China is the largest LCD TV market in the world and Chinese TV makers are buying many panels from Korea, Taiwan and of course China. Since the North American and European TV markets slowed down a few years ago and demand from China started to drive the global industry, attention has been shifting to the LCD TV panel inventory in China, and furthermore, the panel strategies of the so-called five big brands in China – TCL, Hisense, Skyworth, Konka, Haier and Changhong.

In China, seasonality in the TV market is strong, and TV brands tended to build inventories before the Western New Year, Chinese New Year (late January or early February), Labor Day (May 1st), and National Day (October 1st) Golden Week holidays to fulfill demand, especially for a massive geographic market with varied transportation quality. These inventory builds have as strong influence on LCD TV panel makers’ shipment performance. While the inventory builds are good for panel makers, there is always concern over whether the sell-through results justified the inventory. Chinese set makers bought a high volume of panels for the 2012 Labor Day Holiday, but according to some observers in China the sell-through results were not good. The worries of over-stocking in China rise.

In our MarketWise – LCD Industry Dynamics report, we developed a special index to track the state of panel inventories in China, by comparing monthly panel shipments to Chinese TV brands to monthly LCD TV shipments by those brands into the Chinese market.

Source: MarketWise – LCD Industry Dynamics

Our analysis shows the inventory level is still healthy even though the Labor Day sell-through was not as good as expected, due to the following points:

• In April, as global TV brands were preparing new product launches in regional markets for the upcoming London Olympics, LCD TV panel shipments to China were constrained and less than previously forecast. Panel shipments to China are likely to stay flat.
• Our research indicates that panel shipments to China will be flat or slightly decline in May, then build gradually in preparation for the October 1st holiday promotion.
• Due to pre-promotional efforts and stronger demand from rural cities, the LCD TV sales result is likely to come in at low single digit growth for the May Day Holiday.
• Sunning and some other Chinese retailers have extended the promotion period after the May Day holiday, so we expect that the inventory will fall from the current level.
• If Chinese TV makers control panel purchasing in the coming months, panel inventories may not reach a risky level, and the supply/demand result will be much different from the pattern in 2H of 2011. Unlike last year, the gap between panel and set seems to indicate that Chinese TV companies are maintaining reasonable levels of inventory.

This was reprinted with permission from DisplaySearch and originally appeared here.