In the midsummer, the LCD TV panel market has dropped to freezing point.
On June 9, two major panel manufacturers, Innolux and AUO, released their monthly operating briefings. In May, their operating income fell by more than 30% year-on-year.
At present, the price of most LCD TV panels has fallen to a record low and has fallen below the cash cost, and the operating pressure of panel factories has increased sharply. Industry insiders said that the cycle period of the panel industry is 12-18 months, and it is still at the bottom of the current cycle, and it is difficult to say that the price will reverse in the third quarter.
Panel prices continue to fall
The briefing shows that in May, Innolux achieved a consolidated operating income of NT$18.005 billion, a month-on-month decrease of 12.6% and a year-on-year decrease of 42.6%; AUO achieved a consolidated operating income of NT$21.971 billion, an increase of 8.6% month-on-month and a year-on-year decrease of 31.6%. %.
The main reason for the decline in revenue was lower panel prices. According to the price report released by TrendForce, the average price of LCD TV panels in four sizes of 32-inch, 43-inch, 55-inch and 65-inch in May fell by $3, $4, $5 and $8 from the previous month.
However, prices have not stopped falling. Sigmaintell expects that the average prices of the above four sizes of panels will drop by $2, $2, $4 and $10 respectively in June.
Prices of LCD TV panels of various sizes have fallen by more than 50% since the upturn in the third quarter of last year. Taking a 32-inch panel as an example, the average price from May to June 2021 was US$87/piece, and now it is only US$30/piece, a drop of as much as 65%.
Data source: Compiled by our reporter based on TrendForce's monthly price vane report
In the second quarter, panel factories may be in a state of loss. According to TrendForce, the price of LCD TV panels of 55 inches and below has fallen below the last line of defense of panel manufacturers in May, the cash cost (referring to the cost after depreciation and management, R&D, and sales expenses), and even close to the material cost.
Panel is a typical cyclical industry. After about 3 years of supply and demand adjustment and superimposed epidemic factors, starting from the second quarter of 2020, LCD TV panels ushered in the longest round of "price increases" in history. However, starting from August 2021, terminal demand has reached saturation, and the panel industry’s prosperity has turned downward and has continued to this day. The market generally expected that the decline in the first quarter of this year is expected to stop, but it failed to do so.
Production cuts expected to increase
Production reduction is a common practice in cyclical industries to deal with falling product prices, and the panel industry is no exception. After the expectation of stopping the decline in the first quarter failed, panel makers began to reduce the utilization rate of production lines in the second quarter, but the effect of the production reduction was offset to a certain extent by the sharply weakened demand. As panel prices of most sizes fall below the defense line, panel makers are expected to significantly increase subsequent production cuts in order to reduce price declines and inventory pressures.
TrendForce believes that the total TV panel production capacity of the three panel giants BOE, CSOT, and Huike in the third quarter is expected to decrease by 15.8% compared with the original plan. With the more significant production reduction plans of panel manufacturers, it is expected that the quotations of TV panels of 55 inches and below will show a flat trend in the third quarter.
The third quarter is the traditional peak season of the industry, and now the panel factory's production reduction means that there is no suspense in the second half of the "peak season". However, it cannot be ruled out that under the premise of continuous expansion of operating pressure, the number and scale of manufacturers who have joined in reducing production will further expand, accumulating more abundant energy for the rebound of TV panel quotations.
In this situation, the Korean factory may restart the shutdown plan. There are reports that Samsung Display will completely withdraw from the LCD (Light Emitting Diode) TV panel business in June this year. In recent years, Samsung Display has successively shut down its LCD production lines and turned to display technologies such as OLED and QLED. Samsung Display originally planned to shut down all LCD production lines by the end of 2020, but in order to ensure a sufficient supply of panels under the epidemic and a sharp rise in panel prices in the early stage, the shutdown plan was delayed.
The same is true for LG Display, a major Korean panel maker. The company originally planned to stop production of domestic LCD TV panels in South Korea by the end of 2020, but it is still operating today.
A person who has followed the panel industry for a long time judged: "Although Samsung Display's shutdown of LCD production lines has little impact on the supply side of the industry, it means that Korean companies have started to lose money again, and prices are still falling, so LG Display It is only a matter of time before the local LCD production line is shut down.”
Supply is only the price side, and whether demand can be boosted is more critical. Ovi Ruiwo said that this round of TV panel price reductions has continued for nearly a year, but due to fuel price increases, high shipping costs, and no significant price reductions in upstream semiconductors and other links, complete machine manufacturers are still facing greater cost pressures. Brand manufacturers are conservative in their expectations for global TV demand this year.
