Hidetoshi Himuro, DisplaySearch– Weak demand in the end-product markets seems to be slowing price movements of large-area LCD panels. In December, notebook PC panel prices remained unchanged or rose by 1% from the previous month. Monitor panel prices stayed flat, as if they were in a lull. Both CCFL- and LED-backlit TV panel prices decreased by 2-3 %. With some exceptions, TV panel prices have fallen for seven months since May of last year.
IT panel prices trended modestly during December 2010 to February 2011 due to slow demand and price down bias. It may see re-declining prices in Q1’11. The next price peak will be around August 2011.
TV panel prices will continue to drop in Q1’11 before rising in Q2’11.
Price negotiations kicked off in early January with panel suppliers’ somewhat bearish attitude, offering prices unchanged from the previous month. Meanwhile, set makers have not been showing a proactive stance in panel procurement toward the next fiscal year, which was common last year during this transition. Behind the trends is the fact that the weak demand at the moment discourages set manufacturers from purchasing panels. In addition, there has been an increasing concern of a downturn in TV demand after the government’s stimulus budget has been run out. In the IT device market, it is highly possible that production/inventory adjustment of old models has started before the releases of PCs with new CPUs or platforms planned in and after the second quarter.
While notebook PC panel prices in many cases fluctuate below the cash cost (= materials cost + direct cost + manufacturing labor cost and indirect cost), panel suppliers are working hard to prevent prices from dropping below the bottom by reducing utilization again to deal with an increased panel inventories at some set makers around the end of last year. This trend is more likely to continue until the end of the first quarter in a time of sluggish demand. Besides, the market is hoping for a surging demand for new products as many of them including tablet devices have been announced at the 2011 Consumer Electronics Show (CES). Unfortunately, however, most of these new sets will be produced or shipped out in and after the second half, so there is no direct positive impact on the current demand.
For TVs, prices of leading products including 32” panels are reaching cash cost for Taiwanese panel manufacturers. In addition to the weak demand, the situation does not allow panel suppliers to reduce utilization of fabs because they need to amortize newer-generation lines. Although situations vary depending on the company, it is forecast that prices will continue to fall to the break-even point (= cash cost + amortization cost) unless a clear indication of demand recovery is confirmed in the end product market.
Since most monitor panels are produced from the same manufacturing lines as TV panels, it is difficult to adjust production capacity by adjusting utilization. Therefore, they are vulnerable to the supply and demand situation of TV panels, especially those in major sizes that are sometimes diverted to low-priced and small TVs. Monitor panels have just a little room for further price reduction because they are already at the cash cost level. However, there are some strong downward risks as major set manufacturers are showing signs of downward revision in their shipment plans against the backdrop of the weak TV demand and a slowdown in monitor demand including the situation in China.
In the panel pricing scenario in January, with a continuous sluggish demand anticipated in addition to the background of each market, it is forecast that weak tone will continue for a while. In other words, TV panel prices will keep falling (though the reduction rate is likely to shrink as prices are reaching the cash cost), while IT device panels will fluctuate within a narrow range. However, there is a possibility that prices will turn downward slightly on a temporary basis, especially for monitor panels.
In general, both panel suppliers and set makers will need patience for operation until the end of Q1’11. It is hoped that business deals will be in good shape again in 2H’11 when the demand grows seasonally and the current prices create a feeling of hitting the bottom, as panel shipments increase versus the demand for new products such as PCs.