The cold wind is rising, and all the trees are bleak. The display panel industry, which is in a cyclical fluctuation, feels "winter meaning" earlier than before.
With the panel manufacturers such as Beijing Oriental Science and Technology Group Co., Ltd. (000725.SZ), Huaxing Optoelectronics Co., Ltd. (000100.SZ) of TCL Group (000100.SZ) and Wisino Technology Co., Ltd. (hereinafter referred to as "Wisino", 002387.SZ) gradually disclose the "report card" in the first three quarters, to varying degrees. The decline in net profit shows the fact that the panel industry is under pressure.
China's panel manufacturers, busy with expanding production capacity, this year's psychological journey can be described as a "song of ice and fire". On the one hand, the scale expansion based on the increase of production capacity is booming; on the other hand, the traditional consumer electronic terminal market such as TV, mobile phone and computer, which is pointed to by the downstream market of panel, tends to be saturated, and the main export terminal market is cold.
The market is forcing panel manufacturers to change. Recently, the panel giant Beijing Oriental signed a project cooperation agreement with the Beijing Fangshan District Government to invest 13.6 billion yuan to build a life science and technology industry base project in Beijing. The project is expected to be put into operation in 2022 as a whole.
Following the change of organizational structure, Beijing Oriental has invested heavily in the field of health care, which has also aroused heated discussion in the industry. According to Peng Jianfeng, deputy secretary-general of China Electronic Video Industry Association, the medical field is in the period of double upgrading of intelligence and visualization, and huge demand for display devices will be released in the next few years. The panel manufacturer chooses to lay out the health care field, which is also the vertical extension of its main industry in the downstream application field.
BOE Medical Bureau
In 2018, the invention of liquid crystal was 50th anniversary. Wang BOE, the first generation LCD panel, has invested the biggest investment this year in the field of health care.
According to the latest announcement issued by Beijing Oriental, the company has signed a project cooperation agreement with the Fangshan District Government of Beijing. The two sides intend to build a project of Beijing Oriental Life Science and Technology Industry Base at a high-end manufacturing base in Beijing.
The project is implemented in two phases. The first phase of the project includes R&D and operation center of health headquarters, innovation center of life science and technology, international medical transformation center, excellent medical science and education center and digital hospital. The second phase of the project includes digital hospital phase II, global partnership Industrial Park and other related projects. Among them, R&D and operation center sub-projects are divided into health R&D and operation center, digital hospital R&D and operation center, regenerative medicine R&D and operation center, health park R&D and operation center, etc. The sub-project of digital hospital is to combine artificial intelligence, Internet of Things technology and life science and technology to build a research-oriented digital hospital which integrates clinical diagnosis and treatment, clinical application transformation, education and training.
According to the agreement, the total investment of the first phase of the project is about 13.6 billion yuan, and the investment quota of the second phase of the project is negotiated separately. The first phase of the project is expected to be operational in 2022 and stable operation period in 2027. In the supplementary agreement with the Fangshan government, Beijing Dongfang promised that after the first phase of the project was put into operation, the estimated annual income from 2022 to 2031 would increase from 1.72 billion yuan to 47.31 billion yuan, and from 2031 to the expiration of the land transfer period, the estimated annual income would not be less than 47.31 billion yuan.
In other words, after 13 years, life science and technology projects will contribute not less than 47.31 billion yuan annually to the business income of Beijing Oriental. Comparable data show that in the first half of 2018, the total business income of Beijing Oriental was 43.474 billion yuan, of which 39.169 billion yuan was realized in the sensor business, while only 526 million yuan was generated in the smart health service business.
This also means that if the life science and technology projects are successfully implemented, the business income of Beijing Oriental Intelligent Health Services will be located in Bozhong with the panel industry.
BOE has been eager for health care. In the first half of this year, Beijing Oriental integrated the three business sectors of port devices, wisdom couplet and wisdom medical workers into seven business groups, including mobile health IoT platform business group and wisdom health service business group.
Earlier, Beijing Eastern invested 250 million yuan in 2015 to acquire all shares of Mingde Investment Co., Ltd. as a platform for investment and development of Beijing Eastern Intelligent Health Services. At the same time, the registered capital will be increased to 3 billion yuan for the development of Beijing Mingde Hospital under Mingde Investment and the preparation of digital hospital.
"Beijing Oriental has the leading technology reserve and capacity layout in the display field, as well as the experimental exploration of Mingde Hospital. This vertical extension to the field of medical equipment is also logical." Peng Jianfeng, Deputy Secretary General of China's electronic video industry association, said.
An industry insider in the panel industry who has been working hard for many years further pointed out that in developing the market potential of emerging application fields, panel manufacturers tend to experiment on a small scale first, and then promote it on a large scale after exploring a viable business model. "This will ensure a lower trial-and-error cost, and the landing of specific projects will be more conducive to promotion."
Regarding whether the project cooperation agreement signed by Beijing Oriental will enter the approval process, the relevant person in charge of the company's brand center did not make a positive response, but said that the information about the construction of the life science and technology industry base should be based on the announcement.
In the announcement, Beijing Eastern frankly said that after the signing of the cooperation agreement and supplementary agreement, the company will submit to the competent examining and approving body for consideration according to the actual situation, which is uncertain.
It is worth noting that the net profit of China's panel makers is also declining. According to the Beijing Oriental Quarterly Report, in the first three quarters of this year, the company realized revenue of 69.464 billion yuan, an increase of 0.08% compared with the same period last year; realized net profit of shareholders belonging to listed companies of 3.379 billion yuan, a decrease of 47.82% compared with the same period last year; net profit after deducting recurring profits and losses was 1.099 billion yuan, a decrease of 81.43% compared with the same period last year. According to TCL Group's financial data, in the third quarter of 2018, Huaxing Optoelectronics realized sales revenue of 19.05 billion yuan, down 6.8% from the same period last year, while EBITDA was 6.1 billion yuan, down 28.99% from the same period last year.
Panel industry Nirvana
In fact, behind the large-scale cross-border investment of Beijing Oriental, it is the industry's dilemma under the fluctuating supply-demand relationship of global display panel. According to the Blue Book of China's New Display Industry (2017-2018), the global output value of display panels fell by 7.1% in 2018 compared with the same period last year, and the output value is close to 100 billion US dollars.
Dong Min, Vice President of AVC, pointed out that "since 2018, even until 2019, the market scale of terminal consumer electronics products such as mobile phones and televisions around the world will be shocked, and the market demand will be stagnant. Including Beijing Oriental, Huike, TCL's Huaxing Optoelectronics and other manufacturers, the high-generation LCD panel line has entered a period of intensive capacity explosion. These two reasons add up, and the market price of the panel will fluctuate.
In fact, the market volatility of terminal consumer electronics is particularly prominent in the field of television. According to AVC's latest "Summary Report of China's Color TV Market in the Third Quarter of 2018", the retail volume of China's color TV market in the third quarter of 2018 was 104.09 million units, with a retail volume of 30.3 billion yuan, down 15% from the same period last year.
Compared with the cold market of the traditional shipment end, it is obvious that many advanced LCD panel lines are coming into operation. On November 14, the first 11-generation LCD panel production line of Huaxing Optoelectronics was put into operation, and the second 11-generation LCD panel production line was also announced to start construction. In addition, the 10.5 generation line of Foxconn Guangzhou will be put into operation next year. BOE announced that it will build another 10.5 generation LCD panel production line in Wuhan.
Dong Min said that for panel manufacturers, the market environment is not necessarily related to whether they decide to produce a full product or not. "Whether the production line is full depends on capital progress, equipment progress, product development progress, improvement of panel yield and other conditions, but not on market demand, which is essentially different from other products to put into production according to market expectations. For China's panel manufacturers, the primary task at present is to expand the scale of panel production, and then to gain greater voice, better share depreciation, and get a larger pool of customers.
It is noteworthy that panel manufacturers, including Beijing Oriental, although the pace of production of panel production line has not slowed down, but action has been adjusted to adapt to the position of the market.
In addition to Beijing Oriental's military deployment in the field of medical display, TCL Group's previous announcement also said, "Huaxing Photoelectric Active Layout Commercial Display, Laptop Computer and Vehicle Display and other new business areas of product development, expand high value-added market segments, enhance the level of profitability."
Peng Jianfeng, deputy secretary-general of China Electronics and Video Industry Association, told reporters, "By 2021, China will build 19 lines of 8.5 generations or more. These capacities are built not only for existing terminals such as televisions, computers and mobile phones, but also for the advance layout of the "show everywhere" trend. The application of sub-areas, such as vehicle display, medical display, education display and public service display, is still in its infancy, but has shown a fairly high growth rate.
Although panel manufacturers can absorb certain production capacity, they often face new market rules when they enter new application areas.
"The biggest difference between industry-level applications and consumer-level applications of intelligent display is that the former requires very high specialization. For example, in the driverless stage, in-car display is ubiquitous, but how to define gauge safety requires cross-disciplinary cooperation between automobile manufacturers and display manufacturers. Smart hospitals are also ubiquitous in display, but how to define the specifications and functions of display products in various scenarios also requires cross-border cooperation between medical institutions and display manufacturers. Peng Jianfeng said.
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