Sharp“s decision to add 10th generation LCD glass production by 2010 will not prompt the same rush to production among its rivals that greeted the coming of larger substrates in the past, Corning Chi…
Sharp“s decision to add 10th generation LCD glass production by 2010 will not prompt the same rush to production among its rivals that greeted the coming of larger substrates in the past, Corning Chief Operating Officer Peter Volanakis said at a Corning investor conference in New York on 8 February 2008. Production of 10G substrates will likely attract investment from LG.Philips LCD and Samsung- Sony“s S-LCD joint venture, both of which might be willing to meet the USD 3 billion cost involved, Mr. Volanakis said. The companies also have high-profile brands that could benefit from a 2,850mm x 3,050mm substrate that Sharp will use to produce 32W, 37W, 42W, 57W and 65W panels, he said. Corning will invest USD 795 million in the 10G facility. Other LCD manufacturers like AU Optronics and Chi Mei Optoelectronics, which rely heavily on OEM, are less likely to add 10G, he said. AU and Chi Mei recently unveiled plans for 8.5G production by 2009. “That“s a USD 3 billion dollar investment and unless you have a strong brand and access to markets, that“s a dumb investment”, Mr. Volanakis said. Samsung, Sharp and LG “certainly have the brand power to afford the investment”, he said. Samsung has hinted at plans for a 10G or 11G facility, but has not finalized plans. The 10G costs can be offset by expanding an OEM business for the panels, Mr. Volanakis said. Indeed, Sharp has reached supply agreements with Syntax-Brillian and Toshiba and has a stake in Pioneer. “You have to think how big is the OEM market for giant TVs and I can“t imagine there would be a lot of those. People are going to wait and see how this turns out, but maybe one or two more” LCD manufacturers will install 10G capacity, Mr. Volanakis said. Corning has long been skeptical of the need for adding 10G glass, citing logistical issues inherent in transporting it. However, in autumn 2007 Corning agreed to invest USD 400 million in 2008 on construction of a 10G glass facility that will be connected to Sharp“s proposed plant in Sakai City, Japan. Corning will invest USD 800 million to USD 1 billion in capital projects in 2008, including initial investments in 10G and 8.5G in Taiwan. Despite 10G“s potential for producing 32W and up, the technology will not take production away from smaller substrates currently used for those panels, Mr. Volanakis said. Corning also supplies 8G and other glass to Sharp and expects to initially produce prototype 10G substrates at its factory in Shizuoka, Japan. “Sharp“s investment here is really directed to their share of the business and being able to make the full range of sizes”, Mr. Volanakis said. “I don“t see this cannibalizing their existing business or assets”. The move to expand LCD production comes with LCD TVs expected to take a 50% worldwide unit share in 2008, surpassing CRT-based models (43%) for the first time, Mr. Volanakis said. In 2007, LCD TVs had a 38% share of a market that sold 201 million TVs, while CRTs were 55%. TV sales are projected to rise to 218 million units in 2008, including 29 million LCD TVs in the USA, he said. Much of the decline in CRTs is related to sharp falls in production, Mr. Volanakis said. Worldwide CRT capacity was cut 40% in 2007. Corning has shut its tube plant in South Korea, folding Samsung Corning TV into Samsung Corning Precision LCD, he said. CRT manufacturing was moved to Malaysia and a joint venture in China where Corning has a “small” investment, Mr. Volanakis said. Corning combined the TV operations because “we don“t need a separate entity to manage what is a declining business overall. It“s basically going to be what“s left of the China business”. Corning began withdrawing from the tube business several years ago starting with the shutdown of its plant at State College, Pennsylvania. Global LCD glass demand is projected to rise 25% to 30% in 2008 to 2.2 billion square feet (200 million square meters) from 1.7 billion (160 million square meters) in 2008. It will increase to 3 billion (280 million square meters) by 2011, Mr. Volanakis said. The average LCD TV size is forecast to increase to 34.5 inches by 2011 from 31.4 inches in 2007, he said. If the average size hits 35.5 inches in 2011, that adds another 110 million square feet (10.22 million square meters) of glass demand, Mr. Volanakis said. CRT sales are projected to drop to 57 million units by 2011, from 111 million in 2007. But if the decline deepens to 28 million units, that would add 310 million square feet (28.8 million square meters) of LCD glass demand, he said. During the same period, 40-inch and up sizes are expected to account for 28% of the TV market by 2009, up from 15% in 2007, Mr. Volanakis said. LCD TVs represented 21% of the installed TV base in Japan of 110 million in 2007, while the sets were 15% of 300 million in the US, he said. The three economic recessions that have hit the US during the past 30 years have had little impact on TV sales, Corning vice chairman James Flaws said. But during the US energy crisis of the mid-1970s, sales of TVs fell 5% in 1974 and 20% the following year, Mr. Flaws said. During that period, the worldwide TV market was 30 million units and color models averaged around USD 800, more than 10% of the average US family“s disposable income at the time, Mr. Flaws said. Even if US TV sales were flat in 2008, just 66 million square feet (6.13 million square meters) of glass would be “lost” from a total of 2.2 billion, he said.