Make Glass. Make Money.

Key Thoughtz

• Making glass rather than buying it creates competitive advantage for panel producers.
• Margin pressures and capacity shifts to China may alter the glass supply chain.

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Recent announcements by IRICO Group Electronics and LG Chem confirm that display companies have started adjusting their glass supply strategies. Glass cost and size can constrain panel producers’ ability to compete in a given AMLCD market segment. Securing supply of certain substrate sizes at affordable prices will be a key success factor for producers as they invest in new Chinese capacity and protect profits in established domestic fabs. The shift of AMLCD fabrication from Japan, Korea and Taiwan to China will change glass substrate supply strategies (for background, read Will Korea Approve?

Planned Ownership Structure of IRICO Glass

Source: company disclosures and BizWitz analysis.

Announcements by Chinese companies deserve to be read with some skepticism but IRICO Group has demonstrated ability to accomplish substantial capacity expansion in the face of competitive opposition in the past. In addition, the group is an important part of provincial aspirations and politics in Xian. It therefore seems prudent to take the group at its word and assume that it will become a significant supplier of smaller substrates to domestic panel makers in the next five years.

Given the history of accomplishment by the LG Group in display-related markets, it seems prudent to assume significant AMLCD glass capacity will develop in the Paju cluster of facilities. Such capacity could benefit LG Chem and LG Display next decade. In addition, development of productive glass technology creates a real option for placing such capability near fabs created through joint venture in China. At the least, it creates potential to support such ventures with glass exported from Paju.

Taken together, such developments may alter the glass supply chain that has proven so profitable for a few companies over the past two decades. For more insight, download Make Glass. Make Money.