Price Overview, 1H of Oct, 2009
In late September, panel prices of monitors and notebooks marked an earlier-than-expected turning point of a downward trend – this occurred after seven consecutive months of panel price hike, amid downstream customers’ increased set cost and rising inventory level of channels.
According to WitsView’s observation, downstream clients have finalized their September price negotiation with panel makers at the end of Sep, and the results are highlighted as follows:
– Monitor panels declined by $3~5 last month; with rising inventory level in retail channels, downstream customers have begun to adjust their inventory on hand and reduce panel demand in October; therefore, panel prices will likely continue their downward trend and decline by another $5~7 in October.
– Notebook panel prices are relatively more stable than that of monitor panels as panel shipments in September benefitted from ODM and brand major vendor’s introduction of new Windows 7 models in October. Thereafter, panel demand in October is expected to be lower than that of September as downstream customers will begin to adjust their inventory levels; as a result, notebook panel prices are forecast to decrease by $2~3.
– LCD TV panel prices in September remained fairly stable, thanks to demand in Q4, the traditional hot season; only the small-sized panels, such as 26W and 32W, reduced prices by $2~3 among a few customers; prices of 37W and above are maintained. Sales performance during China’s National Day holiday has been the focus of the market, as sales performance will affect October TV panel price trend. On the other hand, as monitor panel production capacity has loosened, it is forecast that small-sized TVs price trends will be impacted and decrease by $5~10, while large-sized TV panel prices will also begin to fall due to a potential oversupply. (See figure 1)
Monitor Panel Price Update
In October, monitor panels will face considerable pressure to reduce prices, as Q4 is a key promotion period for brand vendors, competition in retail channels will incur higher management and marketing expense, and when panel prices started to drop, distributors’ losses from this price drop will be passed on to the brand vendors, therefore, several customers requested that panel makers provide price protection to offset their losses. On the other hand, downstream channel inventory has yet to be cleared away during year-end sales, therefore, demand for panels will be gradually reduced, and monitor panel prices may potentially fall between $5~7 by the end of this month. (See figure 2)
TV Panel Price Update
In Q3, retailers and TV manufacturers in China have already finalized their inventory preparation for the National Day Holiday sales. After the panel price increase, TV set cost rose substantially, therefore, Chinese TV brand vendors faced grave challenges against the cost advantage of international brands, which have the support from their internal panel supply. According to an official report by the Ministry of Commerce of the People’s Republic of China, "Three days prior to the National Day Holiday, sales boomed across all regions in China. From Oct. 1 through Oct. 3, some 1,000 key retailers in China reported a total of 14 billion yuan (about 2 billion U.S. dollars) in sales revenues, up 15% from the same period of last year, with household electrical appliances, jewelry, autumn and winter clothing, and cars leading the consumption." Particularly, "Beijing’s Suning Appliance, a leading chain retailer of home appliances, reported a 91.7% YoY increase in sales revenues on Oct. 2, and up 25.8% for the first three days of the Holiday; Shanghai’s Suning Appliance in the first three days also recorded sales equivalent that of a typical month." According to this report, sales performance in metropolitan cities during the Holiday is significantly better than expected, and international brands may therefore regain their market share. In contrast, local-Chinese TV manufacturers’ market shares may be impacted, and the process of inventory clearing prolonged, consequently reducing their demand for panels; coupled with the potential issue of oversupply in the coming weak season, October TV panel price decline is confirmed, ranging from $5~10. (See figure 3)
Notebook Panel Price Update
In September, large-sized notebook panel prices are fairly stable as panel shipments benefitted from the introduction of Windows 7 models in October, ODM and brand vendors’ shipment will likely peak in October; thereafter, panel demand will gradually decrease month after month. Market sentiments have become more conservative as monitor and TV panel prices declined. Similar to monitors, in order to retain their market share, brand vendors have invested more in management and marketing expense; furthermore, the panel price increase in Q3 has hindered downstream vendor’s profitability, therefore, as channel inventory reaches a sufficient level, downstream customers will subsequently be more pressured to request for panel price decrease, as a result, notebook panel prices are forecast to fall by $2~3.(See figure 4)
Conclusion
Panel prices have rebounded since Q1, in addition to downstream customers’ inventory replenishment, China’s electronic stimulus program has also spurred the growth of panel shipments month after month. Between June and July, glass shortage led to a substantial $10 increase in panel price, and panel demand grew in the weak season. However, after market euphoria faded, downstream inventory has gradually risen, and the issue of panel price returned to the negotiation table – monitor panel prices fell in September (earlier than expected), but both TV and notebook panel prices maintained: TV panel shipments are buttressed by sales of China’s National Day Holiday and the hot season in U.S. and Europe, while notebook panels benefitted from the launch of Windows 7 models. That said, as demand weakens after October, panel prices will be more volatile, and panel makers’ profitability will have to stand another rigorous test.
