Many Market Noises in Monitor Panel Price Trend in Feb
According to WitsView’s (a research division of TrendForce) latest survey regarding the market development in Feb11, the inventory pull-in from downstream clients has begun to weaken after the Chinese Lunar New Year. During the Chinese New Year, LCD TV sales in China reached roughly 2.7 million units. Although the market share of local brands rose, sales were mainly concentrated in the small-sized TV segment. Generally-speaking, the sales results merely met expectations. In the Japan market, as the Eco-point subsidy program draws to a close, demand is expected to drop notably. For IT products, there was no robust demand during the period between last year’s Christmas holidays and the 2011 Chinese New Year. Meanwhile, the design flaws of Intel’s new-generation Sandy Bridge chipset is expected to indirectly impact the PCs demand in Feb11. In essence, the only conducive factor underpinning the forthcoming demand will be from the launch of new models. This will help underpin the panel prices in Mar11. Yet, as the market enters a traditional slow seasonality, this support will likely be only temporary.
From a supply standpoint, amid the rapid utilization rates increases, driven by the panel price uptick that began in Nov10, and downstream clients’ early inventory preparations, the panel output stood at a relatively high point in Jan11. However, since Dec10 some of the module output continues to be weighed down by several factors in 1Q11. Specifically, Samsung and Sharp have both been conducting manufacturing process upgrades on their existing production lines, thereby affecting their respective panel output. In addition, AVIC Jonhon(SVA)’s utilization rate in Feb11 has dropped notably, due to equipment upgrades on its G5 line. The utilization rates of BOE and IVO has also respectively reduced to 35% and 65%. Meanwhile, LGD is making some adjustments to its TV panel production, while AUO and CMI are slightly adjusting their respective G5 and G6 output. In the tablet PC segment, following Apple’s footsteps, other global cell phone and PC makers have started to aggressively launch relevant 7” and 10.1” products. Despite the strong panel demand, the low yield rates have substantially consumed a huge portion of the G5 and G6 capacities. In light of the factors mentioned above, and the fact that panel makers are suffering losses, panel prices have hovered near the cash cost level for some time now. The heavy financial pressure has provided little room in terms of the price negotiations for Feb11, consistent with WitsView’s original projections that additional panel price falls will be limited.
As the market enters into Mar11, the aforementioned factors, which have more or less dampened the panel supply, will gradually ease. According to our current observations, the respective utilization rates will return to even higher levels. Coupled by continuing capacity increases, which include BOE’s G6 line, LGD’s G8.5 line, Samsung LCD’s G8.5 line, CED Panda’s G6 line, AUO’s L8B and CMI’s G8.5 second phase expansion, it will all further drive up inventory levels amid an anticipated weak market demand. The inventory build-up will definitely deal a serious blow to the general panel price trend.(see figure1)
TV panel price update
In Feb11, the TV panel demand further weakened, due to reduced orders from clients and the labor and raw material shortage at the module end. Meanwhile, the sales performance during the Chinese New Year holidays was merely in line with previous projections. In addition, both local and international brand vendors focused on the promotion of budget-priced CCFL products, rendering sales of the LED products to be much worse than expected. Consequently, LCD TV panel prices will continue to drop in Feb11. Specifically, the 32” will fall by $2~$3, while the 37W and above will decline by $5~$10. Meanwhile, the price gap between LED backlit TVs and their CCFL counterparts will continue to narrow. Coupled by the uncertain market demand, the LED TV panel price pressure will remain high.(see figure2)
Monitor panel price update
According to WitsView’s shipment survey on the downstream monitor SIs and brand vendors, they jumped notably in Jan11 over Dec10 and also during the same period of last year. This was primarily attributed to the relatively low panel price base period and early production and inventory preparations over concerns of a labor and raw material shortage in Feb11. But as the end market sales were not particularly strong, downstream clients will likely revise downward their Feb11 sales plan. The corrections on both the market supply and demand, and the fact that panel makers are already under heavy financial pressure, has created a phenomena where neither the seller nor the buyer are willing to back down on the panel price negotiations. For some sizes, where the panel price is relatively lower, such as the 18.5W, it has prompted clients to shift demand from the 19” to the 18.5W instead. Meanwhile, as strong demand was witnessed during the Chinese Lunar New Year for small-sized TVs, they are expected to inch up by $0.5~$1 in Feb11. Looking at the 19” and 22W, their prices have been underpinned by the reduced panel supply. By contrast, for the 19W, 21.5W and 23.6W, the increased output but weaker demand has resulted in a downward price pressure. Fortunately, prices are expected to fall by only $1.(see Figure 3)
Notebook panel price update
Based on WitsView’s survey of the downstream segment, NB shipments are expected to decline by 7% QoQ in 1Q11, due to the weaker-than-expected sales performance during last year’s hot selling season and discovered design flaws in Intel’s new Sandy Bridge chipset. In Feb11, shipments are projected to fall by 6.6% MoM, sliding to a relatively low point in recent months. Meanwhile, impacted by the tablet PCs, shipments of the mini-NBs will slump by nearly 30% QoQ. For Feb11, the monthly drop will also decline by 14%. In terms of the NB panel price in Feb11, they are expected to fall by $0.5~$1.5.(see figure4)
Conclusion
Given the many factors affecting the panel price development, it has been particularly complicated in Feb11. This is most notable in the monitor segment, where the different sizes have respectively exhibited varying price trends. For Mar11, amid the downstream clients’ respective sales plan, a more notable monthly sales growth should be seen, due to the lower base period in Feb11. In the forthcoming months, the panel capacity will continue to play a key role in stabilizing the market. Given the slow panel price decline, the relatively high utilization rates will help bring down costs. Taking advantage of this cost-down remains the most viable option for panel makers in offsetting the losses from the continued panel price drops. Still, if demand begins to weaken more evidently, but the panel output grows further, the resulting inventory build-up will adversely affect the panel price trend. Once prices drop too severely, panel makers can only rely on reducing their utilization rates to more effectively and rapidly solve the oversupply problem.
