Monitor and Notebook Panel Prices to Approach the Bottom

by WitsView on Oct.06 2010

According to latest survey by WitsView, a research division of TrendForce, the inventory level among panel makers gradually went down after panel makers reduced the input capacity; under the pressure of financial loss, panel makers tried to persuade customers to accept the price to keep flat or even increase after IT panel prices fell below the cash cost.

Due to slow recovery in economy, along with the Europe debt crisis, most downstream vendors did not achieve their sales target in 1H10. In addition, panel prices posted a significant decline because of the inventory pile-up, which resulted in the retailers’ weak demand and the insufficient confidence toward the market. 4Q10 is the traditional hot season for consumer electronics which is also the last quarter for downstream vendors to strive for their annual sales performance. In order to spur consumer purchase, downstream vendors hope to launch aggressive price promotions to clear away the inventory on hand.

The sales performance during China National Day holiday is considered the first indicator for consumer purchase in 4Q10. Meanwhile, LED TVs will draw the largest attention in the market which also heats up the competition between the international and local brands. However, panel makers face the continued decline in CCFL TV panel prices; thus, for them, whether the international brands or the local brands tops the market share, brands’ aggressive sales promotions as well as the increasing LED panel demand will benefit both the financial result and the shipment volume.(See figure 1)

TV Panel Price Update

The sales performance of China National Day holiday is the main focus in the market in October. According to China Top6 TV Brands Monthly Panel Demand Report, panel demand from China top 6 TV brand vendors arrived at 3.5M units in August, growing by 60% MoM; of which, the procurement volume of LED panels accounted for 25.8% of the total demand which targeted at the sales during the Moon Festival and China National Day holiday. However, panel demand was estimated to fall by 23% MoM in September, indicating that panel demand will become weaker after China National Day holiday. On the other hand, for the sales performance during the holiday, we expect that with the in-house panel supply as well as the cost advantage in LED supply chain, international brands such as Samsung, Sony, Sharp and LGE will top their rivals with lower prices, and further to gain more market share in China.

Since TV demand in North America remained weak earlier, LED TV sales was also worse than expected, leading to the relatively high inventory level among downstream customers and retail channels. Additionally, the leading Korea brands have started to increase the panel procurement volume strategically within their respective groups which certainly caused a significant impact on Taiwan panel makers. In order to fight for customers’ orders by the end of the year, the pressure of TV panel price decline persists.(See figure 2)

Monitor Panel Price Update

From WitsView’s observation toward downstream customers’ current condition, the month October is not only the year-end in HP’s fiscal year, but also the quarterly-end of 3Q10 among most vendors. Therefore, in order to start up the distribution for the year-end hot season, shipments from downstream SIs and brand vendors posted a large increase in August. On the other hand, the panel prices fell below panel makers’ cash cost; additionally, panel makers have begun to reduce G5 glass input tremendously, and adjust some of G6 capacity. Hence, stimulated by the growing demand as well as the financial adjustment, panel makers and several downstream customers try to persuade customers to accept the price to keep flat or increase. Due to the limited supply, prices of 17”, 19W” and 19” will potentially become more stable, and even increase moderately under the relatively lower prices earlier. Yet, it is noted that the buildup of inventory among downstream customers and retail channels may not be able to clear away promptly. There is still around two months before entering the year-end hot season. Thus, under the premise of unclear market structure, the degree of price rebound may not as strong even if the prices hit the bottom.(See figure 3)

Notebook Panel Price Update

According to WitsView’s latest survey on the shipments from downstream SIs, since the actual end-market demand was not substantial, the growth momentum in August and September was mainly from the distribution for year-end hot season and the pressure of issuing the financial report at quarter end. As far as we understand, the panel and set inventory among downstream customers are still high. However, panel prices of mainstream 14.0W and 15.6W may be approaching the material cost among panel makers, so the further decline in prices is limited. In spite of that, panel makers’ competitions with each other remained intense. The booming sales of Apple iPad triggered another competition in tablet segment. Brand vendors began to throw themselves into the development in tablets which sprang up a tablet fever in non-brand and copycat market. The public merely focused on tablets and shifted the market’s central issue. Thus, that the competitive tablet market will bring either the positive or the negative impact to the notebook segment will have to wait till later to find out.(See figure 4)

Conclusion

Under the pressure of reduced IT panel production and the financial loss, panel prices will possibly rebound through strategic manipulation. Yet, TV panel prices remained constrained by the supply glut, leading to the continued panel price falls. That CCFL models still accounted for at least 80% sales of the overall flat-panel TV market was neglected because of the marketing hype in LED TV. Therefore, in order to fulfill the capacity at G8 and above, the average size of TV has to be increased to 40” rapidly rather than stay at around 33~34”. While the capacity at G8 and above could be successfully digested, the global supply will be able to reach the actual balance. It is clear that it still takes a while to achieve the target.

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