DisplaySearch LCD Industry Dynamics Update

This article was written by Deborah Yang, a research director for DisplaySearch. The original article can be foundhere.

The LCD industry is changing rapidly and in order to catch up with the dynamics more frequently, DisplaySearch publishes MarketWise-LCD Industry Dynamics every month. Here are key takeaways from the March report.

  • The smartphone industry is concerned about three evils: backlight, cover glass, and battery. Smartphone brands and panel makers are racing to reduce the thickness of smartphones. Nichia has developed a 0.3t LED package that reduces the backlight by 0.35-0.4t. Corning has developed a 0.4t Gorilla Glass.
  • For LCD glass makers, realistic supply/demand is rather balanced. Three new Chinese Gen 8 lines start mass production in 2015. Corning is supporting BOE’s Gen 8 at 100%. NEG is supporting CEC Panda’s Gen 8 at 100%. AGC is supporting CSOT’s Gen 8 at 100%. Chinese panel makers have asked LCD glass makers to supply 0.4t, but this thickness may be problematic for the new Gen 8 lines.
  • The polarizer supply will be balanced to tight through next summer due to the tight supply of protection and COP films.
  • In February, BOE beat its LCD TV panel shipment plan by the most. It pushed out higher than expected shipments of 32”, helping it rank fourth. BOE plans to use 80% of its Chongquing Gen 8.5 capacity for TV panels.
  • The leading global TV brands want to maintain very aggressive shipment targets, though high panel prices have reduced their profitability. TV makers are also struggling with currency issues in Russia and South America.
  • Some leading TV brands are maintaining their aggressive TV panel procurement plans for strategic reasons and this has been the most critical swing factor for the LCD TV panel shipment outlook and panel pricing in Q2’15. We still do not rule out the possibility of a sudden and significant correction in late Q2’15.
  • TV makers’ on-hand panel inventory levels are expected to remain reasonable at the end of March, but most TV makers are less aggressively booking panel allocations for Q2. 4K TV panel shipments have slowed in recent months due to inventories.
  • TV makers are asking for certain targeted panel prices for Q2 and Q3 so they can maintain aggressive shipment forecasts and promotion program plans. If panel makers cannot make price concessions, some TV makers will either cut back or push back their demand forecasts.
  • With the exception of a few leading TV brands, most TV makers, including the top six Chinese TV brands, are becoming conservative. Their purchasing will remain mostly flat or drop Q/Q because they are concerned about the downward trend for panel prices and the risk of demand adjustments in the market. The top six Chinese TV brands are planning to cut TV panel demand by 3-5% Q/Q in Q2’15.
  • There are clear signs that the supply for 32”, 55”, and 4K models is loose. Prices decreased in March. The supply for 42”/43” remains tight due to the transition from 42” to 43”. 43” supply is limited to LG Display and AUO.
  • In response to increasing pressure on 4K TV panels, panel makers have been working to reduce the cost of 4K TV panel models and promote low-cost solutions for 4K lineups (M+, Inno-module 4K).
  • The risk of excess supply will rise in Q2’15 because:
  • BOE is considering two new Gen 8 fabs in Xiamen and Mianyang, so its Gen 10 project may be on hold or under consideration for a while. China Star is considering a Cu process for its T1 fab. This could result in a loss of capacity of around 10K/month, so it may re-think doing it while it is very possible to set up a Cu process at its T2 fab. In response to softening demand for 32”, China Star is considering producing less 32” and more 49” and 55”.
  • TV OEMs are preparing to ship new 2015 models. One business award came from Xiaomi, which sources from Taiwanese TV OEMs a 40” FHD model and 48” and 55” 4K models. Xiaomi is also considering 32”, 43”, and 65”.
  • Channels used to select the TV models, (panel) prices, volumes, and vendors during the second quarter for promotions in the second half of the year. This has become challenging this year because there are mixed messages coming from the LCD TV supply and demand outlook. There has yet to be a clear sign that panel makers want to make price concessions. As a result, some channels are becoming conservative and may push back or lower their demand forecasts for 2H’15 because they are looking for better deals with competitive panel prices.
  • After the Super Bowl, LCD TV demand slowed in North America and turned cloudy. In the US, the recent sell-through unit growth worsened and prices are stabilizing. The market remains price elastic, so it is worth keeping a careful eye on the impact that stable prices will have on sell-through.
  • Ali Venture Capital, the VC subsidiary of e-commerce conglomerate Alibaba, has offered to purchase for CNY 2.4 billion newly issued shares of Beijing-based TV and film production company Enlight Media in a private offering.
  • There are still monitor panel inventories, so it remains challenging to sell out panels. As a result, panel makers are offering many special incentives and deals. Demand will remain weak in Q2’15, and panel prices will trend downward.
  • PC monitor brands lowered panel purchasing in February. Only 23.8” and 24” remain stable due to limited capacity.
  • Korea panel makers are aggressively promoting PLS, VA, and TN monitor panels and have already engaged in projects with main customers under concession deals. Weak demand in Q1’15 and competition made sales very difficult.
  • Some OEMs are reallocating their production locations. Compal plans to close its ChongQing fab and move notebook production to countries in South Asia like the Philippines. The notebook supply chain cluster may slowly move to South Asia, and the lead position of the notebook PCs production base in China may be challenged.
  • Intel’s CPU supports Android and Windows, so adopting an Intel CPU for dual OS tablet PCs is a new strategy for adding value. A dual OS (Android and Windows 8.1) 10.6” FHD tablet PC is priced at CNY 1,299 in China.
  • Channels are concerned about increasing inventories, some of which are carried over from last quarter.
  • Consumers have become more price sensitive due to no major promotional periods. Overall, TV market demand is slowing.
  • Aggressive TV panel purchasing in Q1 and the unchanged aggressive TV panel purchasing plans of the leading TV brands for Q2’15. This encourages LCD TV panel makers to keep their LCD fab utilizations unchanged. This could suddenly reverse when TV brands have to adjust orders significantly due to an increasingly difficult TV business environment. We do not rule out the possibility of sharp price corrections in late April or in May.