Price Overview, 1H of Nov, 2009
China’s National Holiday TV sales performance was in line with market expectations, and consequently eased concerns of high inventory build-up, and boosted downstream customers’ confidence towards Chinese New Year TV sales during 1Q10. The optimism further encouraged TV makers, both Chinese and international, to gear up for TV sales in advance and pull ahead panels required. This move effectively buffered the potential price drop due to anticipation of the slow season.
Additionally, a power outage occurred at Corning’s glass furnace in Taichung Science Park, Taiwan; however, the impact to the overall glass supply is quite limited – this is because panel demand has entered a down cycle, and many panel makers had already planned to reduce their panel production in an effort to prevent the price plummet witnessed in 2008. Seeing that panel supply may be tight, downstream customers did not substantially decrease their panel demand.
Therefore, according to our assessment of panel price trends this month, under the condition that market confidence continues panel prices will still slide, but the decline may be less steep than expected. (See figure 1)
Monitor Panel Price Update
Monitor panel prices will still fall in November, although the drop will be fairly moderate, this is mainly because adjustments in the market took place early, in 3Q09, and panel makers had allocated more capacity to the production of TVs panels, which have relatively higher demand. Moreover, several panel makers’ production lines were impacted by the tight supply of glass substrate, which eased concerns of panel oversupply. In addition, stimulated by downstream customers’ optimism toward sales in 1Q10, panel demand increased in the slow season, and buffered the price decline. Therefore, prices are forecast to decline by $4~5. (See figure 2)
TV Panel Price Update
TV sales during China’s National Holiday grew substantially compared to last year, which dispelled concerns of rising set inventory, and encouraged positive outlook towards sales in 1Q10. On the other hand, compared to the poor sales performance last year, this year, backed by global economic recovery, the market holds an optimistic outlook towards sales performance during the Christmas holidays and New Year. Additionally, in late October, a power outage occurred at Corning’s glass furnace in Taichung Science Park, Taiwan. The incident inevitably led to speculations that panel supply from Taiwan-based panel makers may be reduced due to potential tight glass supply. In the past, downstream TV makers have suffered from panel price hikes; now, the declining prices ease the pressure from high set cost is and help to maintain the basic panel demand. TV panel prices are forecast to fall by $5 on average, which is more moderate than previously anticipated. (See figure 3)
Notebook Panel Price Update
Windows 7 operating system stimulated shipments of large-sized NB panels, this in turn stabilized panel prices in November. Size-wise, strong demand was seen in 17.3W and 15.6W, with Europe and the U.S. as their main market. On the other hand, ULV single-core models declined heavily as their CPU performance did not match expectations; 13.3W models were the ones most heavily impacted. Looking forward, a majority of ODMs expressed, in their recent financial reports, optimistic outlook towards 4Q09, and substantially increased their projected YoY growth rates for next year; this also stirred up much excitement in the large-sized notebook and netbook market. Hence, NB panel prices are expected to merely dip by $1~3 in November. (See figure 4)
Conclusion
This year, the monitor market rebounded earlier than expected, and adjustments in the market also took place ahead of the schedule, therefore, the overall inventory level is still fairly healthy. TV panel demand remains strong, stimulated by impressive sales performance during China’s National Holiday and potential tight glass supply; therefore, even with the coming slow season, price declines will be buffered. Similarly, backed by healthy inventory level and the launch of Windows 7 models, NB panel prices are also quite stable.
Additionally, after panel makers announced their 3Q09 financial results, it is evident achieving profitability on an annual-basis would be a challenge for Taiwan-based panel makers. Therefore, impacted by decrease in both demand and price, adequate reduction of panel output is crucial. Even though such reduction could affect their market shares, it helps to secure panel makers’ capital strength in the event of any negative market conditions. That said, the current price position still allows room for profits, therefore, most panel makers will still endeavor to sell as many panels as they can. Yet, once high inventory build-up occurs in downstream channels, panel makers will suffer the consequence.
