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Musing on Displays
Mixed Results in May LCD Panel Pricing
May 10, 2020
When COVID-19 caused China to shut down travel, particularly during a holiday that is considered the biggest travel period in China (Chinese New Year), some LCD and OLED fabs were left understaffed. While lower than normal production in February is not unusual at Chinese panel fabs, the inability of workers to return to work after the holiday caused considerable disruption, not only to the fabs themselves, but to the overall display supply chain. South Korean and Taiwanese fabs were less affected early on (down 8% and 1.6% in US$ respectively in February), while China panel production was down 11.4% (in US$) during that same period. Coming out of February all regions were up and the overall display space increased panel sales over 31% m/m as workers returned to fabs and panel producers turned up the panel production spigot. May will be a difficult month for panel pricing, because the industry is in a mini-transition, or actually mini-transitions. In a more normal environment, it would be relatively easy to understand the impact of Samsung Display and LG Display’s withdrawal from the large panel LCD production market and how that would affect the industry, but the mini-transition is complicated by the COVID-19 outbreak, which is causing a second mini-transition based on its effect, first on supply and then on demand. As the pandemic began to wan in China in April it reached epic proportions in the rest of the world. Panel makers quickly built panel inventory, sometimes aggressively ordering extra components to ensure supply, causing components suppliers to experience excessive demand and panel pricing increases were expected. Just a few months earlier, panel producers were lowering utilization rates to slow the decline in panel prices after months of declines, but began to see increases in pricing once the industry had lowered inventory levels. But it was impossible to see how fast and widely the virus would spread, and how it would affect demand, which is the ‘other’ mini-transition the industry is facing. The pending supply side excess became a slowing of demand. In April, Samsung Display signaled it was reducing production for the month of May to reduce inventories, and all hopes of panel price increases disappeared. Without a reoccurrence of the virus, demand in Europe will begin to return in June and trend to near normal levels by September. Demand in North America will likely take a bit longer, but could experience a more vigorous snap back. Panel makers in Taiwan and South Korean are taking a relatively conservative stance. Chinese panel producers being more aggressive. Panel pricing will be under pressure (primarily TV panels) for May, June and to a lesser degree in July, with a more stable pricing environment in 3Q, with a return to stability in 4Q. This scenario assumes the practices of the past will be followed and no new breakout of the virus in the fall. LCD price changes in May and June include:
Mixed Results in May LCD Panel Pricing
May 10, 2020
When COVID-19 caused China to shut down travel, particularly during a holiday that is considered the biggest travel period in China (Chinese New Year), some LCD and OLED fabs were left understaffed. While lower than normal production in February is not unusual at Chinese panel fabs, the inability of workers to return to work after the holiday caused considerable disruption, not only to the fabs themselves, but to the overall display supply chain. South Korean and Taiwanese fabs were less affected early on (down 8% and 1.6% in US$ respectively in February), while China panel production was down 11.4% (in US$) during that same period. Coming out of February all regions were up and the overall display space increased panel sales over 31% m/m as workers returned to fabs and panel producers turned up the panel production spigot. May will be a difficult month for panel pricing, because the industry is in a mini-transition, or actually mini-transitions. In a more normal environment, it would be relatively easy to understand the impact of Samsung Display and LG Display’s withdrawal from the large panel LCD production market and how that would affect the industry, but the mini-transition is complicated by the COVID-19 outbreak, which is causing a second mini-transition based on its effect, first on supply and then on demand. As the pandemic began to wan in China in April it reached epic proportions in the rest of the world. Panel makers quickly built panel inventory, sometimes aggressively ordering extra components to ensure supply, causing components suppliers to experience excessive demand and panel pricing increases were expected. Just a few months earlier, panel producers were lowering utilization rates to slow the decline in panel prices after months of declines, but began to see increases in pricing once the industry had lowered inventory levels. But it was impossible to see how fast and widely the virus would spread, and how it would affect demand, which is the ‘other’ mini-transition the industry is facing. The pending supply side excess became a slowing of demand. In April, Samsung Display signaled it was reducing production for the month of May to reduce inventories, and all hopes of panel price increases disappeared. Without a reoccurrence of the virus, demand in Europe will begin to return in June and trend to near normal levels by September. Demand in North America will likely take a bit longer, but could experience a more vigorous snap back. Panel makers in Taiwan and South Korean are taking a relatively conservative stance. Chinese panel producers being more aggressive. Panel pricing will be under pressure (primarily TV panels) for May, June and to a lesser degree in July, with a more stable pricing environment in 3Q, with a return to stability in 4Q. This scenario assumes the practices of the past will be followed and no new breakout of the virus in the fall. LCD price changes in May and June include:
- Notebooks - +0% to +0.5%
- Monitors - +/- 0.3%
- TV – Small sizes - -4% to 6% (as some sizes are in short supply)
- TV - Large sizes - -1.5% to -3.5%
From SCMR, LLC
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Barry Young
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