MarketWise – LCD Industry Dynamics Update, February 2015

By Deborah Yang

displaywall-0315The LCD industry is changing rapidly and in order to catch up with the dynamics more frequently, we publish MarketWise-LCD Industry Dynamics every month. Here are key takeaways from the February report.

  • Chinese mobile phone brands are willing to shift to high-end models with low-priced LTPS high resolution panels. This trend may affect smartphone brand share in 2015. The Chinese brands may be able to increase their share, like they did last year.
  • Merchant color filter makers are developing on-cell touch with panel makers. In-cell and on-cell touch panels (due to the cost advantages of TDDI, which integrates the driver IC and touch controller into one chip) have become major components of the smartphone application.
  • Increasing concerns about the mixed trend in panel supply/demand may lead to different pricing scenarios starting in Q2. TV makers may reset their annual business plans lower to achieve better profits, while some panel makers have been encouraged to be aggressive with panel supplies like 32”. These developments are increasing concerns that a correction will occur in Q2’15.
  • BOE outpaced China Star as the largest supplier of 32” in January. BOE will ramp up its Gen 8.5 fab in Chongqing in Q2, and the first product will be a 32” HD panel. It is worth following BOE’s production strategy at this new fab.
  • In January, shipments of 4K TV panels decreased sharply, down 29 percent M/M. They represented 7% of total TV panel shipments, a noticeable decline from 10 percent the previous month.
  • There were signs of a shift in bargaining power in late February, and the price pressure on some sizes, in particular 32” and 55”, and 4K models is increasing. Some leading TV brands are even starting to ask for the market refunds from their captive panel suppliers to make up for TV business losses in Q1’15.
  • Some panel makers agree that it is about time to lower prices within a reasonable range to help TV makers promote new products in the market without losing profit because this will be healthier for the LCD TV industry. However, there has not yet been a clear sign that any panel maker is willing to make price concessions, and panel makers have different views concerning price erosion trends for FHD and 4K models.
  • We don’t rule out the possibility of a sharp price correction. Increasing financial pressures have become a priority issue for top brands. If panel makers do not make reasonable price concessions then some brands may slash panel demand in March to pressure panel makers into lowering prices sharply.
  • Some TV makers are trying to push prices down by as much as 15% or more for mainstream sizes like 32”, a level at which TV makers can somewhat manage profits and maintain aggressive shipment targets and panel makers can still make a profit.
  • Some Korean leading TV brands may slash their aggressive stretch business plans by 10% to secure profits. This is a difficult decision for TV brands to make from a competitiveness and procurement strategy perspective, but it is worth watching to see whether other industry peers do the same with their business plans and how it will influence supply/demand in Q2 and their strategies for 2H’15.
  • Sales results for the recent Chinese New Year holiday are not yet clear, but without a doubt those results are critical to understanding the extent of demand corrections not only by the top Korean brands but also the Chinese TV brands whose morale has been low in recent quarters.
  • Panel makers lowered their targeted shipments to Chinese TV makers by 10 percent for February, 2 percent for March, and 8 percent for April, implying that panel makers have become cautious toward real demand from Chinese TV makers. Some are shifting their panel allocation priority to non-Chinese TV makers that maintain firm demand.
  • Five of the top six Chinese TV brands decreased LCD TV shipments to the Chinese domestic market by 7 percent Y/Y in 2014. Hisense was the exception. This was the first decrease in sales volume for China in years. Display area grew by 5 percent Y/Y thanks to the quick adoption of larger-sized LCD TVs.
  • Since mid-2014, AliExpress has become the largest online sales website in Russia. It is becoming the equivalent of Amazon, but it is just a marketplace. This will be a major portal for TV sales for China. There are plenty of Chinese brands on the site, not just leading TV brands but also other emerging TV brands like Xiaomi, LeTV and Lenovo.
    The results from AliExpress are worth watching because top global brands are concerned that an emerging market like Russia will be troubled for a long time, and it will be interesting to see how much risk
  • Chinese brands are willing to take.
  • Notebook PC OEMs reported weak demand in Q1 and do not expect a recovery in Q2. Some OEMs started quoting lower assembly prices to get PC brands to pull in partial production volumes from Q3 to June.
  • Orders for 9.7” tablet PC panels have significantly dropped in Q1’15. Even sizes like 10.1” were purchased by brands, and white-box companies were unable to cover during this weak demand season.
  • Monitor brands adopted 20.7”W TN panels to lower the risk from the 19.5”W TN supply issue in 2H’15. This panel is supplied solely by BOE and has become a necessary backup to the 19.5”W TN panel.
  • In the US, there was pressure on retailers to have strong January TV sales due to excess inventory carry-over from 2014 holiday promotions. The Super Bowl was at the beginning of February, and the final weeks of January was the last major opportunity for retailers to sell 2014 models before the new models are introduced.
  • In China, the major local brands are carrying eight to nine weeks inventory, which is a little higher than normal. TV exports remained flat in January.
  • In Western Europe, inventory clearance before the introduction of the 2015 models has started, but it appears to be relatively gentle. A surge in 4K promotions at low prices has stopped.
  • In Eastern Europe, Russia saw a surge in sales as consumers cleared TV sets from retailers before prices increased due to a currency decline. January’s sales reportedly crashed to half what they were in 2014.