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Displays

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Displays

Overview of Korea’s Industries 2012

PROMISING INVESTMENT OPPORTUNITIES

02_ Overall Status of the Display Industry 04_ Characteristics of the Display Industry 13_ Investment by Foreign Companies

Display Industry

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1. Overall Status of the Display Industry

1. Overall Status of the Display Industry
Flat-Panel Display (FPD) Market and Technologies
·The flat-panel display (FPD) market is growing based on the competitiveness of three major technologies: thin-film transistor-liquid crystal displays (TFT-LCD), plasma display panels (PDP) and organic light-emitting diodes (OLED). ·TFT-LCD has the largest market. The technology dominates the market, as it can be used in different types of applications, ranging from small devices including mobile phones to large appliances including televisions. ·PDP differs from LCD in that it does not need back light because it is self-luminous. Its use is limited to large applications such as televisions because the technology cannot be applied to small devices. It consumes more electricity than LCD. ·OLED is also self-luminous, and its use is limited to small devices such as mobile phones, as research is still underway to apply the technology to larger devices. OLED is lighter and consumes less electricity than LCD. It has great potential due to its simple structure and focus on materials, and it is praised as the foundation for flexible display, which is expected to lead the future.

OLED is drawing attention as an alternative to the fundamental weaknesses of LCD
·(Definition) OLED is a next-generation display that uses organic compounds to emit light and has a more than 1,000 times faster reaction than LCD. According to how it works, it is divided into two categories: Passive Matrix (PM) OLED that forms pixels by simply crossing positive and negative poles and Active Matrix (AM) OLED that places TFT to be used as a switch on each pixel. ·[History) 1963 - First development of light-emitting display; 1987 - First development of OLED by Kodak; 1999 - Development of AM OLED by Sanyo-Kodak; 2000-2003 - OLED comes to market by Sony, Samsung, Pioneer; 2007 - Mass production of active matrix organic light emitting diode (AMOLED) panel by Samsung, launch of 11-inch television by Sony.

Characteristics of the Industry
LCD: Capital-Intensive Mechanism Industry
·High-risk industry where failure for market estimation can lead to the elimination of a company and where a timely, large-scale investment is critical; industry where large companies that have the capacity to mobilize large capital are fully equipped with necessary parts and materials.

Investment Costs in Panel Line by Generation
Classification Investment costs Production capacity (input glass) Optimal size Size of major panels
Source: Displaybank

5th
KRW 1.1 trillion 60,000/month 17“ 1,100X1,300mm

6th
KRW 1.5 trillion 60,000/month 32“ 1,500X1,850mm

7th
KRW 2 trillion 60,000/month 40“ 1,870X2,200mm

8th
KRW 2.5 trillion 60,000/month 46“ 2,200X2,500mm

Display Industry

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2. Characteristics of the Display Industry

2. Characteristics of the Display Industry
Creation of Various Upstream / Downstream Industries
·The industry needs various parts and materials, creating high added values of downstream industries and many jobs. ·Diverse upstream markets - small- and mid-sized products including mobile phones, IT products (i.e. monitors and laptops), household appliances such as televisions, etc. (upstream > end products, downstream > parts, materials).

Growth Potential of Each Country
Size of the upstream display market by country
Classification Market size (USD million) Market share Korea
36,217 41%

Taiwan
33,053 37%

Japan
17,210 19%

China
2,411 3%

Display Supply Chain
Industrial Materials
Liquid crystal polymer, inorganic pigment, photosensitive polymer, glass tube, fluorescent substance, injection gas, resin, film material

Electronic Materials
Sheet (light guide plate/reflecting plate/diffusion plate), film (TAC, protective), photoresist, stripper, cleaner, electrode material, fluorescent substance, polarizing plate

Parts
Glass plate, liquid crystal, color filter, BLU (back light unit), driver, IC

Modules
LCD, PDP, OLED

Sets
TV, PC, mobile phone

Status of Korea’s Display Industry
·Korea’s LCD modules: 35-40 trillion KRW of annual revenues. ·World’s top 2 global LCD manufacturers (Samsung Electronics, LG Display). ·World’s top 2 global LCD TV brands (Samsung Electronics, LG Display).

LCD Industry Clusters
·Five clusters (Paju, Giheung, Tangjeong, Cheonan, Gumi) have been established, and among them, Paju (LG Display) and Tangjeong (Samsung) are equipped with the newest facilities.

Status of the Global Display Industry
Market Size and Major Corporate Players
·Market size: Japanese companies led initial technological development in the LCD upstream industry in the 1990s. But since 2000, Samsung and LG have made bold investments, and now the two companies are leading the global market. - Four northeastern countries (Korea, Taiwan, Japan, China) are actively nurturing the display industry as their national strategic industry, and they are the only countries producing LCD. - The LCD upstream market stood at USD 88.7 billion in 2008 and has decreased to USD 71.7 billion due to the global recession. But with the market bouncing back, it is expected to grow to the 2008 level by 2014. ·Major manufacturers by country: Korea (Samsung, LG Display), Japan (Sharp, IPS Alpha, TMD, NEC, Hitachi, Fujitsu, Epson, Sony), China (BOE-OT, SVA-NEC, IVO, Century, Tianma), Taiwan (AUO, CMO, CPT, Hannstar Innolux, Prime View).

Comparison of the Top 2 Clusters
Classification
Incheon International Airport 164km 30km (Pyeongtaek, Dangjin) 85km 34 minutes (KTX), 90 minutes (automobiles) Daecheong Dam Cheonan, Asan Cheonan (8), Asan (4) Located at the center of Korea Distance from Seoul Adjacent to Seoul Adjacent to the military demarcation line (psychological issues).

Paju
50km

Tangjeong

Distance to major facilities or places Water supply

Ports Seoul Seoul Station

50km (Incheon) 35km 60 minutes (automobiles, railroads) Paldang Dam Ilsan

Cities in the vicinity Institutions for higher education Strengths Weaknesses

Display Industry

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2. Characteristics of the Display Industry

Types and Industry Status of Core Electronic Materials
Types of core electronic materials
Materials Glass LC Wet Chemical Target Organic Chemical Gas Polarizer Films Blu Films OLED Used Organic Material
Glass Substrate Liquid Crystal Developer, Echant, Stripper, Thinner ITO, AL, Mo Photo/Color Resist, Overcoat, Photo Spacer, PI, BM Cleaning/Processing Gas Compensation, Protection, Release, TAC, PVA Diffusion, Prism, Reflection, Reflective Polarizer HIL/HTL EML/ETL

Liquid Crystal (LC)
Details Classification Status of the domestic industry Market size Growth rate Suppliers Ratio of imports Entry barriers Market penetration by foreign companies Remarks
Companies including Merck and BASF from Germany and Chisso and Dainippon Ink Corp (DIC) from Japan are competing, but Merck dominates more than half of the global market. Over USD 500 million per year. Average annual growth rate of 12.2% expected by 2014. Merck (factories in Pyeongtaek), Chisso, DIC. Entirely importing raw materials (Merck: post-processing at Pyeongtaek. Chisso, DIC: entirely importing). Merck, Chisso and DIC monopolize the global market. High-entry barriers in technologies discourage new companies from joining the industry. - Little need to localize the production of raw materials for LC. - No difficulty importing raw materials from Germany and Japan.

Status of the core electronic parts/materials industry
Glass
Classification Remarks
- Samsung Corning Precision Material (SCP) has melting furnaces in Korea and is supplying Samsung and LG Display (LGD) with glass. - NEG founded PEG, a JV with LGD, in Paju. - AGC has lines for front-end/back-end processes in Gumi. - NHT changed its name to AvanStrate INC in 2008, as Carlyle acquired its shares. - After Schott withdrew its business in Korea, LG Chemicals purchased its assembly lines and technologies. Over USD 4.9 billion per year, four suppliers. Average annual growth rate of 5.3% expected by 2014. All of the global companies (SCP, NEG, AGC, ASI) have a presence in Korea. Over 70% is locally produced and less than 30% is imported. Schott attempted to enter the market but failed. Demand is high due to lack of supply, but the entry barrier is high. The four suppliers have already secured production bases in Korea.

Wet Chemical
Classification Status of the domestic industry Market size Growth rate Suppliers Ratio of imports Entry barriers Market penetration by foreign companies Remarks
Local players have large market shares and advanced technologies, so foreign companies have no motivation to enter the Korean market. Over USD 700 million, high ratio of etchant and stripper markets. Average annual growth rate of 8.8% expected by 2014. Over 10 suppliers. No imports at all. Active localization encourages competition among local companies. Most global companies have already secured production bases in Korea.

Status of the domestic industry

Market size Growth rate Suppliers Ratio of imports Entry barrier Market penetration by foreign companies

Display Industry

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2. Characteristics of the Display Industry

Target
Classification Status of the domestic industry Market size Growth rate Suppliers Ratio of imports Entry barriers Market penetration by foreign companies Remarks
Metal target factories are located near metal mines, and only post-processing factories enter the overseas market. Over USD 500 million per year. Average annual growth rate of 13.5% expected by 2014. Less than 10 suppliers. About half is imported. Metal materials for electrodes are monopolized by companies owning mines. The number of suppliers is not large, but high entry barriers exist. - Little need to localize the production of raw materials for targets. - Some companies have secured production bases in Korea for post-processing. There is a possibility of penetrating the Korean market for part of post-processing. - ITO Target (domestic market dominated by SCP, Heesung Metal and Nikko), Al Target (Japan’s Kobelco and Korea’s Dongwoo Fine-chem share the domestic market and Kobelco is monopolizing the global market), MO Target (Plansee’s share is over half and the rest is dominated by Hitachi Metal, Ulvac and Mitsui Mining).

Organic chemical
Classification Status of the domestic industry Market size Growth rate Suppliers Ratio of imports Entry barriers Market penetration by foreign companies Remarks
As local companies continuously raise their technology levels, the localization rate rises. Over USD 1.1 billion per year. Average annual growth rate of 15.6% expected by 2014. About 10 suppliers (Korean companies: LG Chem, Cheil Industries, Kolon, Dongjin Semichem; foreign companies: JSR, Chisso, TOK, AZEM). 70% is locally produced and 30% is imported. A large number of local and global companies are competing in the domestic market, but continuous technological development is still needed. So companies with proprietary technologies can enter the market. Most global companies have secured production bases in Korea. Some products are imported, but cost pressure is not strong.

Major products

- Photo Resist: The domestic market is led by Dongjin Semichem, and Zeon, AZEM, Cotem and - Color Resist: Thanks to localization, Cheil Industries and LG Chem are major suppliers and - Resin BM: Cheil Industries is exclusively supplying Samsung Electronics with materials, and the rest is covered by JSR and Sumitomo. LG Display’s suppliers are Japan’s TOK and Korea’s Soulbrain. Chisso (Japan). Dongwoo Fine-Chem are major suppliers.

Major products

- Overcoat: The domestic market is dominated by Kolon and LG Chem (Korea) and JSR and - Photo Spacer: Japan’s JSR has the largest share in the Korean market, and local companies including Dongjin Semichem, LG Chem and Exax are competing.

Polarizer Films
Classification Status of the domestic industry Market size Growth rate Suppliers Ratio of imports Remarks
As it is a proprietary item, there is concern about technology leaks. Production facilities in Japan are enough to meet demand. Over USD 1.9 billion per year. Average annual growth rate of 7.8% expected by 2014. About 10 suppliers (Fuji Film, Konica Minolta, Kuraray, Nihon Gosei, Sekisui Chemical, Fujimori Kogyo, Sun-A Kaken, Osung LST, Mitsubishi Plastics). In general, the polarizer film industry is slow in localization. TACPVA and compensation films are produced in Japan, and protective films and release films are being localized by LG Chem, Osung LST and Toray Advanced Materials. Customers of TAC, PVA and compensations have a high need for localization, but Japanese companies have little need for localization. Korean companies are actively localizing protective films and release films. Foreign companies with TAC and PVA are less willing to penetrate the Korean market due partly to technology protection issues. Korean players are expanding market shares of protective films and release films. The TAC film market is exclusively dominated by Fuji Film and Konica Minolta, because of issues such as raw material supply, limited demand and high technological barriers.

- PI: Over 80% of polyimide, which is a raw material for alignment layers, is provided by Japan’s
JSR and Nissan. Local company Cheil Industries is also doing business, but Japanese countries have long dominated the market.

Entry barriers Market penetration by foreign companies Major products

Display Industry

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2. Characteristics of the Display Industry

Gas
Classification Status of the domestic industry Market size Growth rate Suppliers Ratio of imports Entry barriers Market penetration by foreign companies Remarks
Most foreign companies with competitive gas business have secured production bases in Korea. More than USD 300 million per year. Average annual growth rate of 11.3% expected by 2014. About 10 suppliers (local companies such as Sodiff and Daesung Industrial Gases, and foreign companies including Air Products and Praxair). 20-30% (70-80% is locally produced.) Global gas companies have already entered the Korean market, and OCI Materials and Daesung Industrial Gases are continuously expanding their presence. Some of the companies that recently entered the Korean market have not founded production bases.

Back Light Unit (BLU) Films
Classification Status of the domestic industry Market size Growth rate Suppliers Ratio of imports Remarks
Korean companies have advanced technologies for films and materials used in BLU. BLU is a material for module processing, which is part of the post-processing of LCD manufacturing. Module processing is being transferred to China. Over USD 1 billion per year Average annual growth rate of 2.1% expected by 2014 Over 10 suppliers The BLU film industry is being rapidly localized. Reflection films are exclusively provided by two Japanese companies and only post-processing is carried out in Korea. Reflective polarizers are monopolized by 3M. There is little need for newcomers in the industry, except for reflective polarizers. As 3M has many patents in the field, Korean companies are localizing the production of reflective polarizers with technologies that do not infringe on 3M’s patents. The market for diffusion films and prism films has been saturated due to localization, so the market potential is limited. - Diffusion film: The first BLU film to realize localization. SKC-Haas, Shinwha Intertek, Sangbo, Kolon and Toray Advanced Materials dominate the market, out-competing Japanese companies. - Reflection film: Toray and Teijin Dupont Film (Japan) dominate the market. Market entry is not easy, as it is a low-price product and Toray has a patent for technologies to manufacture it. - Prism film: 3M dominated the market from the early stage of LCD until 2005 as an industry pioneer based on its patent for prism shapes and their combinations that increase luminance. Since 2005, companies from Korea, Japan and Taiwan have rapidly penetrated the market by developing technologies to form prism patterns and securing manufacturers. - Reflective polarizer: 3M holds a monopoly in the reflective polarizer market with its technologies and patents. Mirae Nano Tech, Shinwha Intertek, LMS and Woongjin Chemical (Korea) are developing alternative technologies.

Entry barriers Market penetration by foreign companies

- Cleaning Gas: Air Products and OCI Materials are the two strongest players in the Korean

Major products

cleaning gas market, and Kanto Denka, Foosung and Hyosung also have high market shares. - Processing Gas: The domestic market is dominated by Air Products, Air Liquide, OCI Materials, Daesung Industrial Gases, Showa Denko and Praxair.

Major products

Back Light Unit (BLU) Plastic
Classification Status of the domestic industry Market size Growth rate Suppliers Ratio of imports Entry barriers Market penetration by foreign companies Remarks
Korean companies have advanced technologies for films and materials used for BLU. It is used as material for module processing, which is a part of the post-processing of LCD manufacturing. Module processing is being transferred to China. Over USD 200 million per year. Average annual growth rate of 11.3% expected by 2014. 3 Imports account for 30%. Japanese companies have been competitive in BLU plastics, but the localization level is high. The diffusion plate sector is highly localized and competitive. Light guide plates are usually manufactured at factories in Japan. BLU attachment processes are being transferred to countries like China, so Korea is not appropriate for capacity building and localization.

- LGP: PMMA, used for light guide plates, is a traditional chemical material. It requires high initial capital and has high technological barriers. Japanese companies are providing Korean companies with it, except for LG MMA, a JV with Nippon Catalyst. As production bases for BLU are transferring to China and products of Coretronic and Radiant (Taiwan) are becoming more popular, the demand for products of Chi Mei (Taiwan) is on the rise. - Diffusion plate: The diffusion plate market started its growth along with the spread of LCD TVs. Teijin and Asahi Kasei dominated the market at first, but Korean companies including Cheil Industries, Dongwoo Fine-Chem, Kolon and Heesung Chemical are rapidly replacing the Japanese players.

Major products

Display Industry

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2. Characteristics of the Display Industry | 3. Investment by Foreign Companies

3. Investment by Foreign Companies
OLED Used Organic Material
Classification Status of the domestic industry Market size Growth rate Suppliers Ratio of imports Entry barriers Market penetration by foreign companies Major products Remarks
Electronic materials for OLED are similar to TFT-LCD. Organic materials forming emission layers are expected to grow with the OLED market. The domestic organic materials market in 2009 stood at USD 80 million, but it is showing rapid growth, expected to grow to USD 160 million in 2011 and USD 1.47 billion in 2014. Average annual growth rate of more than 70% expected by 2014 (rapid growth expected as new markets are created). Over 10 suppliers. Dependence on foreign companies was high in the early stages, but thanks to localization, imports currently account for a small part. Global players show strong performance, but partnerships are strong as materials companies and front-end businesses usually pursue joint development. Companies with proprietary technologies can enter the market. Not many foreign companies are in the Korean market due to low demand and high prices.

Company
Samsung Corning Precision Materials Nippon Electric Glass (NEG) Asahi Glass Corp (AGC) AvanStrate Inc (ASI) Merck Chisso Dongwoo Fine-Chem AZEM Hantok Chemicals Nikko Mitsui Mining Ulvac Materials TOK Nissan Chemical Air Products (AP) Air Liquide Fuji Film Toray Advanced Materials 3M Teijin Dupont LG MMA Mitsubishi Rayon Bayer Sheet Korea

Location
Cheonan, Gumi Paju Gumi Pyeongtaek Pyeongtaek Pyeongtaek Pyeongtaek, Iksan Anseong Ulsan Pyeongtaek Pyeongtaek Pyeongtaek Paju Pyeongtaek Gumi, Ulsan Yeosu Seoul Gumi Naju Seoul Yeocheon Daesan Gimhae

Investment type
Joint Venture (JV) JV Direct Investment (DI) DI DI DI DI DI JV DI DI DI JV DI DI DI DI JV DI DI JV JV DI

Products
Glass, ITO, Target Glass Glass Glass LC LC, Overcoat Etchant, Stripper, Photo Resist Developer, Thinner, Photo Resist Developer ITO Target Al Target Mo Target Resin BM Pi Gas Gas TAC Diffusion Film Prism Film Reflection Film PMMA PMMA Diffusion Plate Former NHT

Remarks
JV of Corning (U.S.), Bokwang, Samsung Corning Established a JV (PEG) with LG display

Chisso Korea Japan’s Sumitomo Chemical owns 100% of shares AZEM Korea JV of Japan’s Tokuyama and Samsung Fine Chemicals Nikko Materials Korea Mitsui Metal Korea Ulvac Korea JV with Cotem NCK Air Products Korea Air Liquide Korea Fuji Film Electronic Materials Korea JV of Japan’s Toray and Korea’s Saehan Post-processing Dupont JV of LG, Nippon Catalyst, Sumitomo Chemical JV with Daesan MMA Acquisition of Sewon Precision Industry

- HIL/HTL: LG Chem and LUDIS (Korea) are major suppliers. Hodogaya (Japan) supplies to
Korean companies, but the supply is decreasing. - EML/ETL: Major suppliers of EML in Korea include Gracel, SFC, Doosan Electro-Materials and BG; Idemitsu (Japan) has also penetrated the Korean market, but its supply is decreasing.

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Liquid Crystal Display

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Liquid Crystal Display

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