year before — with scores of transactions and notable multi-billion dollar companies being absorbed.  In 2016, we all will be working within a newly reconfigured supply chain.

Increasingly, in this business landscape, collaboration is required simultaneously across the extended supply chain — customers’ customers’ customers are now routinely part of the discussion in even unit process development.  Facilitating interaction and collaboration across the extended supply chain is part of what SEMI does and I’ll be updating you in next week’s letter on how, but first, let’s review what’s happened and what’s happening.

2015 Down 1%: “In Like a Lion, Out Like a Lamb”

2015 had an optimistic start with a strong outlook and good pace in Q1 and 1H.  In January 2015 forecasters projected semiconductor equipment and materials growing in a range of 7 percent to nearly 14 percent vs. 2014.  Global GDP, as late as May 2015, was pegged at 3.5 percent for 2015 after coming in at only 3.4 percent in 2014.  In August, estimates dropped to 3.3 percent, in November estimates dropped further to 3.1 percent for the year.

As our industry has matured, semiconductor equipment and materials growth rates are ever more tightly correlated to shifts in global GDP.  With global GDP unexpectedly dropping, the second half saw declining book-to-bill activity and the year will likely end flat or slightly negative for 2015.  Though nearly flat, the numbers are still impressive with a healthy $37.3 billion annual revenue for semiconductor manufacturing equipment and $43.6 billion for semiconductor materials.

An important change is since the 2009 financial crisis, electronics, chips, and semiconductor equipment and materials markets have been much more stable year-to-year than in the years prior to 2009.  Also, the movement of the three segments is much more synchronized compared to the earlier years of boom and bust. For SEMI’s members this means cycles are becoming more muted — enabling members to shift business models accordingly to better maintain prosperity.

Fab-Equipmt-600w Capital-Equip-600w

 

2015’s $125+ Billion M&A:  Inflection Point for Silicon Valley Icons and Global Titans

2015 is a year that will be viewed as an inflection point in our industry.  The unprecedented M&A volume (more than $125 billion for semiconductor related companies) and the size of individual deals through the electronics supply chain will forever  change the industry.

historic-proportions

While there have been waves of consolidation for semiconductor Integrated Device Manufacturers (IDMs) in the 1980s and 1990s, and semiconductor equipment and materials in the 1990s and 2000s, the fabless semiconductor companies are the latest wave undergoing consolidation.  Although, in 2015, not just fabless, but all segments saw major deals — even iconic chemical brands DuPont and Dow Chemical announced their intention to merge.

Large and familiar brands like Broadcom (Avago), SanDisk (Western Digital), Altera (Intel), Freescale (NXP), and KLA-Tencor (Lam Research) have been merged and will continue forward as part of their acquirers.  China is on the move with its ambitions to quickly grow its indigenous semiconductor supply chain with recent acquisitions of ISSI, OmniVision, NXP RF power unit, and notably Mattson in the semiconductor equipment segment.

In an age when new fab costs are pushing double-digit billions of dollars and leading-edge device tapeouts are surpassing $300 million per part, consolidation is a strategy to increase scale, leverage R&D, and compete better.  For SEMI’s members, the winner-take-all stakes increase and raise expectations for technology, product performance, application development, speed, and support.  This, in turn, means that SEMI members have an increased need for a newly drawn pre-competitive collaboration model along the extended electronics supply chain and for Special Interest Groups (SIGs) to drive collective action in focused sub-segments and for specific issues.

Collaboration-is-critical-6

Source: SEMI (www.semi.org), 2015

2016 Up ~1%: Stay Close to your Customer and your Customer’s Customer and …

Current projections for semiconductor equipment and materials suggest that 2016 will not be a high growth year.  The span of forecasts ranges from almost -10 percent to +5 percent.  At SEMI’s Industry Strategy Symposium (ISS), 10-13 January, we will be taking a deep-dive into the 2016 forecast and on the business drivers and will have a much better picture of the consensus outlook.

However, it is already quite clear that following this enormous wave of consolidation, the industry will look different and will offer new and different opportunities.  Listening to SEMI’s members, I’ve heard that during this period of upheaval it’s absolutely critical to stay close to one’s customers – but more than that – to have access and ongoing direct dialogue with the customer’s customer … and customers’ customers’ customers.

In light of the cost of research and development, the magnitude of risks, and the speed of new consumer electronics adoption, SEMI members find that they need to intimately know emerging requirements two to three steps away in the supply chain, and may require rapid and innovative development from their own sub-suppliers to meet product delivery in time.  In parallel, we see system integrators (electronics providers) staffing up with semiconductor processing engineers and equipment expertise, both for differentiation of their own products and for potential strategic vertical manufacturing.

2016 will mark an acceleration of collaboration and interdependence across the extended supply chain.  Next week, I’ll provide an update letter on SEMI’s related activities with an overview of what SEMI is doing to meet the realities of a reshaped industry.  SEMI’s role is evolving, and more important now than ever, in helping the industry achieve together, what it cannot accomplish alone.

SEMI-Infographic--Achieving

Learn more about SEMI membership and upcoming events.

LG is showcasing a handful of futuristic concepts at CES 2016 this week, including an 18 inch prototype of an OLED display that can roll up like a newspaper.

Source: LG

Source: LG

The display has a high-definition resolution of 1200×810 with almost one million mega-pixels and can be rolled up to a radius of 3cm without affecting the function.

OLED screens are composed of LEDs that emit their own light from the lit pixels, conversely to older LCD technology which relies on a backlight to illuminate the display. Many phones such as those produced by Samsung already use OLED panels, but they have so far been entirely inflexible.

LG’s new technology paves the way for smaller electronic devices that can bend – like phones – but LG claims it can be scaled up to the size of a 50 inch television.

The company said the new screens were mounted on a “high molecular substance-based polyimide film” that served as the back plate for the rollable panel. The polyimide film reduces the thickness of the panel which helps to “significantly improve” its flexibility.

The screen is currently just a prototype and can only be rolled up in one direction. It is also quite delicate and can be damaged easily resulting in dead pixels appearing on the display.

LG Display’s KJ Kim said that in the future consumers will be able to roll up their television sets when not in use, although he gave no release date for the new technology.

The display was shown at the Consumer Electronics Show (CES) in Las Vegas along with a number of other exhibitors such as Samsung who have demonstrated a smart fridge and a television that can act as a wireless hub for the Internet of Things.

Gary Shapiro, one of the organizers of CES, said: “We are in the middle of a revolutionary wave of innovation where game-changing ideas are springing up from small companies and entrepreneurs all over the world.”

Driven by continued innovation in vehicle connectivity and safety technologies, global revenue from automotive display systems will grow at a compound annual growth rate (CAGR) of more than 11 percent to $18.6 billion by the end of 2021. This will add nearly $9 billion in annual revenue compared to 2015, according to IHS Inc., a source of critical information and insight to the global automotive industry.

Data from the Automotive Display Systems Forecasts from IHS represents production of instrument cluster systems, head-up display systems and center stack display systems as full automotive modules, not just display panels. Center stack display systems are expected to account for half of the overall revenue growth, while head-up display (HUD) systems will boast the strongest revenue CAGR at nearly 21 percent from 2015.

“The automotive displays supply chain will see some amazing growth and innovation through the end of the decade, as more vehicles debut new displays or standardize larger ones in the instrument cluster, center stack and head-up display systems,” said Mark Boyadjis, senior analyst and manager for Infotainment and HMI at IHS Automotive. “There is additional growth opportunity in lower volume display applications for rear seat entertainment, HVAC control panels, and new applications such as smart mirrors with full displays entering the market now.”

Global production volumes for factory-installed center stack and instrument cluster display systems are each estimated to grow by more than 40 percent over the forecast period, each surpassing 60 million units by 2021. IHS forecasts an even higher growth rate for the production of head-up display systems, which will exceed 65 percent, surpassing 6 million units annually in that same timeframe.

The forecasted global growth in display systems is based on multiple factors. In China, for example, overall volume is boosted, because original equipment manufacturers (OEMs) are beginning to add smaller displays into the instrument cluster and center stack, while regional vehicle sales also grow. Meanwhile, head-up display systems are growing globally, as prices for these new and innovative display technologies fall and they become increasingly relevant to reduce driver distraction.

Displays grow in both volume and size

Automotive displays are increasing in volume and in size. IHS forecasts global shipments for automobile display components overall to grow at a CAGR of more than 6 percent to 170.6 million units by the end of 2021. According to the Automotive Display Market Tracker H2 2015 from IHS, at least two TFT-LCD or AMOLED displays will be in all new cars produced in 2021.

By 2021 automotive displays 7.0-inches and larger are forecasted to reach 33.5 million units, growing at a CAGR of nearly 10 percent, largely driven by the 8.0-inch size class. “Automotive display sizes are growing quickly to help support multiple infotainment, safety and vehicle system functions that require more screen real estate to inform drivers and passengers,” said Hiroshi Hayase, director for small medium display at IHS Technology. “Vehicles are designed with displays in mind, combining digital clusters, HUDs and center stack displays for a truly immersive experience for the driver.”

Increasing demand for infotainment functions, safety systems and vehicle electrification have persuaded OEMs to consider larger, more complex displays in the center stack, instrument cluster and other applications. Global shipments for instrument cluster displays are shifting from 3.0-inch and 4.0-inch to more than 5.0-inches, and center stack displays are shifting to 7.0-inches and larger. Center stack displays between 8.0-inches and 10.0-inches are already common among high-end vehicles and luxury brands, and they are even being introduced in high-volume vehicles, like D-segment sedans and crossovers.

Aftermarket applications for automotive displays also continue to grow, with high demand for aftermarket navigation systems and radios in China, Russia, and Brazil. These numbers also impact global automotive display shipments.