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ANALYSISDisplay industry: hidden axis for US 'techno-democracy' agenda

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Experts ask US officials to view display industry as key national security asset amid China's growing influence

By Kim Yoo-chul

One of the key lessons the United States has learned from its trade conflict with China, which has caused supply chain issues that also led to worsening political and economic relations between the world's biggest economies, is that having a high level of manufacturing capability has even larger implications for national security.

Washington's launch of the Indo-Pacific Economic Framework (IPEF) is aimed at regrouping advanced democracies amid the rise of some autocratic states such as China, which U.S. President Joe Biden described as "… a battle between the utility of democracies in the 21st century and autocracies."

The alliance of techno-democracies protects technologies seen as critical such as 5G, quantum communication, facial recognition and AI in their rivalry with China, with the help of its Asian allies. Korea and Taiwan are the leaders in semiconductors, and keep these high-tech ecosystems afloat.

Given the Biden administration's focus on the battery industry is also intended to keep the battery supply chain strong as batteries' importance starts to grow, experts said it's worth paying more attention to the display industry from a national security perspective too.

China outpacing IPEF members to become global display leader

While more in-depth discussions are needed on the rather vague IPEF agenda, experts said like semiconductors and the battery industry, it's reasonable for U.S. officials to apply "place-focused approaches" to the display industry.

An aerial view of LG Display's complex in Paju, Gyeonggi Province / Korea Times file
An aerial view of LG Display's complex in Paju, Gyeonggi Province / Korea Times file

"The Biden administration is viewing semiconductors and displays as important engines of economic competitiveness and pillars of national security, because bulking up the manufacturing capacity of these parts creates new jobs and offers value-focused growth opportunities. But the display industry is also following the semiconductor industry in becoming a significant high-tech industry with only a few industry players ― most of which are based in Korea, Taiwan and Japan ― which have proven manufacturing capability," a senior trade ministry official told The Korea Times.

According to his analysis, the main reason that the display industry is receiving less attention is the fact that, unlike semiconductors and batteries, no "big name" companies have large-scale flat-screen factories in the United States, mostly due to cost factors.

The IPEF could encourage the shifting of supply chains in critical industries, away from China and toward member states, potentially creating new manufacturing jobs in the United States. Taiwanese display company Foxconn is operating a plant in the U.S. state of Wisconsin.

"From the job market standpoint, the magnitude of the display industry in the United States is quite small compared to that of the battery and semiconductor industries ― which have already won huge foreign investment and conducted massive amounts of recruitment. It's very unlikely that the U.S. government will react too quickly to the rise of Chinese companies in the display industry. But if China tightens its control in the global display market, then it may lead to supply chain disruptions," the official said.

The key question is how the U.S. and Korean governments could react to the growing influence of China in the global display industry, given the fact that the U.S.' industry and military are struggling to acquire advanced displays outside of China. Because of the souring bilateral ties, supplying the U.S. military with Chinese display products won't work.

How fruitful a U.S.-led technology alliance would be and how effectively it manages key stakeholders' participation is in question. Political and industry analysts say that the display industry could be treated as a "hidden axis" in terms of backing Washington's pursuit of strengthening the technology alliance, as U.S. politicians are still concerned about the possible risks associated with products from Chinese tech companies.

The intersection between advanced displays and the automotive and aerospace industries is becoming very clear. Displays have become an integral part of daily life. China is outpacing Korea in LCDs. Last year, the combined global share by Chinese companies in LCDs was 40.4 percent, followed by Korean companies with 36.3 percent, according to market research firms.

An aerial view of Samsung Display's display complex in Tangjeong, Asan, South Chungcheong Province / Korea Times file
An aerial view of Samsung Display's display complex in Tangjeong, Asan, South Chungcheong Province / Korea Times file

In general, the display market is no longer lucrative. Supply chain analyst Ross Young at Display Supply Chain Consulting (DSCC) said this year would be the "worst of times" as everything is going wrong for the display industry ― lower units, lower prices, loosening supply, higher costs and lower margins. Prices are expected to fall.

Plus, Young said that there will be a large drop in capital spending throughout the next year and that he expects extra capacity will come from offline sources, another negative factor in the threat to firms' bottom line. Samsung retired its LCD business as of this month, while its chief rival LG Display is also cutting its production of LCDs.

Korea still beats China in next-gen OLED tech

Meanwhile, Korea is still leading over China when it comes to the level of technology applied to manufacturing OLEDs, considered the next generation of displays ― for use in all advanced and high-tech products ― as both Samsung and LG pioneered the market.

"Given Chinese companies' growing influence in the display industry, it will be worthwhile for Washington's policymakers to view the display industry as a national security asset just like semiconductors and batteries," said Kim Dong-won, an analyst at KB Securities in Seoul.

An expert in the display industry said that if China expands its influence in the OLED market, then this will give Beijing a lot of power, helping it control supply and even the development environment of the technology in the future.

"If China controls the global display market ― including OLEDs ― then this may lead to the industry seeing another supply crunch. Assuming that displays are also treated like toilet paper and COVID face masks, which at one point were scarce due to supply chain issues, Washington and Seoul policymakers will need to take steps to keep the OLED supply chain working," Moon Kook-chul, a professor at Gachon University in Seongnam, Gyeonggi Province, was quoted as saying in a recent YouTube interview with the elec, a local tech media outlet. Moon has worked at Samsung's display business, as well as LG and a Chinese display firm.

Currently, China's display industry is entering its second five-year plan and will be self-sufficient by 2025.

'Supply-push approach'

Washington's strategy for its semiconductor and battery industries is represented by the combination of "demand-pull" and "supply-push" approaches. Experts say it could be an idea for the U.S. to apply a "supply-push" for the display industry ― offering incentives and providing financing for manufacturers while increasing funding for research projects in advanced technologies.

Representatives at Samsung Display and LG Display said they have no comments regarding the possibility of establishing OLED plants in the United States.

Nevertheless, one high-ranking executive at Samsung's partner company in Korea said he was hoping to see the role of advanced displays discussed between trade policymakers in the United States and Korea from a national security standpoint, and why the buildup of resilient supply chains of these advanced displays matters. He added that the governments in the United States and Korea should let Korean display manufacturers counter Chinese companies.

Former Vice President Mike Pence is seen through an LCD as he speaks at the Gas Energy Education Program roundtable discussion at Enerfab in Kansas City, Missouri, June 16. AP-Yonhap
Former Vice President Mike Pence is seen through an LCD as he speaks at the Gas Energy Education Program roundtable discussion at Enerfab in Kansas City, Missouri, June 16. AP-Yonhap

"Leading Chinese display companies are now on a hiring spree for Korean workers who hold 'competitive' display patents and experience with the guarantee of offering huge incentives and salaries. Advanced displays are being used in everything and their usage could be expanded from electric vehicles (EVs) to high-end products," an executive said on condition of anonymity.

However, some experts say that display supply chain disruption concerns seem to have been somewhat exaggerated. They said that while there is a chance that the display supply chains may see some disruptions, the national risk of display adoption in the United States isn't significant, and is less of an issue than the semiconductor and battery supply chains face.

"If China expands its market share even in the OLED market, it's unlikely for Beijing to place a heavy restriction on the U.S.' access to displays because doing so could also hurt its economy," said another government official who was previously involved in various state-funded display projects, adding that he is viewing any warnings regarding display supply chain issues as a message to win more government funding.



Kim Yoo-chul yckim@koreatimes.co.kr


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