Panel makers benefitted from the panel shortage in Q2’14, which enabled panel prices and shipments to increase at the same time. There is expected tightness in TV, notebook PC, and monitor panels to continue in Q3’14, before inventory adjustments are made in Q4’14.
There has been speculation about shortage occurring again in 2015. The possibility arises from a few ongoing trends. First, while panel inventories have been building in the LCD TV pipeline as panel shipments exceeded set shipments by double-digit percentages in 2013 and 2014, TV brands are launching promotions for the coming holidays, including China’s October Golden Week and November 11th special festival, Black Friday/Thanksgiving in the U.S., Christmas/calendar New Year, and the 2015 Chinese New Year. The belief is that these events will bring inventories to much lower levels.
Second, according to the Quarterly FPD Supply/Demand and Capital Spending Report, in 2015, growth in TFT LCD and AMOLED area capacity will be 6.8%, compared to demand growth of 6.5%, a very close match. This is closer to balance than in 2014, for which there is an estimated supply growth of 4.5% and demand growth of 7.9%, which clearly created shortages; however, conversions of existing TFT capacity to AMOLED backplane production will decrease effective capacity. Also, the ramp-up of new fabs, especially in China, is likely to be time-consuming and might not be as smooth as originally planned. Both of these issues could lead to slower growth in effective capacity than demand growth in 2015.
Third, given the slow growth in TFT capacity in 2013 and 2014 (less than 5%), component makers have been reluctant to increase their capacity. While there is new component production in China, quality and reliability still lag. With the increase in panel capacity growth in 2015, there is a potential for component shortages in 2015, which would limit panel availability. The development of new panel technologies will require additional component development. The high growth rate in smart handheld devices may monopolize driver IC wafer and foundry capacity. The shift to high resolution may consume additional capacity for chemicals and optical films.
Finally, competition between TV brands is likely to become more intense; with Japanese brands losing share, Korean and Chinese TV brands are competing to increase their share; in particular, Chinese brands are trying to increase exports to the global TV market. This is leading brands to increase their shipment plans, which means their first priority is to secure panel allocations rather than negotiate prices. Meanwhile, there is increasing integration of the supply chain, and panel makers are increasing production of open cells to address the expansion in TV models. These factors will drive increases in panel procurement.
In the Monthly Large-Area LCD Pricing Report, there has been a projected possible adjustment in late Q4’14 and Q1’15 of the panel inventory that has been building in 2013 and 2014. But after the inventory adjustments, there is an expected shortage to come again in 2015. And this potential may have an impact on TV brands panel procurement.
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