Despite an uptick in demand for display panels, including those for TVs, monitors, and notebook computers in the third quarter of 2015, the industry is still concerned with oversupply and lower pricing, according to the latest price report by WitsView, a division of TrendForce.
“TV sales during China’s National Day holidays were weak and did not provide an opportunity to turn the TV panel market around. With much of the capacity being used in TV panel production, there are rising worries that panel suppliers will face both oversupply and weak demand in the TV application,” said Eric Chiou, WitsView senior research director, in a statement.
“To address this imbalance, suppliers are stepping up their efforts to lower their TV panel inventories as well as finding ways to maximize these products’ margins. Hence, TV panel prices have taken a dive due to the combination of aggressive shipments and price slashing,” he added.
According to WitsView’s latest price report, prices for TV panels have declined across all sizes in October. Here’s the breakdown:
- 32-inch panel prices have fallen by about $2 to $3 on average.
- 5- and 43-inch display prices dropped by $7 to $8 due to increasing oversupply.
- 48- and 49-inch segments also fell by $8 to $9 due to inventory pressure.
- 55- and 65-inch panel prices decreased by more than $10.
“Even though 32-inch TV panels from some suppliers are now sold below their cash costs, their prices might drop further to the $60 threshold next month if the industry does not significantly adjust its overall capacity utilization,” Chiou stated.
In September, Charles Annis, senior director at IHS reported that panel manufacturers were maintaining high utilization rates “well above 90 percent at their larger glass fabs since last year.”
“Even with recent price declines, many large panel sizes currently sell at marginal profits,” Annis added. “At least for now, panel makers have decided to keep utilization high and minimize overhead costs, in order to chase as much profit as possible while they are still able to. The downside to this strategy is that panel inventories at set-makers have ballooned, widening the gap between TV panel shipments and TV set shipments.”
Chiou also noted that quote prices for small-size panels - 18.5-, 19.5- and 21.5-inch segments - have fallen through their cash costs in October and will likely to keep falling in the short term.
“While monitor panels with higher dealing prices are still subject to negotiation between suppliers and buyers, prices in general are consistent with the market downtrend,” Chiou added. “Price decline for products that quoted below the market average is also starting moderate. Small-size segments have seen decline widen by about $1 to $3. For 23- and 24-inch panels, their prices have fallen by around $2 on average due to the intense price competition among few dominant suppliers.”
While price negotiations have slowed for TN HD panels as suppliers significantly cut pricing due to fierce competition in the first half of 2015, there is still “heated negotiation” for prices of higher end FHD and IPS panels, reported Chiou.
“For suppliers, FHD and IPS products consume more of their capacity and have better margins compared with TN HD products. They therefore are willing to lower the prices of FHD and IPS panels to make them more competitive against HD panels and to boost their shipments,” explained Chiou. “Branded notebook vendors on the other hand want to raise the specs of their notebook systems with high-end panels. This will catch consumers’ attention and generate sales. Hence, the 15.6-inch FHD panels may see the largest price drop compared with other notebook panels this month owing to efforts of suppliers, with decline reaching $1 to $1.50.”
Lower pricing for all display sizes is having an impact on the bottom line at display manufacturers. Case in point: Sharp Corporation recently revised its financial results forecast down for six months ended September 30, 2015 and the fiscal year ending March 31, 2016.
Sharp said: “Operating results downturned from the previous announce, due to sales decline and further drop in the market price from intensified competition in small- and medium- size LCDs for the smartphone business in the Chinese market. Hence we hereby announce the revision of financial forecast of the six month ended September 30, 2015 and the fiscal year ending March 31, 2016 from the previous announce on May 14, 2015.”
The company further stated that factors that may influence figures for the final reported business include:
- The economic situation in which the Sharp Group operates
- Sudden, rapid fluctuations in demand for products and services, as well as intense price competition
- Changes in exchange rates (particularly between the yen and the U.S. dollar, the euro and other currencies)
- Regulations such as trade restrictions in other countries
- The progress of collaborations and alliances with other companies
- Litigation and other legal proceedings against the Sharp Group
- Rapid technological changes in products and services, etc.
Other suppliers like LG Display are weathering the storm through differentiated product strategies. The company recently reported a seven percent increase in revenue in the third quarter of 2015 compared to the second quarter of 2015, and revenue was up nine percent year-over-year. The company attributes revenue growth “…to its continuous differentiated strategy efforts in response to reduced demand among TV set manufacturers and price declines for displays.”
“Total net display area shipments in the fourth quarter are expected to increase by a low single digit percentage compared to the third quarter due to seasonal factors expected at the year end, and although the supply of products and sizes may vary, the downturn trend in panel prices is expected to slow,” said Don Kim, CFO at LG Display, in a statement. “We will continue to achieve profits through a differentiated strategy mainly due to Ultra HD, AIT and M+ products and a thorough preparation for the OLED market.”
“TV panel inventory adjustments will continue into the first half of 2016, because more manufacturing capacity will be coming online, especially in China,” said David Hsieh senior display director for IHS, in a statement. “Global consumption is stagnant and the replacement cycle is slow, which will not support strong growth in the coming year.”
“The collapse of panel prices in the second half of 2015 is encouraging panel makers to shift their product mix, because smaller panel sizes will experience deep losses,” Hsieh said. “Panel makers will be spurred to produce larger panels, which are more profitable, rather than stick with smaller panels with deeply eroded profitability,” Hsieh further stated.
The latest IHS report, Display Long-Term Demand Forecast Tracker, finds that 134 million LCD TV panels were shipped in the first half of 2015. Although prices declined in the second half of the year, panel makers have maintained capacity utilization to produce even more panels, coupled reducing panel prices to encourage TV brands to keep buying for their short-term needs and for the upcoming holiday season. “All of these factors will have a negative impact on LCD TV panel demand in 2016,” Hsieh said.
IHS expects LCD TV panel demand to drop three percent in 2016 over the year to reach 257 million units.