SDP Guangzhou Zengcheng Panel Factory Volume Production Postponed Hon Hai Panel Road Hard Ahead

At the end of 2016, Terry Gou, who was helm at Hon Hai, was ambitious. He invested 61 billion yuan in Zengcheng, Guangzhou, to build a super eco 10.5 generation 8K display eco industrial park. However, the Zengcheng panel factory, which planned mass production in 2019, is facing a new situation of delayed mass production.

In fact, the operation of this production line is SHARP's SDP (hex display), which is also an important layout after Hon Hai's acquisition of SHARP. Today, the panel not only fails to produce products as scheduled at the end of September, but also generates disputes with equipment suppliers.

In response, SDP issued a statement recently that the company had invested in the company in mainland China, due to the delay in mass production from six months to April 2020 (but the trial production date in October 2019 was still normal).

For the payment, SDP said that the total purchase amount of 60% has already been paid for the goods. "The purchase has yet to be paid, which accounts for about 40% of the total amount, of which Japanese manufacturers account for about 40%. Most manufacturers have agreed to our conditions. As for (Taiwan), the amount of NT $8 billion 400 million is not yet delivered or unpaid, because (Taiwan) China's suppliers are mostly small and medium-sized enterprises. Therefore, suppliers in Taiwan will fully perform their payment according to the original procurement contract conditions."

At the same time, Terry Gou has already transferred SDP shares. At that time, SIO International Holdings, invested by Terry Gou in personal terms, had a 53.05% stake in SDP.

Hon Hai Group's Sharp Co said in September 12th that Terry Gou owned SHARP's 10.5 generation SDP plant in Guangzhou. Taniguchi Hideo, deputy vice president of SDP company, said Terry Gou had already sold SDP shares because of personal factors, so the operation of Guangzhou's factory has nothing to do with Terry Gou.

Terry Gou quit, Hon Hai around the story of SHARP and SDP panel factory to continue, and how to move forward is the focus of attention in the industry.

With the price of mainstream panel falling below the cost of cash, the panel factory is under tremendous pressure. - Song Wenhui photo

Selling rumors to mass production postponed

Although 4 and May of this year, the production of the ultra view panel plant has been postponed. But in July 31st, the first 65 inch product lighting ceremony of the 10.5 generation eco industrial park was held at the factory.

This is also the confidence of Hon Hai in delivering mass production to the outside world. At that time, Luo Zhenghao, chairman of XXX, said: "in February 14th this year, the first core equipment of the park, 8K high-precision exposure machine, has been stationed in the array factory. After 168 days of fighting day and night, the first high-resolution 65 inch display is officially lit today.

Zhu Qibao, director general, said: "next, we will use the industry's fastest speed to upgrade productivity and improve productivity."

However, lighting and mass production are two concepts. According to the plan, the park will be the world's most advanced 8K LCD panel factory after the completion of the project. It will produce 65 inch and 75 inch panels. The two phase project will build the next generation panel and related follow-up products. It is estimated that the output value will reach 92 billion yuan after the mass production.

By August, the situation was turning rapidly, and the news of the supermarket was looking for buyers.

For potential buyers, Wit Display analyst Luffy Lin analyzed the twenty-first Century economic report, saying: "BOE and Huaxing are not likely to pick up the disc, there are already two. Both group and CLP Rainbow / panda are short of the super high generation line. If we buy the 10.5 generation line, we can make up for its shortage in the super size market and enhance its OEM business. But we are still in a state of deficit at the moment, and we may not be able to eat the 10.5 generation line of Guangzhou.

CLP / panda has planned to build the 10.5 generation line, but it has been delayed for a long time. If we buy the 10.5 generation line directly in Guangzhou, we can save many middle links. Hui Ke originally planned to build a 11 generation line in Zhengzhou, but because of the blocked regional investment policy, there were no funds to buy the 10.5 generation line in Guangzhou.

At present, no definite takeover decision has yet been made, but for a panel factory which has not yet produced large quantities and has invested heavily, it is not easy to sell itself. And from the big environment, the LCD panel oversupply is still grim. What's more, its production time continues to be postponed, and payments need to be paid, facing uncertainty.

Luffy Lin believes that there are three reasons why SHARP Guangzhou Zengcheng 10.5 generation panel factory has not been scheduled for mass production. For one thing, at present, SHARP panels do not have enough access to the sea. Originally, they have a large number of panel stocks. If we push forward the mass production of the 10.5 generation lines in Guangzhou, we will only increase inventories. Secondly, the panel market is very low, prices continue to decline, competitors are reducing production and insurance prices. If we push forward the 10.5 generation lines of Guangzhou, we also face losses. Thirdly, the relevant units may not fulfill their previous Subsidy Commitments, so that SHARP's 10.5 generation lines will fall into financial pressure.

How can we overcome internal and external difficulties?

Why did Hon Hai invest so much in the panel industry? In fact, Hon Hai has already entered the field of panel. Another company of our group is engaged in LCD panel production. Hon Hai subsequently ushered in the key SHARP acquisition, SHARP's income bag, Hon Hai has ambitious ambitions for revitalizing SHARP brand, focusing on the upstream and downstream industry chain built by SHARP brand, the panel is indispensable, and SDP LCD panel technology has been leading.

SHARP brand itself is also out of the sea, reoperating SHARP TV brand in the country, reclaiming SHARP's brand authorization from Hisense in overseas, and strengthening the consumer electronics brand has always been the ambition of Hon Hai. In Guangzhou, the construction of a faceplate factory can provide capacity and reduce costs for the domestic market. The planned American factory also lays the foundation for overseas markets.

At the same time, in 2016, the panel resources were very scarce, and the prices were also loiter. The large size and high definition of LCD panels were also the trend of the times. Therefore, we need to tighten the panel's armaments and expect the panel to expand the new profit point for Hon Hai.

However, the original plan has been interfered. On the one hand, the Guangzhou Zengcheng panel factory has been postponed, and the factories in the United States have encountered difficulties. Hon Hai has invested tens of billions of dollars in Wisconsin to build a LCD panel factory. After that, the original 10.5 generation LCD factory is changed to sixth generation, and the factory scale will be further reduced. A lot of people close to Hon Hai told the economic news reporters in twenty-first Century that the biggest problem was that they could not recruit employees locally, and skilled technicians were more difficult to find.

On the other hand, from 2018, the boom of the industry began to decline, and the trough of the panel continued until 2019. In the past two years, the capacity of large-sized LCD has been gradually released, and the supply and demand of the LCD TV panel market is seriously unbalanced, and the price of TV panels continues to bottom down.

The Sigmaintell report shows that with the release of the 10.5 generation of capacity, the supply capacity of 65 inches and 75 inches has been greatly improved. Although the brand has greatly expanded the market share of 65 inches in the terminal market, the demand growth rate is far less than the growth rate of the panel production capacity. The supply and demand is seriously unbalanced. The decline of the 65 inch panel price in the two quarter has increased, and the overall decline in the first half of this year has reached 14%.

"With the price of mainstream panel falling below the cost of production, the panel factory is under tremendous pressure. Since the first quarter of 2019, the main businesses of the panel manufacturers have already seen losses. In the next two years, a lot of new capacity will be produced, and the supply area will keep growing. And the demand side is facing the market capacity saturation and consumer purchasing power decline. "The gap between supply and demand will continue to expand when the panel makers do not control their capacity. The panel market will face the risk of persistent oversupply for a longer period of time," predicts the group. The industry will accelerate the reshuffle, and the survival of the fittest will be inevitable. "

As Han factory LG and Samsung continue to quit liquid crystal production and turn to OLED, Chinese manufacturers are continuing to add liquid crystal panels, and future big players of LCD will be concentrated in China. Where will the new export be? Traditional TV is obviously not the best choice. Recently, HUAWEI has brought the smart screen of the color TV industry. When visiting the offline stores, the reporter observed that although the appearance of the new TV products changed little, consumers' interest in the intellectualization of TV was quite strong. In addition, liquid crystal growth has been increasing rapidly in the B commercial market.

In this round of shuffling and iteration, Hon Hai faces a lot of challenges. How to manage better after Terry Gou's withdrawal is a key issue for the new leadership team.