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Musing on Displays
 
LCD Prices Continue Dropping and Panel Makers Respond by Lowering Utilization
July 29, 2019
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The LCD industry expected to see more stable panel pricing as it enters 3Q, which is technically the beginning of the holiday build period and also touches on both ‘back-to-college’ and ‘back-to-school’ retail inventory stocking, and notebook and monitor panel pricing were down relatively small amounts (-0.1% and -0.3% respectively), but TV panel price reductions made it apparent that July was not going to be the ‘savior’ month that would set the tone for more stable pricing in 3Q.
 
TV panel prices dropped by 4.6% in July, but that average includes a number of panel sizes that are no longer being priced and remain fixed for averaging.  Look at active TV panels, the price drop was 6.2% for the month, and some TV panel sizes were down almost 8%, due to utilization reductions at a number of panel producers, inventory reductions and relatively weak demand. Buyers use these opportunities to withhold orders anticipating or prompting further reductions. The axiom that ‘panel prices cannot fall below cash costs’, is not remotely accurate, In 2Q, the industry saw 0.5% sequential increase and 2.4% Y/Y growth in sales, after a very difficult 1q (-12.1% sequential and -0.7% Y/Y) and a number of panel producers saw incremental sequential sales results, but those oriented toward TV panel production will have a hard time in 3Q if the kind of pricing seen in July manifests itself throughout the quarter.
 
Small panel pricing was also weaker than expected in July, and again looking at only active panel sizes, smartphone pricing was down 4.6%, far more than the averages below would indicate as Samsung shifted more production to independent design houses, which destabilized smartphone panel pricing. Such large price drops in two very prominent panel segments make it almost impossible to spot trends, and as each panel producer responds differently, with some lowering utilization and others finding themselves in the middle of capacity expansion, pricing becomes a guessing game.  If panel producers are willing to cut production further, there is a chance that inventory levels can be reduced enough to generate some pre-holiday pricing stability, but that is still a big if, and with 26% of the 3Q quarter already completed, further cuts would have an increasing impact on 3Q results.