Looking at the global landscape, only the Nasdaq has been performing exceptionally well, achieving a V-shaped reversal led by a group of technology stocks and even setting a new all-time high against the trend.
The ChiNext market in the A-share market seems to be underperforming, opening high and closing low, but the consumer electronics sector is leading the way. Last week's article, "Consumer Electronics: This Sub-Segment is the Most Promising!", already pointed the way.
Consumer electronics – this segment is the most lucrative!
Today we'll talk about the panel industry and my country's breakthrough in this field.
01 "Lack of chips and screens"
In contemporary society, among individual objects, display panels are the objects that the human eye focuses on for the longest time.
Imagine how much time you spend on your phone and computer each day?
It's normal for an average office worker to spend 2-4 hours after get off work on their phone, TV, or computer, not even counting commuting time. People spend more time looking at screens than with their spouses, children, or family, highlighting the importance of screens.
As is well known, the lack of chips and screens has always represented the two major pain points facing China's electronics industry.
So many years have passed in the blink of an eye, has this predicament improved at all?
This can be seen from current reports. When mainstream media comment on the domestic electronics industry, they usually describe it as "lacking in core technologies and core technologies." This seemingly minor difference reflects the tremendous changes that the domestic display panel industry has undergone in the past decade or so, with a number of excellent domestic panel manufacturers gaining a place in the world.
02 The History of South Korea's Catching Up in the Panel Industry
The panel industry is characterized by long cycles and large investments.
The long cycle refers to the long time from commissioning to production. The first two years are for civil engineering. After the factory building is completed, it usually takes 6 months to move in and debug the equipment. After that, it is called trial production if qualified products can be produced. After trial production, it is mass production. Only after mass production can the production line be operated at full capacity.
It takes more than two years to complete this process smoothly, and if there are setbacks along the way, it is not uncommon for it to take 10 years.
Secondly, the investment is enormous.
Each production line requires an investment of 1 billion yuan and necessitates the purchase of a large amount of equipment. Since 2014, the average annual investment in domestic panel production lines has exceeded 50 billion yuan, and the total investment in the 18 production lines planned for 2018-2020 has reached 597 billion yuan.
It's worth noting that a lithography machine, considered the most expensive piece of equipment in the chip industry, costs only a little over $100 million.
This means that only players who are not afraid of losses and have a lot of wealth can continue to play in this industry.
During the era when Japan dominated the panel industry, South Korean giants Samsung and LG only dared to enter the market because they were backed by large conglomerates.
Samsung's LCD business suffered losses for seven consecutive years from 1990 to 1997, averaging $100 million in losses per year between 1991 and 1994.
LG's LCD business suffered an average annual loss of $53 million from 1987 to 1994, a loss that lasted for eight years.
But the Samsung Group, LG Group, and the South Korean government behind them remained unfazed and instead placed increasingly larger bets.
03 Panel industry relocates to China
In short: The panel industry originated in the United States, flourished in Japan and South Korea, and currently, mainland China is gradually gaining the largest production capacity advantage in the world.
Previously, industry insiders revealed that Apple would no longer invest in the development and supply of new products after shipments of existing iPhone and Apple Watch products came to an end.
LGD will cease production at its OLED factory in Paju, South Korea, by the end of the year. Some facilities will be relocated to other factories. The old production line will be closed and converted into an experimental research line in order to reduce losses caused by OLED panels.
In contrast, domestic LCD panel supply will increase this year, while South Korean capacity will further contract. Overall, the cycle of rapid and continuous increase in LCD panel supply is expected to end next year. If LCD panel demand increases next year, there may be significant price increases expected, indicating an industry turning point is underway.
04 Target Opportunities
Currently, due to a combination of factors such as technology transfer and the strategic positioning of international giants, the trend of production capacity shifting from South Korea and Taiwan to China in the entire LCD panel industry is very obvious.
The trend of domestic leading companies clustering together is also becoming more obvious, with the top three domestic companies, BOE, TCL, and Tianma, increasing their global market share year by year.
BOE needs no introduction; it's the leading company in China's panel industry.
TCL Technology continues its asset restructuring, focusing on display panels. With new production lines coming online in the future, the company still has significant revenue potential, and its future panel production capacity is expected to grow even further.
As for Shenzhen Tianma, Shenzhen Konka, and Visionox, they are all catching up, and you can wait for the leading stocks to stagnate before taking action.
