NEG’s Korea factory closure impact to the display industry

Historically, NEG has been the number one glass vendor for LG Display historically and set up glass tanks close to LG Display’s TFT factories in Paju City. On May 29 2023, NEG announced the closure of its Korea factory . The Korea factory’s total six glass tanks capacity is considerably large at 3 million m2 per month. NEG, however, has ramped up in Japan with two new tanks. Omdia has forecasted that some of the Korean tanks mass production will stop, but did not anticipate a total closure of the NEG Korean factory.

Figure 1: NEG’s regional glass capacity

Source: Omdia

Glass makers are paying for cutting costs

The events of the last few years have inevitably affected the display glass industry as supply was tight in 2021. A recession started in the second quarter of 2022 (2Q22), the same time as the Japanese yen (JPY) depreciation against the US dollar accelerated. On the other hand, material price has increased amid the global inflation surge.  Recent high electricity costs has severely impacted glass makers as they use glass tanks to melt glass with high-temperature electric power.  Display glass substrates are still traded in JPY, and glass makers have managed to maintain the JPY price of glass substrates in 2022. However, major display glass substrate makers have faced deficits in 4Q22. NEG needs to improve the profitability of its display glass business. NEG’s automotive glass fiber business is also in a weak position and is unable to cover the LCD business. Omdia believes the closure of the Korean factory will help increase its display glass business profitability.

NEG’s Korean factory closure will impact glass supply/demand

NEG’s sudden Korean factory closure will have a significant impact on glass supply/demand. Figure.2 indicates glass supply/demand without NEG Korean factory closure. The glass supply/demand is 7.6% glut in 3Q23, and we are forecasting it is in balanced situation. Glass supply/demand will be 7.4% in 4Q23. 

Figure 3 is a new glass supply/demand model simulation following NEG’s Korean factory closure announcement. The new glass supply/demand ratio is 2.9% in 3Q23. We are forecasting 2.7% in 4Q23.These figures consider if the glut ratio is under 5%, glass supply is tight. 2.9% and 2.7% present a tight situation. Panel makers will have to pay in money or improve business relations to ensure they have enough glass delivery. Currently, glass makers have two to three months inventory therefore, 4Q23 will be more severe than 3Q23. Corning has also announced a glass price increase with 20% due in 3Q23. Tight glass supply may conclude with high price increases in 3Q23 and 4Q23. 

Figure 2: Glass supply/demand model before NEG Korean factory closure announcement

Source: Omdia

Figure 3: Glass supply/demand model after NEG Korean factory closure announcement

Source: Omdia