Large LCD panel suppliers released some of their newly added production capacity ahead of schedule, resulting in higher than expected supply in the first half of 2017, according to WitsView, a division of TrendForce. This higher estimate for global production capacity in 2017 may result in downward price pressure in the second half of the year. While this isn’t good news for suppliers, buyers of 43- and 65-inch panels, in particular, should expect lower tags in the second half.
Global production capacity for large LCD panels in terms of total glass input area will increase by 5.8 percent annually in 2017, reaching 218.3 million square meters, according to WitsView. This is 0.3 percent higher than an earlier estimate.
“This year’s increase of monthly large-size panel capacity is estimated at about 295K sheets per month (K = 1,000),” said Kou-Han Tseng, assistant research manager of WitsView, in a statement. “And with some of this additional capacity being made available in advance, the large-size panel capacity for the first half of 2017 is estimated to have reached 100K sheets per month, higher than the earlier estimate of 85K.”
“More than 60 percent of this year’s newly added production capacity will become available later in the second half of 2017,” according to Tseng. This means large-size panel capacity will increase by about 105K and 90K sheets per month in the third and fourth quarter, respectively, he noted.
WitsView said the additional 295K sheets per month will be used primarily for the manufacturing of TV panels including the 43-, 50-, 55- and 65-inch sizes. The increased production capacity is expected to have the biggest impact on the 43- and 65-inch segments, which are looked at as niche markets in terms of supply, according to Tseng.
Global monthly shipments of 43-inch TV panels were approximately 2.5 million units at the beginning of 2017 and then increased in the second quarter when BOE Technology’s new fab in the Fuzhou, China came into operation, said WitsView. The market watcher now expects the average monthly volume to reach 3 million units by the end of 2017, a 20 percent increase compared with the beginning of this year. The additional supply resulted in a softening of prices starting in May.
Earlier this year, WitsView reported that other Chinese panel makers also plan to increase their production capacity. “CEC-Panda has scheduled the building of two Gen-8.6 fabs before 2019. BOE and CSOT will each have a new Gen-10.5 fab in operation as well by that year. These four fabs of advanced generations will make an immense contribution to the overall TV panel capacity,” said the market watcher.
On the other hand, prices for 65-inch TV panels have increased rapidly since the beginning of 2017, which drove Taiwanese and South Korean panel makers to increase their production, according to WitsView. The average monthly shipments for 65-inch panels is expected to increase by more than 30 percent from 750,000 units in the first quarter to about one million units at the end of 2017.
However, with the supply expansion there will be “pressure to correct prices downward during the latter six-month period,” added WitsView.
The market researcher also noted that with more than 60 percent of the total production cost of a LCD TV set related to its panel, major ODMs are securing their panel supply sources via vertical integration. “China’s ballooning share of global TV panel shipments, which is projected to reach at least 33 percent this year, is in great part attributed to the rapid expansion and integration of its domestic panel industry,” said WitsView.
In May, WitsView reported weakening prices for medium-sized 40- to 43-inch LCD panels, dropping by $1 on average, compared with pricing in April. The price declines were attributed to additional production capacity from Chinese panel makers, lower than expected TV sales in China, and TV OEMs pushing for lower prices due to thin margins.
“The LCD TV panel market has been a seller’s market for almost a year and prices have consistently gone up. The weakening of quotes for medium-size panels is a signal that the general price upswing may have reached a limit,” according to WitsView.
The average quote of 55-inch UHD panels also dropped $1 in May compared with the prior month due to “poor sales” and additional production capacity, which “slightly exacerbated” the oversupply situation. WitsView said 55-inch models account for more than 30 percent of new TV sets sold in China.
“Supply will become an important factor in determining the course of the panel market during the second half of 2017, especially in the fourth quarter,” said WitsView.