Panel Price Pressure Persists in August Due to Huge Cut in Panel Procurement

by WitsView on Aug.06 2010

Based on WitsView, a research division of TrendForce, amid inventory problem and weak demand, panel price appeared to post a larger decrease in August.

It was forecast that 3Q10 panel supply would be tight, so panel shipment increased greatly to meet downstream vendors’ aggressive restocking in 2Q10. Therefore, as we previously predicted in the beginning of the year, 3Q10 panel demand may be weaker than usual. Moreover, sales performance in Europe and China retail channels was lower than expected, which resulted in the rising panel and set inventory among downstream vendors. On the other hand, panel makers’ cell and module inventory is on the rise because downstream vendors have to reduce panel procurement to digest the build-up inventory. The pressure of inventory closeout remained in the supply chain, leading to a fairly marked impact on panel price and demand.

In spite of that, we still hold an optimistic perspective toward 2H10 sales performance in retail channels. First of all, 2H10 is the traditional peak season, including back to school sales and other sales promotions for China National Day, Black Friday, Christmas and the New Year holidays, so sales performance in 2H10 may be more outstanding compared to that of in 1H10. Second of all, to reach the annual target by the end of the year, brand vendors will need to focus on sales performance in 2H10 since it was generally weaker in 1H10. Panel price decrease will contribute set cost reduction. Then brand vendors will be able to use the incentive to stimulate consumers’ purchase to achieve the annual goal.(See figure 1)

TV Panel Price Update

The weak end-market demand and the inventory problem caused the TV panel price to drop sharply since the end of July. The sales turnover in retail channels was slow, resulting in the rising inventory. Furthermore, both CCFL and LED TV sales were lower than anticipated. It is preliminarily estimated that 32W and above product price decline may exceed $10 per unit. Although TV panel extended its decline, TV products were still more cost-competitive than IT products which posted larger decrease. The price drop also motivated downstream vendors’ restocking in preparation toward 4Q10 peak season.(See figure 2)

Monitor Panel Price Update

Based on WitsView’s observation, brand vendors targeted on inventory adjustment and reduced panel procurement volume tremendously in July, resulting in the larger-than-expected panel price decline. On the other hand, since inventory closeout was still the priority in August, panel demand remained weak. Therefore, the inventory pressure among panel makers was on the rise. Monitor panel price is estimated to fall by $5, recording a larger decline compared to that in July. In addition, price protection was requested by downstream clients, which weakened the price trend in August as well. Since the price of monitor panel with CCFL backlight slumped, panel makers’ attitude toward LED monitor panel price quote turned into conservative. They aimed to make up the revenue loss, caused by CCFL product price decline, by stabilizing LED product prices.(See figure 3)

Notebook Panel Price Update

According to the panel shipment survey conducted by WitsView, large-sized (>11.6W) notebook panel shipment jumped by 16.6% QoQ while shipment from downstream SIs merely grew by 6%. Inventory pressure persisted among downstream clients, as well as the uncertain end-market demand. As a result, large-sized notebook panel price also faced the pressure of price cut, estimated to decrease by $3~4. Under the booming sales of Apple iPad, coupled by the fading netbook segment, netbook’s market share is gradually shrinking.(See figure 4)

Conclusion

In the beginning of the year, WitsView took a rather conservative attitude toward 2010 market forecast, and indicated that an oversupply may occur in Q3. The current market condition is far worse than that we predicted earlier in Q1. It mainly attributed to the panel makers’ 2Q10 aggressive shipment and clients’ aggressive restocking. On the other hand, since Q2 was still the traditional slow season, end-market demand was not as strong as expected. Instead, inventory problem will damage Q3 profitability. The market condition in Q4 remained unclear, yet panel price fluctuation and capacity adjustment will be the critical factors to determine the market trend.

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Panel Price Pressure Persists in August Due to Huge Cut in Panel Procurement

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