Panel prices may fall below cash costs in the second half of the year, and manufacturers face production cuts

WitsView, an optoelectronics research subsidiary of research firm TrendForce, said that panel prices continue to fall, and it is already difficult for manufacturers to make profits in the second quarter. Although the trade war situation has eased, negotiations still need to continue. If the negotiations hit a snag again, causing the peak season in the second half of the year to be sluggish, the possibility of panel prices falling below cash costs may increase significantly, and operating pressure in the second half of the year will increase, and they may face the decision of whether to reduce production.

TrendForce points out that for panel manufacturers, improving cost structure has become a top priority. Since variable costs such as components are difficult to control, panel manufacturers continue to optimize manpower and product portfolios in each plant, while reducing capital expenditures as much as possible, hoping to meet the more arduous challenges in the second half of the year by reducing fixed costs.

TrendForce believes that judging from the panel price situation in the second quarter, the quotations for mainstream sizes such as 14-inch and 15.6-inch, which are the most in demand for notebook computers, are already quite close to the cash cost level, and small-size LCD monitor panels such as 18.5-inch, 19.5-inch, and 21.5-inch are also beginning to show a situation of no profit.

As for some TV panel sizes with relatively stable quotations in the first half of the year, the price increase lasted only two months, and prices began to fall again in June. Take 32-inch as an example, the current cash cost is about US$35-36 per piece, but the quotations have reached US$38-39 per piece. If the downward trend continues, it is very likely to fall below the cash cost in the second half of the year. Other sizes such as 55-inch and 65-inch are also facing the same situation.

TrendForce said that although AUO and Innolux have continued to develop new products in the past two years, for example, AUO has achieved good results in 8K TV panels and e-sports related IT panels, and Innolux has actively developed Mini LED backlight and Dual Cell products with improved brightness and contrast, the key to operations ultimately lies in profitability.

As for the cost, TrendForce said that several major components, including COF, may be in short supply, which will affect the shipment of large-size panels in the second half of the year. It seems that this has been resolved. In addition, the market is also waiting to see whether the price of driver ICs, which have not been reduced for several consecutive quarters, will begin to loosen. Since some panel manufacturers have arranged annual maintenance for equipment, the shipment area of ​​large-size panels this year will be less than expected. Therefore, when panel manufacturers negotiate prices with end customers in the second half of the year, it may be difficult to maintain a price-reduction attitude on the grounds of component shortages.