Seasonal weakness depressed TV and NB panel pricing in April

by WitsView on Apr.13 2011

According to the observation on market development trend in April by the research department WitsView under TRENDFORCE, the panel price has been supported by the greatly enhanced production and sales plans among downstream customers as compared with what happened in February. The impact of earthquake in Japan on short-term panel supply has been limited mainly because panel makers still have 5 ~ 6 weeks of cells and module inventory and 4 ~ 6 weeks of material inventory in their hands. Therefore there should not be any shortage of panel supply before middle of May. As for the materials (such as ACF and ITO targets) for panel production which could be affected after May, panel makers have been actively seeking alternatives. Related upstream raw material suppliers in Japan have also been picking up the pace of restoration of production to avoid losing potential customers due to earthquake effect. However, the earthquake effect on the key parts for sets may be the focus of observation by mid May, while portable products may receive the heaviest impact. The panel orders from downstream customers may be affected if there is shortage of materials for the sets by then.

The second quarter has been the traditional low season for the market, so the visibility of demands for monitors and TV products will not be high. Being squeezed by Tablet PCs, the market growths of Regular NBs and Netbooks will face slow down or even regression. Even though the May 1^st holiday in Mainland China should provide a boost to the demand for LCD TV panels, our current observation indicates that the sales plan for May 1^st holiday among Chinese TV makers have come back to normal level after rapid growth of LCD TV in Chinese markets in the past two years. The main hot sales seasons will still be in the second half of the year, while the demand for TV panels in the global market is still relatively weak. (See figure 1)

TV Panel Price Update

The demand for TV from global end market in the second quarter appears to be weak. From the tracking and observation of panel procurement quantity of top six TV brands in Mainland China listed in WitsView’s survey, the total procurement quantity has shrunk to 1.4M in February. Although the procurement quantity in March has grown almost 70% from February, it still shows a YoY regression. This means the stock preparation prior to May 1^st holiday in China is not enough for significant improvement on the over-supply situation. On the other hand, after the closure of Eco-point subsidy, domestic market demand in Japan must take a rather notable regression in 2011 regardless of earthquake impact. The falling trend of panel price is inevitable with this ambiguous end demand. However, as time goes by, panel price has been gradually reduced to a level lower than cash cost such as there will not be too much room for further price drop in the future. From the supply perspective, due to notable level of inventories in the first quarter among panel makers, they have been rather careful with production capability control in light of slow demand, and first priority will be the inventory reduction. Plus the effect of earthquake on productions of Japanese panel makers, the supply-demand environment is in favor of the following price hitting the bottom. (See figure 2)

Monitor Panel Price Update

According to WitsView’s survey on the shipments of downstream monitor OEM makers and brand makers, although the production and sales plans in April have been reduced from the peak in March, downstream customers have been rather careful with panel procurement by keeping inventory within reasonable range after hard lessons learned in 2010. Under the pressure of profit loss, panel makers still hold on to the strategy of raising price if possible because TV panel price is still going down. However, the market is in low season in the second quarter with ambiguous demand visibility. Therefore customers will only accept reasonable price hike. We predict the price trend in April to follow the pattern in March fluctuating between 0~1.5 dollar increase according to supply-demand status of different panel sizes. (See figure 3)

Notebook Panel Price Update

According to WitsView’s survey on the shipments of downstream OEM makers, the production and sales numbers of large-sized NBs and Netbooks in April have declined from the numbers in March. The red-hot Tablet PCs not only brings huge impact on Netbooks, but also squeezes the market of large-sized NBs such that the QoQ growth of the second quarter could be lower than original market forecast, and this will work against the panel price rebound. In addition, although the earthquake has little short-term effect on NB related parts (such as upstream materials for batteries and CD-ROM ), the speed of recovery of supply chain after mid May will still be the key factor for the shipment of brand makers from the end of second quarter to the third quarter. (See figure 4)

Conclusion

The end market performance in second quarter could be worse than original forecast, and we have to take into consideration the negative impact of earthquake in Japan. However, considering the low price, low profit and low inventory, the hot season demand in the second half of the year should be expected. The unstable global political and economical situations and continuous rising crude oil price are going to induce more severe inflation issues; although the White House has reached initial agreement with the Republican Party on budget cut proposal to avoid the dilemma of closure of some government agencies, it is expected that government capital spending will be further tightened; Japanese government has asked civil servants and government officials to take pay cuts to finance the earthquake reconstruction funds; Portugal has formally requested for financial aid from European Central Bank; Asian countries have adopted more stringent policies against rising housing price to avoid the crisis of housing bubble due to influx of hot money. The following impacts on TFT-LCD industry of all aforementioned negative factors must be carefully watched.

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