Foxconn Gen 10+ LCD Display Manufacturing Highlights Yield Management Challenges with Large-Screen TVs

August 28, 2017

Foxconn’s recent announcement that it plans to build a 20 million square foot manufacturing facility in Wisconsin has garnered a lot of attention, and deservedly so. From an economic standpoint, this $10 billion investment over the next three to four years promises to boost the local and U.S. national economy, and create anywhere from three thousand to thirteen thousand new jobs if executed according to plan.

And that’s just the tip of the iceberg in terms of potential economic development. Electronics manufacturing facilities of this size and scale aren’t typically built in a geographical void. Instead they help comprise a regional supply, manufacturing, and transportation ecosystem via which a range of materials and components can be locally sourced, assembled into products, and shipped to distributors. It’s increasingly likely then that the supply chain for consumer electronic devices will see an expanding footprint in the midwestern U.S. on the heels of Foxconn’s investment. When the world’s largest contract manufacturer sets up shop in a new territory, others are bound to follow.

The announcement is similarly noteworthy for the components slated to be manufactured at this new facility. Although Foxconn is best known to many in the U.S. for its role in assembling Apple iPhones in China, the new Foxconn fab isn’t targeted to service the lucrative smartphone market. In a move that pivots its attention from small-screen portable devices, the Foxconn facility in Wisconsin will produce LCD displays for large-screen televisions.

Big-picture trends

The market for LCD display panels is notoriously volatile, prone to upswings and downswings as consumer tastes and market demands shift. Panel suppliers must calibrate their manufacturing capacity accordingly, carefully calculating production and inventory targets to preserve their razor-thin profit margins. In this context, a $10B investment in a new LCD panel fab can be perceived as a major gamble.

But a brand new fab is precisely what’s required to sustain production capacity when transitioning from sub-40-inch displays to displays that are 50 inches and larger – sometimes much larger. You can’t simply upgrade an existing fab to accommodate significantly larger glass panels. Across the entire production line, from the manufacturing tools to the conveyers and beyond, new infrastructure and equipment will be needed.

And yet Foxconn has correctly predicted that a new large-screen LCD display fab is a sound investment to meet growing consumer demand for larger TVs. Experts estimate that global demand for large-sized TVs is growing at an annual rate of more than 20%. Market research firm IHS Markit specifically notes that 65-inch and 75-inch LCD TVs are the fastest growing segments in the LCD TV market, and the 60-inch and above LCD TV market in North America is expected to grow from 4.2 million units in 2015 to 9.5 million units in 2021. Indeed, North America is the biggest market for large-screen LCD displays of 55-inches and above, perhaps a telling reason why Foxconn has expanded its manufacturing operations here.

The demand for larger TVs has been growing for many years, but it wasn’t until relatively recently that these TVs’ price points became palatable to mainstream consumers. This comes at a time when consumers are looking to upgrade their smaller, earlier-generation TVs in favor of larger, higher resolution TVs that provide a more immersive and high-quality visual experience.

Bulky, plastic bezels have given way to sleeker designs that maximize screen space and conserve living room space, and the evolution to 4K video and onward to 8K is enabling shorter viewer-to-TV viewing distances. Where previously a standard HD, large-screen TV required a wide viewing berth to compensate for image pixilation, the newest generation of ultra-HD, large screen LCD TVs enable comfortable, closer-range viewing regardless of room size. Factoring in the additional benefits of new quantum dot color enhancement technology, one could make the argument that there’s never been a better time to upgrade our LCD TVs.

Improving yield & profitability

Foxconn’s new Wisconsin facility will be a Gen 10+ fab, designed to accommodate glass substrates sized approximately 3 x 3.5 meters (10 ft x 11.5 feet) – more than 10 square meters in area (105 square feet). This contrasts with conventional Gen 8.5 fabs limited to glass substrates that are approximately 2.2 x 2.5 meters (7.25 x 8.25 feet) – about 5.2 square meters (59 square feet).

The key advantage of Gen 10+ is the significant improvement in yield that it provides relative to Gen 8.5 when processing larger displays. With Gen 8.5, only three 65-inch panels can be processed per sheet of glass substrate, and the remaining 40 to 50% of the glass will be used for other panel sizes – multi-model glass (MMG). With Gen 10+ on the other hand, eight 65-inch panels can be processed from a single sheet with the same amount of labor, at a 95% glass utilization rate. The resulting reduction in glass substrate inefficiencies goes a long way toward improving overall yield, costs and profitability.

Foxconn’s new Gen 10+ fab is only the sixth publicly announced fab of its kind in the world, and the first and only Gen 10+ fab currently slated to be built in the United States. Going forward, every mainstream LCD TV manufacturer will require access to a Gen 10+ fab to maintain competitiveness in the large-size LCD TV market.

The yield benefits inherent to Gen 10+ will help to improve LCD panel manufacturers’ cost efficiencies and profitability over time. The additional advantages enabled by high-precision AOI, array testing, and repair systems will magnify these yield improvements and help pave the way for future generations of large-screen LCD TVs that strike an optimal balance of form, picture quality and affordability.

However, the transition to Gen 10+ from Gen 8.5 is only half the battle where yield management is concerned. With the construction of new Gen 10+ fabs comes the opportunity to implement advanced manufacturing equipment designed to enable high-speed, automated LCD panel inspection and repair at the individual pixel level – no simple feat as we progress to 4K and 8K video resolution, which represents a 4X and 16X jump in pixel density compared to full HD, respectively.

Leveraging advanced automated optical inspection (AOI) systems, fab operators can quickly scan the entire surface of the glass substrate and identify tiny defects among millions of pixels. The sophisticated image processing algorithms that underpin these AOI systems can also detect recurring defect patterns and alert line operators early in the process when production tool repairs may be required upstream.

Advanced electrical testing systems can determine whether individual pixels or lines of pixels are functional or defective by measuring variations in individual pixel voltage throughout the array. Manufacturers can collect and analyze this data from the production line, and use it to quickly diagnose and repair process-related defects, thereby minimizing material costs and improving throughput.

Automated repair systems can enable the restoration of individual pixels utilizing ultra-precise laser control that will allow, for example, the ability to cut a short-circuited metal line within a three-micron gap between two 4x4-micron transistors. This capability eliminates abnormally bright and/or dark pixels on the display, enhancing overall panel integrity.

In the absence of the aforementioned quality controls, defective pixels could linger throughout the two to three-week period from the time the glass substrate enters the production line until a fully functional display is outputted and powered on – this results in a lot of wasted time, energy and materials in instances where bad pixels render the final panel unsalvageable. In instances where a faulty production tool has evaded early detection and bad pixels replicate from panel to panel, an entire batch of displays could be compromised.

This would be problematic for any LCD display manufacturing line, but especially so for large-screen LCD panels targeted for lower volume, premium-priced LCD TVs. On a per-unit basis, it’s somewhat trivial to scrap a 5-inch smartphone display. When you’re scrapping a 75-inch 8K TV display, the cost penalties are significantly higher.

Author: Shulik Leshem, VP of Marketing, Flat Panel Display (FPD) Division, Orbotech

Published by: EBN

Cautionary Statement Regarding Forward-Looking Statements

Except for historical information, the matters discussed in this website (including in press releases, webcasts, presentations, posts and other places) are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, future prospects, developments and business strategies and involve certain risks and uncertainties. The words “anticipate,” “believe,” “could,” “will,” “plan,” “expect” and “would” and similar terms and phrases, including references to assumptions, have been used in this website to identify forward-looking statements. These forward-looking statements are made based on management’s expectations and beliefs concerning future events as of the date of the applicable information (press releases, webcasts, presentations, or posts) and are subject to uncertainties and factors relating to Orbotech’s operations and business environment, the previously announced acquisition of Orbotech by KLA, the manner in which the parties plan to effect the transaction, including the share repurchase program, the ability to raise additional capital necessary to complete the repurchase program within the time frame expected, the expected benefits, synergies and costs of the transaction, management plans relating to the transaction, the expected timing of the completion of the transaction, the parties’ ability to complete the transaction considering the various closing conditions, including conditions related to regulatory and Orbotech shareholder approvals, the plans, strategies and objectives of management for future operations, product development, product extensions, product integration, complementary product offerings and growth opportunities in certain business areas, the potential future financial impact of the transaction, and any assumptions underlying any of the foregoing. Actual results may differ materially from those referred to in the forward-looking statements due to a number of important factors, including but not limited to the foregoing matters and the possibility that expected benefits of the transaction may not materialize as expected, that the transaction may not be timely completed, if at all, that KLA-Tencor may not be able to successfully integrate the solutions and employees of the two companies or ensure the continued performance or growth of Orbotech’s products or solutions, the risk that the Company may not achieve its revenue and margin expectations within and for 2018 (including, without limitation, due to shifting move-in dates); cyclicality in the industries in which the Company operates, the Company’s supply chain management and production capacity, order cancelation (often without penalty), timing and occurrence of product acceptance (the Company defines ‘bookings’ and ‘backlog’ as purchase arrangements with customers that are based on mutually agreed terms, which, in some cases for bookings and backlog, may still be subject to completion of written documentation and may be changed or cancelled by the customer, often without penalty), fluctuations in product mix within and among divisions, worldwide economic conditions generally, especially in the industries in which the Company operates, the timing and strength of product and service offerings by the Company and its competitors, changes in business or pricing strategies, changes in the prevailing political and regulatory framework in which the relevant parties operate, including as a result of the United Kingdom’s prospective withdrawal from the European Union (known as “Brexit”) and political uncertainty in the United States, or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis, the level of consumer demand for sophisticated devices such as smart mobile devices, automotive electronics, flexible applications and devices, augmented reality/virtual reality and wearable devices, high-performance computing, liquid crystal display and organic light emitting diode screens and other sophisticated devices, the Company’s global operations and its ability to comply with varying legal, regulatory, exchange, tax and customs regimes, the timing and outcome of tax audits, including the best judgment tax assessment issued by the Israel Tax Authority with respect to the audit of tax years 2012-2014 in Israel and the related criminal investigation, the Company’s ability to achieve strategic initiatives, including related to its acquisition strategy, the Company’s debt and corporate financing activities; the timing, final outcome and impact of the criminal matter and ongoing investigation in Korea, including any impact on existing or future business opportunities in Korea and elsewhere, any civil actions related to the Korean matter brought by third parties, including the Company’s customers, which may result in monetary judgments or settlements, expenses associated with the Korean matter, and ongoing or increased hostilities in Israel and the surrounding areas.

The foregoing information should be read in connection with the Company’s Annual Report on Form 20-F for the year ended December 31, 2017, and subsequent SEC filings. This information is also supplemented by the information in the applicable document on this website (e.g., press release, webcast, presentation, posts and other document). The Company is subject to the foregoing and other risks detailed in those reports. The Company assumes no obligation to update the information in this website (including press releases, webcasts, presentations, posts and other places) to reflect new information, future events or otherwise, except as required by law.