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Comparing the Recessions of 2001 & 2008/2009 to the Present
April 12, 2020
Ross Young[1], CEO and Founder of DSCC conducted a webinar for SID members where he compared the 2001 and 2008 recessions and used the past to predict what might happen to the display industry due to COVID-19. The full webinar is expected to be available on www.SID.org. The first set of charts are the US GDP and the SPY for 2000 -2002 and the second set of charts reflect 2007 to 2010. In both cases, at the peak of the recessions, the GDP dipped into negative territory and that was pretty much reflected in the SPY.
Figure 1: Key Financial Charts Showing Recession Impact
April 12, 2020
Ross Young[1], CEO and Founder of DSCC conducted a webinar for SID members where he compared the 2001 and 2008 recessions and used the past to predict what might happen to the display industry due to COVID-19. The full webinar is expected to be available on www.SID.org. The first set of charts are the US GDP and the SPY for 2000 -2002 and the second set of charts reflect 2007 to 2010. In both cases, at the peak of the recessions, the GDP dipped into negative territory and that was pretty much reflected in the SPY.
Figure 1: Key Financial Charts Showing Recession Impact
Source: Ross Young, SID Webinar
[1] Full disclosure—Ross is my son
The effect for the display industry was substantial as revenue s fell by 10% in 2001 and 6% in 2009. The recovery took 2 years , but the growth in the 2nd year was either greater than or close to the predictions before the recession. The reason for the swift recovery in the 2001 recession was fast adoption of LCD monitors, whose ASPs dropped to <$1,000 a reaction to the excess capacity enabled by the recession. The display industry recovered from the 2008/2009 recession in 2010 as LCD TV panel prices were reduced to meet the bulk of consumer demand. Unfortunately, there is no analog of 2001 or 2008/2009 in 2020. The large area LCD industry ended 2019 in an overcapacity situation and prices were dropping. The small/medium LCD industry was under pressure from OLEDs, which was taking away market share at a raging clip. The expectation, therefore, is that the revival will at best be back to normal, panel makers will remain in an over capacity situation, they will continue to sell at below cash cost and continue with negative margins unlike the 2001 or 2008/9 recoveries. The growth of 5G and its adoption of OLED displays should cause a continuation of OLED smartphone growth even as the smartphone industry drops from 1.4b phones to 1.3b phones and OLED TV panel growth will remain more a function of when the Guangzhou starts MP than demand. Unlike the recessions of 2001 and 2008/9, there is no “rescue application” that will accelerate growth
Figure 2: Display Industry Recoveries
Source: Ross Young, SID Webinar
A more likely scenario for LCD makers is one of consolidation. Much has been reported on Samsung and LG’s accelerated closing of large LCD fabs, although some of Samsung’s capacity in China may be sold to local panel makers. The potential sale CEC Panda’s Gen 8.5/6 LCD capacity is reported below in the Musing on Production Section. Both AUO and Innolux have struggled for 2-years and if the capacity drop does not result in a price recovery, they will be hard pressed to compete with the Chinese and could become consolidation targets.