China’s top panel makers, including BOE, TCL CSOT, HKC, and CEC-CHOT, are cutting production to support TV panel prices. Speculations indicate a capacity utilization drop below 60% in the first quarter, benefiting Taiwanese panel companies like Innolux and AUO. Despite these efforts, industry sources caution of a panel industry slowdown due to reduced demand, possibly resulting in lower TV panel prices, reported by TechNews.

The memory industry saw a big downturn due to major players like Samsung, SK Hynix, and Micron drastically reducing production. This resulted in a surge in memory prices and a gradual recovery for the entire memory industry. Panel makers may adopt a similar strategy to boost the overall panel industry as well.

Chinese panel companies currently command a global market share of over 70% in TFT-LCD, with the world’s top 3 LCD panel makers from China: BOE, TCL CSOT, and HKC. As China holds the largest share of panel production capacity, a reduction in production by major players could have a more substantial impact on the panel industry compared to the effects on the memory industry caused by Samsung, Micron, and others.

According to TrendForce’s report in November, BOE began adjusting its production levels in the Q3 and will continue to do so in Q4, with an estimated decrease of 7 percentage points in utilization rates. CSOT, on the other hand, maintained high utilization rates in Q3, supported by major customer stockpiling and the ramp-up of the T9 new production line. However, due to reduced procurement of TV panels by both in-house group brands and international frontline brands, CSOT’s utilization rate is expected to decrease by about 17 percentage points to 76% in Q4.

HKC, which still has two production lines not running at full capacity, anticipates a 14 percentage point decrease in its utilization rates for Q4. This is primarily due to the need to reduce production of one of its main products, the 32-inch TV panel, to alleviate inventory pressures and avoid significant price drops.

In response to this, both Innolux and AUO express their intention to dynamically adjust production capacity utilization in line with market conditions. This strategic flexibility is aimed at fostering a more robust and balanced industry order.

Overall, most panel makers are adopting a more conservative approach to production for 1Q24. Furthermore, several panel makers have indicated a two-week Lunar New Year shutdown for 2024. As a result, TrendForce anticipates that overall Gen5+ LCD panel utilization rates may be revised down to 70% or lower in 1Q24 to maintain the market supply-demand balance.

(Image: BOE)

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Source to UDN, in the wake of sluggish demand in the end-user market, the final stretch of September witnessed the tail end of a promotional surge in TV panel inventories as prices for panels below 50 inches seemed to reach a state of stagnation.

According to TrendForce’s view, Eric Chiou, Senior Research Vice President at TrendForce, has sounded the alarm, suggesting that TV panel prices may undergo a downward adjustment starting in November. This reflects a fourth-quarter demand that falls short of expectations, with continued weakness expected in the traditional off-season demand for the first half of next year.

Industry insiders contend that as TV panel pricing faces pressure to halt its upward trend, companies like AUO and Innolux, despite briefly enjoying profits this quarter, are likely to experience a downturn in their fourth-quarter performance, making it challenging to achieve an annual turnaround.

Eric Chiou analyzes that TV panel prices started rising in March this year. This was primarily a response to panel manufacturers’ consensus decision to reduce production after suffering heavy losses. However, due to the impact of a sluggish economy, terminal demand has failed to see significant improvement. Additionally, brand manufacturers, in response to rising panel prices, began planning early for the procurement of year-end panel needs in the second quarter and from July to August. This trend is already reflected in the pricing of TV panels below 50 inches, which has shown signs of stagnation since September.

In response to warnings from research institutions, it is feared that TV panel prices may cease to rise and may even decline in the fourth quarter. Yang Chu-hsiang, General Manager of Innolux, recently stated that the panel market’s prosperity is as unpredictable as a typhoon, and vigilance is required regarding the consumption power of the terminal market. He emphasized that panel manufacturers would not rush to maximize production but would instead make minor adjustments to meet demand steadily. He also reiterated the expectation that the second half of the year would be better than the first, with next year surpassing the current one.

During a recent earnings conference, the Chairman of AUO revealed that TV panel shipments increased by 5 percentage points in the second quarter. Coupled with cost-saving efforts, the operating gross profit turned positive for the quarter, and losses narrowed compared to the first quarter. Looking ahead to the third quarter, Peng remains optimistic, stating that “the worst time for the panel industry has passed.” With back-to-school and year-end sales seasons approaching, he anticipates that the “second half of the year will be better than the first.”

However, as the fourth quarter faces unfavorable global economic conditions, Eric Chiou believes that brand-end inventory for events like China’s Singles’ Day and the U.S. Black Friday promotions is taking a more pessimistic and conservative stance. September marks the tail end of the high-volume inventory period for TV panels, and with Chinese panel manufacturers having a significant share of TV products, they are expected to profit handsomely this season. On the other hand, Taiwanese manufacturers, with a relatively lower share of TV panel shipments, may hover near breakeven or see modest profits in the third quarter. If TV panel prices halt their upward trend in the fourth quarter, achieving the annual goal of returning to profitability may prove elusive.

(Source: https://money.udn.com/money/story/5612/7462519)

In 2021, shipments of notebook computer panels increased quarter by quarter with record highs posted in each quarter. In addition to strong demand for display terminals, panel makers continued to invest in capacity and resources for notebook computer panel production. With notebook panel shipments hitting a record high in 2021, panel makers also set fairly aggressive BP targets for 2022.

Panel makers shipped 187.7 million notebook panels before the COVID-19 outbreak in 2019 and up to 287.9 million in 2021, an increase of more than 50% in two years. In 2022, panel makers planned to grow by an additional 14.1% to 328.5 million units. With such high expectations, the sudden shipment revisions in 1H22 were urgent and violent, catching panel manufacturers off guard.

In 1H22, terminal demand and inventory problems materialized at the same time

The Russian-Ukrainian war in 1Q22 had a dramatic impact on oil production capacity. In addition, strong terminal demand in the past few quarters drove up the prices of various commodities, causing the annual growth rate of inflation to climb, in turn changing interest policies from central banks to focus on suppressing terminal demand and inflation, and leading to plummeting terminal demand.

Shipments of whole devices in 1Q22 were lower than single-quarter shipments of any quarter in 2021, meaning pandemic-induced demand had weaker since the outbreak of COVID-19. However, China imposed restrictions to prevent resurgences of the pandemic in 2Q22. These measures affected the assembly capacity of notebook computer OEMs, and also reduced 2Q22 notebook computers shipments by 17.7%. Looking into the background of 2Q22, when China’s lockdown measures were implemented, brands did not scramble to request OEMs resume production and supply as they had in the past two years. Instead, brands lowered their annual BP and component orders, reflecting that when brands express a bearish attitude regarding waning pandemic-induced boons and pessimism towards future demand, canceled orders in the supply chain is unavoidable.

Before 1Q22, panels have always resided on the top 3 list of notebook computer components. Therefore, notebook computer brands have adopted overbooking and accumulated inventory in the past two years to respond to strong terminal demand and support performance. The average supply-demand ratio for the past 12 years of whole notebook computer panel devices fell at 12.5%. The supply-demand ratio exceeded the long-term average of more than 18% beginning in 3Q21, reaching an ultra-high level of 28% in 1Q22. A relatively high supply-demand ratio means that panel inventory on the brand side accumulated to a certain extent in 2H21 and rose sharply in 1Q22. A higher inventory level will lead to future revenue support when demand is strong but, when market demand reverses, high inventory becomes a heavy burden on financial reports.

In 2Q22, notebook computer panel shipments dropped by 24.3% QoQ, and this quarterly decline was much higher than the 17.7% QoQ decline in shipments of whole devices. This means that brands have begun to curb inventory and greatly reduce panel purchases. Looking at a wider perspective, the beginning of every downward economic cycle related to consumer electronics is accompanied by demand reversal and inventory problems. The Russian-Ukrainian war was only the last straw that led to this reversal．

（Image credit: Unsplash）

According to TrendForce, based on the quarterly supply-demand ratio, the difference in supply and demand in 1Q22 rose by 4.9% to 8.9% compared with 4Q22, much higher than supply and demand equilibrium at 5%. However, since panel makers still had room to build up inventories and IT panel pricing was still at a profitable level when at equilibrium, there remained an upside to panel makers’ overall operating interest, so there was no operation adjustment at the time.

Whether TV panel demand or IT panel demand, the magnitude of corrections began to intensify in 2Q22. Since the production capacity of panel manufacturers continues trending towards growth, the supply-demand ratio is expected to widen to 11.8% and the severity of the imbalance is set to return to 2008 financial crisis levels. As TVs account for nearly 70-80% of LCD production capacity, LCD TV panel quotations have again dropped, falling to record lows. For example, 32-inch HD quotations have fallen to US$28 and 43-inch FHDs have fallen to US$55.

In light of this situation, panel manufacturers have begun looking for solutions. Other than reducing the cost of upstream materials, the most effective way to buoy pricing is to control output, so news of production cuts began to appear in 2Q22. According to research from TRI, in 2Q22, the LCD glass output area of panel makers’ large generational fabs fell by 3.3% compared with their original planning. At the same time, due to Samsung’s announcement of progressively strict procurement control, TV panel shipments are expected to be downgraded by 1.2% compared with original planning. Therefore, the supply-demand ratio will not change much as panel makers reduce production in an insignificant manner.

No peak in peak season, production reduction in 3Q22 set in stone, stocking momentum expected to pick up in 4Q22

Moving into July 2022, in the past, Q3 was traditionally the time for panel stocking. Originally, panel manufacturers expected the seasonal effect to stabilize or even produce a slight rebound in TV panel prices but the market did not react as positively as panel manufacturers believed. The world’s largest TV brand Samsung once again revised its TV panel purchases downward in 3Q22 from its original plan of 14 million units to 8-8.5 million units. Rumors that purchase volume was even less than 8 million units cannot be ruled out, again pressuring TV panel quotations which were already under pressure to keep from selling at a loss. This news can be considered the straw that broke the market’s back.

If production is not reduced, the supply-demand ratio in 3Q22 will remain on par with the ratio before production cuts in 2Q22 (11.8%). It is conceivable that if inventory from 2Q22 added, panel makers will not only face the risk of an inventory explosion, but also if the price drops again, it cannot be ruled out that all panel sizes will ship at a loss in 3Q22 because pricing has gradually approached Bom Cost. Therefore, some panel makers have begun to plan a large-scale reduction in capacity utilization in 3Q22.

HKC, CSOT, AUO, and Sharp, who count Samsung as their primary customer, are among the panel factories that will see a significant reduction in capacity utilization in 3Q22. Huike, CSOT, and AUO have all planned to greatly reduce production by 32%, 20%, and 25%, respectively, compared with their original plans for their factory campuses. Considering the high cost of its Japanese factory, Sharp needs to maintain a high utilization rate. The company only adjusted Guangzhou Gen10.5, with overall utilization rate expected at only 70-75%.

As the LCD industry bellwether, BOE is facing external resistance. Currently, there are no plans to significantly reduce the capacity utilization rate of its entire production line, with utilization adjustment only planned for the Fuqing (B10) Gen8.5, Chengdu (B19) Gen8.6+, and Hefei (B9) Gen10.5 factory campuses. Overall impact is expected to be 10-15%. CHOT plans to reduce its capacity utilization rate by 10-15% in 3Q22 compared with their original plans due to accumulating more than a month of inventory of their main product, 50-inch TV panels.

If panel makers really control production as suggested by rumors, the supply-demand ratio will have a chance to move to 6.4% in 3Q22. Although a point close to equilibrium cannot be achieved immediately, effective output control will prevent the market from deteriorating further and facilitate advantageous price movement to mitigate or even stabilize the downtrend.

If panel makers continue to control capacity utilization in 4Q22, the price of LCD TV panels is expected to fall into a sweet spot, international brands are expected to perform purchase volume adjustments in Q2 and early spring in 2023, and Chinese brands will also stock up ahead of schedule in 4Q22. Market conditions are expected to have a chance to improve in 4Q22, with a good start for 2023. Otherwise, market conditions will deteriorate again in 4Q22, which will not only cast a shadow on the beginning of 2023, but may also force some panel makes to shut down certain factory campuses due to unbearable losses.

（Image credit: Pixabay）

The massive rise in market demand for notebook computers in response to distance learning needs and WFH applications from 2020 to 2021 has generated not only a double-digit growth in notebook panel shipment, but also a price hike of more than 40% for notebook panels, according to TrendForce’s latest investigations. As various suppliers subsequently scramble to manufacture OLED, LTPS, and oxide panels, TrendForce forecasts these high-end notebook panels to reach a 17.8% market share in 2021 and 21.4% in 2022.

Panels based on OLED technology are primarily supplied by SDC, whose OLED notebook panel shipment for 2020 reached 800,000 pcs. SDC is expected to ship more than four million pcs of OLED notebook panels in 2021, with room for further growth in 2022. In addition to SDC, EDO is also expected to begin mass producing OLED notebook panels in 2H21-1H22. As such, TrendForce expects OLED panels to reach a 1.3% penetration rate in the overall notebook panel market this year. Although BOE and CSOT are currently fully engaged in Hybrid OLED development, Hybrid OLED panels will not enter mass production until 2023 due to technological and cost-related bottlenecks that are yet to be resolved.

The top three suppliers of LTPS panels are, in order, AUO, CSOT, and Tianma. Thanks to such advantages as low power consumption and narrow borders, LTPS panels are widely used in high-end notebook computers. In the overall notebook panel market, LTPS panels are expected to reach a penetration rate of 3.7% this year. With regards to LTPS suppliers, AUO will likely expand its L6K fab’s production capacity of LTPS notebook panels in 2022. Innolux, on the other hand, currently allocates the LTPS production capacity in its Luzhu-based panel fab primarily for smartphone displays. Innolux is expected to mass produce LTPS panels for notebooks some time in 2H21. CSOT and Tianma will likewise gradually increase the share of LTPS notebook panels in their overall panel production in spite of their lack of capacity expansion plans at the moment.

Finally, oxide panels are primarily supplied by LGD, Sharp, and BOE. Much like LTPS panels, oxide panels have the advantage of low power consumption and narrow borders. However, oxide panels are relatively more cost-competitive compared to LTPS panels, as the former require fewer mask layers during the manufacturing process. Hence, oxide panels currently possess the highest market share among all high-end notebook panel types. TrendForce expects oxide panels to reach a 12.8% penetration rate in the notebook panel market this year. With regards to suppliers, IVO and HKC are expanding the production capacities at the Kunshan-based Gen 5 fab and Mianyang-based Gen 8.6 fab, respectively, for oxide panels this year, while CSOT is also planning the same for its new Gen 8.6 fab in Guangzhou. Once these three suppliers finalize their expansion activities, their oxide panel capacities are expected to exceed 70K sheet/m, and these capacities will be gradually available for mass production across 2022-2024.