Prices May Sink into the Downturn Risk in Jan

by WitsView on Jan.10 2011

TV panel demand was revised downward in December, 2010, whereas the utilization rate of TV panel still remained fully-loaded. The oversupply concern resulted in the continued panel price falls. Nonetheless, since both buyer and seller’s ends undertook relatively heavy financial pressure, the price decline was getting limited and approaching to the cash cost level. In January, the estimates for CCFL TV panel price decline is around $3~10, and 32W and below is less than $5. (See figure 2)Based on the latest survey conducted by WitsView, a research division of TrendForce, because of the poor weather condition as well as the depreciation of the euro, 4Q10 retail sales in Europe and the US market was flat. In the Asia-Pacific region, on the other hand, the hot money inflows and the continued strengthening Asia currencies became the major catalyst for purchase, so the end-market demand appeared relatively impressive. However, the overall performance in the consumer market in 2010 clearly indicated that low pricing products remained consumers’ first choice. On the other hand, the innovative and user-friendly concepts make Apple the primary beneficiary in 2010, and the booming sales of iPad further brings the tablet fever to another level in 2011.

Downstream demand reduced with the approach of the Chinese New Year (CNY) holiday. However, panel makers are likely to adjust the utilization rate moderately in January. Therefore, oversupply in panels may emerge again, which is unfavorable for the price trend in January. Nevertheless, after the panel price decline over 2H10, prices have stayed at around the cash cost level for nearly half year. In addition, 4Q10 price increase apparently was not as strong. Hence, since the financial pressure remains heavy, panel price decrease may still be limited – monitor and notebook panel prices may only drop by $1~2 because of the controllable inventory level at the current stage. In TV panels, the prices have extended the decline since 2010, and the profitability level continues to be squeezed. CCFL TV panel price decline is estimated to fall by $3~10 in January, which is sustained by demand for the CNY holiday as well as the launch of new models. Since the modification of LED BLU structure on TV panels further brings down the cost, LED TV panel price is expected to drop more significantly. (See figure 1)

TV Panel Price Update

In January, TV panel demand is mostly triggered by the shipments of new models, and some are from the preparation for CNY holiday. Yet, 4Q10 end-market sales failed to impress. The main growth momentum mainly derived the CCFL models on sales, while LED TV sales remained sluggish that the old model inventory was not able to be cleared away. In order to boost end-market demand, brand vendors try to roll out entry-level LED TVs. However, the mass production of new projects was postponed because it took more time to design in the cost-improved LED TV panels.

Monitor Panel Price Update

Downstream monitor SI and brand shipments showed a MoM decline in December, 2010, and the Christmas sales in Europe and the US may also be affected by the winter storm. In January, downstream customers still take a relatively positive attitude toward the production and sales, because they mainly target on the demand for CNY holiday and are concerned for the labor shortage problem as well as the fewer working days in February. Hence, downstream shipments in 1Q11 are likely to remain unchanged or merely record a slight decrease QoQ.

However, since the inventory replenishment for panels has been started up since last Q4, panel prices once again encounter the pressure of declining under the premise of reducing panel demand as well as the unclear end-market sales. The estimates for the price decline is $1~2. (See figure 3)

Notebook Panel Price Update

Based on WitsView’s survey on downstream SI and brand shipments, notebook shipments posted a MoM slowdown in 4Q10. Currently, the notebook giant Acer pointed out that sales in Europe was weaker than expected, so the market may further concern for the Christmas sales. On the contrary, panel shipments grew MoM in 4Q10 from the preparation for the new models which adopted Intel’s Huron River platform with Sandy Bridge CPU. Nevertheless, since the preparation came to an end, panel demand may turn weaker while entering January. Thus, the oversupply problem motivates downstream customers to request panel makers for lower panel prices. Moreover, panel makers also hope to secure the orders with special deals in prices and quantities. As a result, notebook panel prices may decline in January. (See figure 4)

Conclusion

In terms of the development of tablet PC in 1H11, iPad-like devices are mushrooms to the tablet segment, and non-brand vendors as well as local telecom companies will also become other driving force in addition to the brand vendors. Currently design concept between mobile and PC players remain different in software, hardware, ID and contents. Eventually consumers will decide which one will dominate. In the meantime, netbook share will be pushed out sooner than expected with the rise of tablet touch devices.

The factors such as the storm damage in Europe and the US, the relatively high utilization rate and weaker demand expose the market to the risk of oversupply in January. As the CNY holiday sales result will be clear after February, any critical factors will dramatically change the market trend. Therefore, the market status after January becomes volatile.

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