Qunzhi Research|Analysis Of The Impact Of BOE & CLP Panda Mergers And Acquisitions On The Global LCD Panel Industry

- Sep 28, 2020-

The acquisition of CEC-Panda by Orient (BOE) is the largest merger in the history of the domestic LCD panel industry. Previously, only the case of AVIC (the parent company of Tianma) in the acquisition of the 5th generation line of Shanghai Broadcasting and Television in 2009, and the acquisition of the 8.5 generation line of Samsung Display Suzhou by TCL Technology. Sigmaintell believes that BOE acquired the G8.5 and G8.6 generation lines of CLP Panda. The implementation of this acquisition has a profound impact on the industry. The analysis from the two levels of industry and enterprise is as follows:


Industry impact


1. Industry concentration is further improved


In the past two years, due to the acceleration of LCD panel production capacity expansion, industry competition has become fierce, which has accelerated the industry reshuffle. South Korean panel makers have successively shut down LCD production lines, which has increased the concentration of the industry. This is mainly reflected in the concentration of market share to mainland Chinese manufacturers. Data from Sigmaintell shows that mainland Chinese panel manufacturers are in the global TV panel market in the first half of 2020 The share reached 55.5%, an increase of 9 percentage points over the same period last year.


With the implementation of the acquisition, market share has further gathered to the top manufacturers. Sigmaintell predicts that BOE will acquire 28.9% of the global large-size LCD market by 2022 after it acquires the G8.5&G8.6 generation LCD production line of CEC Panda, and its own production capacity expansion. At the same time, the share of small and medium-sized panel makers will be further squeezed. It is estimated that by 2022, the share of the global Top6 panel makers will be close to 85%.


2. Reshaping the competitive landscape


Affected by the above factors, the global LCD panel competition landscape will also be reshaped. CLP Panda’s two LCD production lines are the 8.5 generation line in Nanjing and the 8.6 generation line in Chengdu. Among them, the 8.5-generation line produces TV, IT and mobile phone products, and the 8.6-generation line produces large-size TV products. Sigmaintell predicts that the acquisition will have a major impact on the competitive landscape of the TV and IT panel market.


1. IT market: With its technical advantages of IPS and IGZO, CEC Panda is actively exploring the IT market. Therefore, its market share has continued to increase in the past two years. In the field of display panels, it has close cooperation with TPV; in the field of notebook panels, it has close cooperation with ASUS, ACER and Xiaomi. Based on this, the impact of the acquisition on the IT application competition landscape has two aspects:


(1) The IPS market position in the display market is strengthened, and the short-term supply of VA curved surfaces is tight: display panel technology is divided into two camps, IPS and VA. Samsung SDC is the main supplier of VA displays in the world (about 70% of the market). The LCD display panel production line will be closed at the end of 2020, and the supply of VA displays will drop sharply. As an important technical route for the display consumer market, especially the e-sports market, VA curved surface is difficult to be replaced in the short term. Although panel makers headed by TCL Huaxing are actively increasing VA curved production capacity, it is still difficult to make up for the reduced scale of SDC. It is expected that VA curved products will usher in structural supply shortage in 2021.

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BOE is currently the largest supplier in the display IPS camp, but its performance in the consumer e-sports market has not been strong in the past. If the oxide production capacity of CEC Panda can be effectively used and combined with its own technical capabilities, it will be further consolidated. The competitiveness of the e-sports product line and the improvement of its supply capacity lay a solid foundation for its growth in the main market segment of e-sports.


(2) The NB market facilitates the improvement of differentiation capabilities: BOE ranks first in the global notebook panel market with a market share of 28%, and has strong competitiveness. CLP Panda’s notebook computer product line based on IPS+Oxide has a strong cost-effective advantage in the game product line. After the acquisition, it is mainly reflected in the improvement of differentiated competitiveness in this market segment.


2. TV market: CLP Panda TV products are mainly produced on the G8.6 generation line in Chengdu, with IGZO and VA technology as the main focus, focusing on large sizes, with 50-inch, 58-inch and 70-inch products as the main products. After active development, It also cooperates closely with domestic and international brands. Sigmaintell analyzed the impact of the acquisition as:


(1) BOE has also become the largest supplier in the global TV market, and its scale and competitive advantages have become more prominent after the acquisition.


(2) In terms of technology, after acquiring Hydis's team and technology, BOE has continued to expand its IPS production capacity and technical strength, and has little presence in VA technology. The TV capacity of CLP Panda is all VA capacity. After the acquisition of BOE, it can form a complementary effect with existing technologies, taking into account the technical demands of downstream customers for IPS and VA, which will help its product layout and customer stickiness. At the same time, CEC Panda has many patents of VA and IGZO, which can also strengthen BOE's patent layout in this area and further feed back its IT and TV business.


3. Upstream materials and downstream brand supply chains are also facing reorganization


Sigmaintell believes that the global LCD panel industry's competitive landscape has gone through four stages: the leading stage of Japanese manufacturers before 1998; the leading stage of South Korean and Taiwanese manufacturers from 1999 to 2008; and the Korean manufacturer from 2009 to 2016 The leading stage; 2017~present, the industry has shifted to the leading stage in Mainland China. At different stages, different market environments, different leading manufacturers, upstream and downstream manufacturers also uphold different supply chain strategies. Similarly, after this merger, Sigmaintell predicts that the adjustment of the competitive landscape will also affect the supply chain reorganization of upstream materials and downstream brands.


Opportunities and risks to the company


Opportunities:


As mentioned earlier, BOE's overall production capacity and market share will be improved. The production capacity and technology of the two parties are complementary to a certain extent. If the integration effect is achieved, it will form an effective support for the further improvement of BOE's competitiveness in the global display industry.


Risk aspects:


1. As the production capacity becomes larger, whether the management can effectively improve efficiency after integration and achieve the effect of 1+1>2 will test the integration and management capabilities of both parties.


2. The greater the production capacity, the more important the stable export to the sea. With such a large scale, in the face of complex and changeable market demands, how to stabilize the export to the sea is very important, and it is necessary to find a balance between stable operation and flexibility and efficiency.