$2.5 Billion LG Chem will invest KRW3 trillion (about US$2.5 billion) in LCD glass substrate production facilities, which are expected to be completed by 2018. The company is planning for an annual production capability of 50 million m2 equalling to about KRW2 trillion. LG Chem will become only the second LCD glass manufacturer in South Korea. The first is a joint venture between Samsung and Corning: Samsung Corning Precision Glass Co. (SCP). Early this year, LG Chem signed an agreement with Schott, a Germany-based materials technology company, to use its glass making technology. At first, LG Chem is expected to invest KRW430 billion to construct a glass facility in Paju, where LG Display is located.
Construction Underway LG Chem broke ground for its new LCD glass substrate production plant in Paju, where LG Display’s G7 and larger LCD fabs are located. LG Chem plans to build seven production lines for LCD glass in Paju. Production is expected to begin in early 2012. Corning’s Weeks is not worried… after the break.
No Worries Corning’s CEO and chairman Wendell Weeks commented that LG Chem’s entrance into the LCD glass market may not pose a major threat. Here are the three main barriers to entry that Weeks shared:
- Obtain know-how on basic LCD glass manufacturing.
- Develop product that meets the industry’s stringent technical requirements.
- Volume product to meet customer demand.
- Be cost competitive with an industry that has been reducing costs for the past 20 years.
Point 1 LG Chem has an agreement to use Schott’s glass making technology. A couple of years ago, Schott attempted to enter the LCD glass market but did not gain much market share. For about two to three quarters Schott struggled to gain any major customers and eventually exited the market. Knowledge transfer is not easy but will not be an insurmountable barrier to entry.
Point 2 I’m not sure if LG Chem will need to meet the industry’s stringent technical requirements as long as it meets LG Display’s requirements. My guess is that both LG Chem and LG Display will work closely together to make sure the glass substrates work with the LCD equipment.
Point 3 Yes, it does take time to ramp up but I’m sure both LG Chem and LG Display know that and will plan accordingly. In the mean time SCP can continue supplying LG Display some glass.
Point 4 The US car industry has been manufacturing cars longer than any other. The long history certainly has not protected the US car industry from being overtaken by newcomers. The last point does not make any sense at all. LG Chem can integrate the best-of-class in terms of equipment and technology to streamline manufacturing costs and be competitive with Corning or any other company who has been manufacturing LCD glass substrates for 20 years.
Not Major I believe Weeks is telling the truth when he states that LG Chem’s entrance into the LCD glass substrate industry does not pose a major threat. It won’t. For now. The reason being that LG Chem will be solely supplying LG Display for the time being. SCP has been supplying some LCD glass substrates to LG Display but eventually will lose out to LG Chem at both locations in Paju and Gumi. Not a major threat but I’m sure it’s not pleasant for Corning.
Source: DigiTimes, Trading Markets, Reuters
{ 2 comments }
You mis a number of points…Corning’s process is different than others. It allows for less post processing and a more modular approach to line construction, which means they can add and subtract capacity on a smaller scale than others. But more importantly, the IP attached is theirs. Others use float process, which has inherent reliability issues. Schott never scaled their process, which leaves LG Chem to experiment on their dime, not something panel mfgs want.
Expecting that LG Display will accept lower requirements on glass specs than others is wrong so they will have to meet the same indutry specs as everyone else requires, or they will lose any chance of building a higher quality customer base. Reliability is tremendously important to panel producers as the glass business tends to have little inventory at both the glass manufacturing level, and at the fabs. Additionally, if delivered glass does not meet spec or has to be recleaned, panel fab utilization can be affected and panel producers will look for another supplier.
LG Chem will have the advantage of having all new equipment, although talking to those in the industry, older seasoned equipment that has been relined, as has over 50% of Cornings production, is as good if not better than new.
Not saying that LG Chem can’t be a factor and eventually capture some share, or that Wendel is an unbiased viewer, but even the #2 player, Asahi has gone through reliability and quality issues over the years and had to ‘buy’ some customers back by offering discounts to compensate. If LG Chen is going to be a captive supplier, they will still have to compete with external pricing, as LG Display will walk away from any disadvantageous cost scenario in order for it to remain competitive with Samsung & the SCP JV. If LG Chem is going to be a merchant, the pressure will be even greater to be both reliable and cost effective. In the glass business, the overall process determines profit and established players such as Corning, Asahi, and NEG have been refining that for many years. JMHO
Corning’s Fusion Process: Yes, I’m quite aware that Corning has a unique process in manufacturing LCD glass. But that has little to do with LG Chem. LG Chem is co-located in Paju with LG Display. That means that initially LG Chem will not be a LCD glass merchant, again meaning that it will not be selling its glass to outside of LG Display. The fact that Corning has smaller glass facilities also does not have much to do with LG Chem either for exactly the same reasons. Yes, Schott never scaled their process but you seem to be missing the picture that LG Display, a panel manufacturer, will be working with LG Chem “on their dime”.
Lower Requirements? Who said anything about lower requirements. I’m talking about the fact that LG Chem simply needs to meet LG Display’s requirements. A merchant supplier like Corning must meet different requirements for different customers. Not so with LG Chem. That was my point. LG Chem can focus on meeting the requirements of a single customer and that will make the process a whole lot easier.
AGC, NEG: Again, the process used to make LCD glass really does not have much bearing on the discussion of LG Chem’s impact on the LCD glass market. LG Chem can be considered a success as long as the company is able to supply quality glass that LG Display can use instead of those from other glass suppliers. The amounts that SCP has been selling to LG Display will eventually disappear and that will have an impact on the overall profitability of SCP and by extension Samsung and Corning.
External Pricing: I will need to simply disagree with you on this. LG Chem will not have to compete with external pricing because LG Chem is co-located at Paju there is no one that will be able to compete. The logistical costs of transporting large LCD glass substrates are huge not to mention the potential for damage. LG Chem will not need to do that. Does SCP compete with other glass manufacturers in terms of price when supplying to Samsung? Heck no. These two companies are connected at the hip, and I don’t mean it just figuratively. I’ve had the pleasure of visiting SCP in Korea a few years ago. Samsung’s LCD facilities are in fact physically connected with SCP’s glass making plant. Why would Samsung work with another glass supplier? This is exactly the same situation with LG Chem and LG Display. LG Display walk away from LG Chem? That’s funny.
Comments are closed.