On February 24, latest research from market researcher Omdia showed that depreciation of flat panel display (FPD) manufacturing equipment is accelerating, which will ease cost pressures for OLED and LCD panel makers.

According to Omdia’s forecast, FPD equipment depreciation will grow at a compound annual growth rate of 9.3% between 2021 and 2028. Globally, fully depreciated FPD manufacturing capacity will nearly double over the period, from about 160 million square meters to nearly 300 million square meters.

Depreciated LCD capacity accounts for roughly two-thirds of total FPD capacity and is projected to rise 60% from 2021 to 2028, driven mainly by the 10.5-generation fabs rapidly built between 2017 and 2022. By 2028, depreciated assets for 10.5G lines will jump from zero in 2024 to nearly 80%.As FPD fabs require multi-billion-dollar investments, depreciation costs can make up one-third of total manufacturing costs across all applications.

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Meanwhile, a similar trend is taking place in the OLED industry, especially for South Korean white OLED (WOLED) and quantum-dot OLED (QD-OLED) production facilities. These fabs are expected to be nearly fully depreciated by 2028, sharply cutting operating costs and enabling sustainable profitability in their large-size OLED TV and monitor businesses.

RGB OLED capacity using fine metal mask (FMM) technology on Gen 6 and smaller substrates — mainly for smartphone panels — will also see its depreciation ratio climb from less than 10% in 2021 to over 60% in 2028.

Omdia pointed out that slower investment in new LCD and OLED fabs in recent years has rapidly reduced manufacturers’ undepreciated asset base. This allows them to operate fabs at lower utilization rates, produce a more diversified product portfolio, and stay profitable in a highly cost-competitive market.

However, the new 8.6G RGB OLED fabs now under construction in South Korea and China are a notable exception to this trend.Omdia stated that these facilities will benefit almost no depreciation before 2030. This will push manufacturers to diversify production and maintain high capacity utilization, in order to spread high fixed costs across a larger number of panels.