How does LCD production in China work?

The demand for LCDs is high: customers are the automotive industry, but there is also high demand from sectors such as consumer electronics. China is particularly attractive as a production location for LCDs: the country's production capacities are large and the supply chains between China and Germany are well established. Certainly, activities in the Chinese market have become more difficult in recent years. The linguistic and cultural barriers have always been great, and with China's strict zero-Covid strategy and the tensions in the Indo-Pacific region, they have not exactly become any smaller.

However, companies in China can still do business successfully - provided they have a local presence and are able to seek and maintain personal contact with their business partners. It is not always necessary to send your own employees with specialist technical, commercial and cultural expertise. Working with an expert who lives in the country and is therefore familiar with the local conditions has also proved successful.

In my experience, there are six aspects to LCD production:

1. Selecting suitable business partners
2. Model-Based Systems Engineering approach
3. Determining the cost structure of an LCDModuls
4. Effektives Qualitätsmanagement
5. Systematic root cause analysis
6. Organizational development

1. Step: Select suitable business partners.

German companies that want to operate in the Chinese market need a local expert to make price negotiations with suppliers as smooth as possible, for example. What must such an expert be able to do? What characteristics should they have?

In my experience, there are three main things:

1. They need to be a bridge builder between cultures. China is a large country with many regional differences. Knowledge of the language and cultural conditions in China's various provinces is therefore essential, as is basic knowledge of countries that are culturally and economically intertwined with China, such as Malaysia.
2. He can deliver results within a short time. Having earned the respect of your Chinese business partners is a prerequisite for this. At management level, this is achieved with a more cooperative management style, while at employee level it is achieved with a rather close management style based on clear work instructions.
3. He must be willing to share his know-how with the suppliers.

The efficiency of the production processes is another aspect that also plays a role in the selection of suppliers. The selection process is the usual one: With the help of on-site audits, you will evaluate several suppliers and select at least three of them, from whom you will then request a price-performance quote. If you compare apples with apples, you still have a price advantage of at least 30 percent compared to manufacturing in Germany due to cheaper labor, machinery and energy costs.

But you just need to make sure that not only the communication processes are highly efficient, but also the manufacturing processes. That's why you should make sure that the suppliers supply different

• LCD types (TN, IPS panels, VA panels, AFFS) and
• systems (e.g. LCD displays, OLED displays, OLED modules, TFT displays, operating screens, graphic displays, USB data loggers, WLAN data loggers, DIP relays or TFT screens)

are as flexible as possible.

Step 2: Assume an MBSE approach.

I would prepare my teams to work according to the Model-Based Systems Engineering (MBSE) approach from the outset, especially when working with customers from the automotive sector. After all, if your customers have requirements that complicate the vehicle development process (VDP), this could cause problems that would ultimately delay the delivery of vehicles.

An integrated MBSE approach is the only way to address these issues.

In this context, I would also advocate PADS when selecting PCB design software. PADS is affordable, powerful and - in my opinion - intuitive to use. And it's comprehensive: your engineers and their teams can take the electronic designs from prototype to production.

3rd step: Determine the cost structure of an LCD module.

In order to achieve your cost targets, an in-depth understanding of the cost structure of an LCD module is essential. In my experience, the following aspects are particularly important when analyzing the cost structure:

Find the cost drivers

Find the cost drivers in the

• array process (thin film, photolithography, Etch stripping)
• Cell process (polyimide printing, rubbing, spacer distribution, sealing patterning, liquid crystal opening, Assembly and sealing, polarizer lamination)
• Module process (COG process, FPC attachment, PCB assembly, backlight assembly, Ageing test, packaging)

Operate machine and process cost optimization

Reduce overall costs by optimizing the machine and process costs of your new developments.

Some opportunities for this are:

• Switch from a curing type of silicone to a more environmentally friendly silicone material with pre-curing in the case of silicones for the insulation and filling area. This allows a soft, jelly-like layer to be formed and then laminated to the LCD at room temperature without mechanical forces.
• Optical bonding uses the OCR bonding process, which has better visibility compared to the admittedly more cost-effective OCA or "air gap" processes.
• For PCAP touch applications (projected capacitive), copper-metal mesh touch sensor technology with high resolution and high conductivity is used. Its manufacture is based on a roll-to-roll production process. This technology is suitable for flexible, foldable and curved applications as well as touch functions in areas outside the display, such as housings.
• The company uses LCDs with high-resolution structures of 3µm, active and passive pen functions (Microsoft, Wacom, USI), customized 3D design requirements for narrow boarders, flexible and curved applications and in-mold labeling (IML).
• Makes use of Photo-Camera technology with new design, focus and orientation.
• They embed hardware and software systems designed to perform a specific task (such as resistance to specific voltages or temperatures) into a larger mechanical or electrical system. Such embedded systems rely on microcontrollers, microprocessors and digital signal processors. On a plug-in card, for example, these are the processor, memory, power supply and external interfaces. They may or may not be programmable.
• The new OLED, QLED and MicroLED displays with better contrast, better response times and better energy consumption are used.
• A new production line is being invested in a reel-to-reel (RTR) process, which is a new generation of flexible printed circuit (FPC) production process. The main feature of the RTR process is that it can complete the entire front-end process, from drilling to hot pressing, of all FPCs at once. Therefore, once the RTR process reaches its stable capacity, the production efficiency will greatly improve.

4th step: Establish quality management.

China is about 7,200 km away from Germany, but the cultural differences are also great. This makes quality management a challenge that deserves special attention.

In my experience, it pays to focus on three aspects in particular:

Implementing standards for safety-related components

The implementation of standards is the be-all and end-all in quality management. Two standards are particularly relevant for LCD production in China: EN/IEC 6150 and the ISO 26262 series of standards.

The former describes benchmarks for the quality of electronic or programmable systems such as controllers. ISO 26262, on the other hand, deals with hazards that could cause the malfunction of individual safety-related E/E systems or their interaction in road vehicles.

You should also keep these standards in mind when selecting your Chinese manufacturers and suppliers so that the standards are observed along the entire value chain.

Using AI in quality management

The probability of errors tends to be higher with production abroad. The reasons for this are to be found in the increasingly difficult environments for manufacturers: products are becoming more complex and schedules more aggressive, but traveling to factories remains cumbersome. In addition, it takes longer to react to defects due to the distance to the production facilities.

You can't wait for defects to occur: By the time it does, it's already too late. One solution to this can be the use of AI systems that do two things:

1. They provide real-time insight into the line status for one or more factories. The status can be called up from any location. Your advantage: you can detect defects very early on and stop quality defects on the line - long before they reach the customer.
2. KI systems carry out an automated error analysis when errors occur. You can access the results quickly and remotely - which makes troubleshooting much easier.

This allows you to proactively find both known and new errors in your lines, despite the distance to the production facility.

Systematic error management

Experience shows that effective error management is characterized by three key areas: Ensuring process quality, implementing a zero-error strategy and focusing on the known top errors.

Ensuring process quality

The basis of error prevention is ensuring process quality. This can be achieved with many measures. The following have proven effective:

• Hiring a TPS manager, who conducts regular training for operators and engineers
• establishing a Total Productive Maintenance department, which checks and improves or repairs equipment during production downtimes
• Regular checking of the programming of CNC machines by the setters and operators, to ensure that the dimensions match the drawings
• Automatic dimensional control of parts on CMM machines, that originate from suppliers and motors assembled in-house
• Regular updating of work instructions for operation and repair
• Execution of frequent, but non-scheduled inspections of the workshop, to create a high level of awareness of the 5S principles among managers and operators
• Introduction of JIDOKA at selected workstations, to reduce failure rates due to manual intervention

Implementing a zero-defect strategy

There are many approaches to implementing a zero-defect strategy. One approach from the field of product design is to ensure that a newly created or revised CAD design is cost-based and designed for manufacturability and assembly.

Here's an example from agile management methods:

• The 5S method: Check a specific area of the plant every morning when you visit the production halls and decide what needs to be done.
• After the plant tour, schedule daily Asaichi meetings and have the department prepare a daily Kaizen report for review by the management team.
• Have all A3 reports placed on the Asaichi meeting boards to facilitate root cause analysis in case of failures.
• Recognize the performance of the best Kaizen employees on a regular basis, preferably in a public town hall meeting.

And finally, a technical approach to implementing a zero-defect strategy in LCD production:

• Prevent Newton rings with hybrid film. Interference patterns caused by the reflection of light rays between two surfaces are caused by a micrometer-sized gap between the plastic film and the glass. The solution is a double-sided hybrid film: one side of the film contains a matt diffuser with a very low angle (1 degree or less), which prevents air bubbles between the glass and itself. The other side of the film, on the other hand, contains a high angle diffuser (60 degrees or more) that improves uniformity.

Focus on top production defects

What production defects are very common is well known - as the table below shows. You should use this information to focus your quality management on the most important errors.

5th step: Conduct a root cause analysis.

If problems do occur: Identifying and evaluating the causes of errors saves time and money when solving problems. The quality management team should take the lead here and drive forward the analysis of the causes of errors in workshops with other departments.

In my opinion, the best tools for root cause analysis are

• Die 5 Warums
• das Challenger-Interview
• Rollenspiele
• Flussdiagramme
• das Fishbone-Diagramm

6. Organizational development: focus on transformation and coaching.

Experience shows that there is no way around transforming the organization in order to reliably achieve cost and quality targets in the long term.

These four points are essential:

1. Encourage willingness to change
2. Ziele kommunizieren
3. Coaching der Mitarbeiter: Establishing a trust-based culture
4. Digitalization: digitalize workflows

Encouraging a willingness to change

The organization as a whole must have the right attitude towards the transformation process. By this I mean three things:

• Willingness to change. It is not the strongest and most intelligent company that survives, but the one that is most willing to change.
• Change as a continuous process. Transformation does not happen in one big jolt. A company evolves every day in many small steps.
• Flat hierarchies. The instructions of top management should reach the worker faster and more precisely. This also means that parts of middle management need to be removed.

Communicating goals

Change succeeds when top management can take managers and employees with them - and communicate the goals clearly.

• Ziele definieren. The purpose of the transformation process is more orders and better figures. At the end of the day, the gain comes from intensive communication and cooperation with the customer's SQE management. The corresponding improvements must therefore be discussed and recorded.
• Goals must be communicated. Managers must make it clear what is at stake: individual interests must be subordinated to the interests of the company. This avoids uncertainty. Because: changes also unsettle managers and cause a loss of control, as the old, safe territory changes, responsibilities shift and are reorganized. This uncertainty is great in Asia, as it harbors the risk of losing face: especially in Asia, losing face with colleagues, friends and family is fatal. It must be avoided at all costs so that employees do not resign internally or physically.
• Impart measures. Townhall meetings have proven their worth as a format for explaining the next steps and timelines and publicizing the milestones that have already been reached. The implementation of certain measures can also be supported with workshops and team-building measures, such as joint outings.

Establishing a trust-based culture

During a transformation process, management should support and, if necessary, coach employees. This means:

• approaching employees. Employees want to be heard. In concrete terms, this means that managers do not sit in the office, but - ideally - in coaching meetings with employees. They take half an hour every day to address the concerns, but also the wishes and suggestions of the workforce. They take part in the daily plant tours and Asaichi meetings, carry out troubleshooting if necessary and monitor the implementation of suggestions for improvement.
• Cultivate a "growth mindset". Managers should see their role as helping employees to surpass themselves.
• Establish a trust-based culture. It is also worthwhile for companies to invest in a trust-based culture from a business perspective. Such a corporate culture motivates employees, increases their satisfaction and prevents burnout.

Digitizing workflows

The final transformation step is the digitization of workflows and processes. When developing a strategy, you will need to consider these aspects:

• The digitization of workflows. The first step is to identify workflows that are required to implement suitable technologies. The criterion for this is whether the workflows are decisive for productivity and competitiveness - and whether their improvement can also be expected to lead to an increase.
• The alignment of the software to an increase in added value. This involves differentiating the operational software landscape with the aim of efficiently controlling the overall system. Some of the existing systems are given additional functions, while others are supplemented by other best-of-breed software, in-house developments or simply office and low-code or no-code applications.
• The processing of customer data. Customer needs must be clearly visible from the customer data. The data should be prepared accordingly.
• User experience. Place the worker as a user at the center of the digital services and provide them with a good user experience in the form of a fast, uncomplicated application. This aspect should by no means be underestimated. It is the key to successful digital transformation.

Conclusion: If you do the right thing for your customers, commercial success will follow!

Four aspects are crucial for successful LCD production in China:

1. Collaboration with a local expert, who mediates and communicates between German and Chinese partners
2. Differentiated knowledge of the product's cost structure
3. Comprehensive quality management with consistent implementation of standards, Real-time monitoring of plants and AI-supported error analysis
4. Further development of the organization to permanently fix cost and quality optimization.

Is that enough?

You guarantee price, quality and deadlines. And yet: more and more customers prefer companies that operate sustainably:

• Sustainability and net zero emissions are becoming purchasing criteria.
• The responsibility of companies for the social contexts in which they operate, the corporate social responsibility (CSR) mutates from a nice-to-have to a question of the company's survival.

This points the way forward!