Price Decline in LCD TV Panel Market to Continue in 2Q18

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Prices of LCD TV panels of all sizes have been decreasing since the end of 2Q17, and have not shown any sign of stop so far, according to the latest report from WitsView, a division of TrendForce. In 2Q18, TV panel prices will show further decline for various size segments compared with 1Q18: the 32-inch by 20%-22%, the 43-inch by 13%-15%, the 49- to 50-inch range by 12%-14%, the 55-inch by 9%-11%, and the 65-inch by 14-16%.

BOE has begun to ship panels of 65-inch or above this March after its 10.5 fab entered mass production, indicating the price war among large-size (65-inch or above) panel makers will go more intense, says Jeff Yang, the assistant research manager of WitsView. The aggressive entry of 65-inch panels has been a potential threat for 55-inch ones, the current mainstream products. The demand for 32-inch panels will be lower in 2Q18 as vendors’ stocking up for the World Cup has come to an end, resulting in continuous price decline for this size segment.

BOE’s Gen 10.5 fab entered mass production, starting the price war among large-size panel makers

Normally, panel manufacturing startups in China will operate at full production capacity as soon as possible in order to obtain government subsidies, so the return of investment and depreciation expense are not the main considerations for them. BOE's gen 10.5 fab entered mass production in this March, and plans to reach the monthly production volume of 80,000 pieces before the end of this year. The economic 65-inch and 75-inch panels are estimated to be shipped in large quantities. Particularly, 65-inch ones will be the main product, considering its market size and good yield rate in new fabs comparing with 75-inch. In addition, CEC-CHOT’s and CEC-Panda Chengdu’s Gen 8.6 fabs also joined the competition in this March and May respectively, which will inevitably influence the demand for current mainstream sizes produced by Gen 8.5 fabs such as 32-inch, 43-inch, 49-inch and 55-inch products.

On the demand size, the market is also not very positive. First of all, TV vendors actively shipped products at the end of last year, aiming to boost the sales goals. However, the performance in the end market was lower than expected, so vendors end up with a high level of inventory. Second, the stocking up for the World Cup has also come to an end in late 1Q18. Last, the market is full of uncertainties due to the US-China trade war, so vendors tend to be more conservative in purchase in 2Q18.

Demand for small size to decrease as the stocking up for the World Cup ends

The 32-inch products has always been the driver of small-size TV market. The panel prices directly affect the brands’ pricing strategy for TV products. Entering the second quarter of 2018, the demand for 32-inch panels has gradually weakened, but the overall supply remained the same, resulting in a steeper price decline for this size segment and lower prices of 32-inch TVs as well. Even 55-inch panels will see a steeper price decline faced with the pressure brought by 65-inch panels’ price drop. In sum, it is difficult for the overall price falling to stop in the second quarter, as production capacity for large-size panels rose and supply for small-size panels dropped.

The Pressure for Panel Makers May Ease in 2H18 if the Demand Recovers in Peak Season

Regarding the third quarter, the US-China trade war and the promotion during China's retail event on June 18th will be the key to the demand recovery. If the demand recovers in the peak season, the pressure for panel makers may be eased. However, if the demand is lower than expected, it is not ruled out that panel prices will continue to drop to the point approaching cash costs. In that case, how to achieve the balance between market share and cost pressures will be a key problem that panel makers cannot avoid.