Large-sized panel shipments drop moderately in December; order visibility unclear in 1H09
According to WitsView’s survey, worldwide large-size panel shipments in December reached 25.15 million units, down slightly by 2.6% MoM. On a YoY basis, they slumped by 23.9%. Although the general end market demand remained uncertain, a stronger pull-in effect occurred during December. This stemmed from the fewer working days in Jan09 and downstream vendors’ preparations for the upcoming Chinese Lunar New Year sales promotions. Coupled by the year-end inventory accounting, panel suppliers aggressively tried to clear away their unsold inventory in minimizing their losses. These factors led to a better-than-expected shipment performance during Dec08.
NB (12.1” and above) panel shipments reached 7.94 million units in December. As a NB panel inventory built-up occurred, due to weak end market sales in 4Q08, the Korean players aggressively tried to reduce their stock by securing more panel orders. This resulted in a small 1.0% MoM NB panel increase in December. In the monitor segment, shipments were down by a mere 0.1% MoM to 10.45 million units. As mentioned above, shipments were underpinned by the panel makers’ inventory clearing. Finally, TV panels experienced the biggest drop among the 3 main applications, where it fell 10% MoM to 6.76 million units. The fall was mainly attributed to the persisting macroeconomic woes and sluggish sales of higher-end TV sets.
Figure1: TFT-LCD Panel Shipment in Dec-08 (K units)
The aggregated large size panel area shipments in December dropped from November’s 4.72 million square meters to 4.28 million square meters, down 9.2% MoM. On a yearly basis, a double digit decline continued, tumbling by 20.8%. NBs increased by 2.1% MoM to 544K square meters, due mainly to the panel makers’ inventory clearing. TV and monitors were down respectively by 14.8% and 1.2% to 2.48 million and 1.25 million square meters. Generally speaking, in the wake of the deteriorating global economy, the smaller and cheaper TV products have become a popular choice among price-conscious consumers. Falling demand of the more expensive bigger-sized TV sets has thus led to a lower consumption of large-sized glass substrates.
Figure2: TFT-LCD Panel Area Shipment in Dec-08 ( K square meter)
TV Panels
In December, TV panel shipments maintained their downward fall, where they were down by 10% MoM and 14.4% YoY to 6.76 million units. Due to the macroeconomic woes, retail prices have become the deciding factor on the TV panel shipment trend. The 26”W and below TV shipment ratio grew sequentially by 2.8 percentage points in December. Meanwhile, the inventory clearing and persisting panel price falls lifted the mainstream 32”W shipment ratio by 3.5 percentage points. Together they accounted for 45% of the aggregated TV panel shipments. As for the 40”W and above, their shipment ratio fell notably by 5 percentage points, an indication of their sagging demand. For the time being, small and cheap TV products are expected to see continued growth.
NB panels
In December, NB shipments reached 7.94 million units. Although up by 1% MoM, it was equivalent to a YoY decline of 20.6%, a clear indication of the sluggish NB end market. The main growth driver was from the Korean panel makers’ inventory clearing. In contrast to November, their NB panel shipments experienced a 14.7 percentage point growth. Size-wise, little changes were witnessed in the aggregated shipments. However, the 17”W was up sharply by 5.1 percentage points, due to the Korean makers’ strong sales promotions.
Monitor panels
The aggregated monitor panel shipments in December reached 10.45 million units, down by 0.1% MoM and 30.9% YoY. After the adjustments in 2H08, the monitor inventory has become more stable. There are also signs of prices hitting bottom soon. But whether an actual price rebound occurs depends largely on the status of the upstream and downstream supply chain and the general market fundamentals. Meanwhile, based on December’s figures, shipment ratio increases included the (16:9) 15.6”W, 5.6”W, 20”W, 21.5”W, 23”W and (4:3) 15”, 20.1”, 20.1”W.
Review of 2008 and what lies ahead
In 2008, a total of 405 million large-sized panels were shipped. Compared to the 371 million figures in 2007, this amounted to a YoY growth of 9%. TVs increased 19.4% YoY to 97.47 million units. Meanwhile, NB grew 17.4% 127.75 million, while monitors slipped by 0.6% to and 179.46 million units. Since 2005, it was the first time monitor panels witnessed a negative annual growth among the three main applications. Coupled by the slowing growth of TV and NB panels, it showed the exceptionally harsh conditions faced by panel makers in 2008.
Figure3: TFT-LCD Panel Shipment in 2007 and 2008 (K units)
Following a serious tight supply in 2007, downstream vendors aggressively pulled-in inventory in 1Q08. In addition, announcements were made regarding their respective next-generation production line investments. Back then the general consensus was that 2008 would be another banner year for panel makers. But this started to change in 2Q08 when the monitor panel demand started to falter. The resulting accumulated inventory eventually led to a severe drop in panel prices. But as panel makers continued to maintain high utilization rates, a very serious glut occurred.
The panel market was subsequently pounded by the global economic slump triggered by the financial crisis that erupted in 3Q08. Despite being the traditional strong season, panel shipments slumped. This not only further worsened the already unhealthy monitor panel inventory, it also dragged down sales of the higher-priced large-sized TVs. Downstream clients were forced to significantly cut their orders, resulting in panel makers to engage in a fierce price competition. The effect on the Taiwan and China panel makers was most evident, due to a lack of a strong own-brand support. Since 4Q08, panel makers sharply reduced their output and manpower. Separately, with no evident rebound, the exceptional strong netbook sales made them a rising star. Although the low-priced NBs helped stimulate a new sales momentum, the overall NB sales was still showed a weakening trend. By the end of 2008, there were also signs of a built-up in inventory.
Having encountered the challenging year in the history of the TFT-LCD industry, panel makers have trimmed their utilization rates, capex and relevant personnel. In addition, they have also conducted a complete review of their business operations. As the panel order visibility remains low in 2009, the most important thing to do now is securing more stable orders from major clients. In addition, they should stop abiding by their conventional management styles and focus on finding new product applications, clients and market segments in countering the slowdown. Examples include further development of moni-TVs, low price and customized display products or tailoring to the needs of new emerging markets. Moreover, a basic production flexibility should be maintained in order to be able to take rush orders. Finally, staying informed of the latest panel price trend, downstream vendors’ inventory pull-in and relevant global economic indicators are vital too. Such factors will help shed light on when a rebound will be seen.
