The mobile phone market continues to be sluggish, why are a-Si panels rising against the trend?

In the first three quarters of 2020, the global smartphone market continued to decline, demand for OLED and LTPS LCDs weakened, and prices fell, but a-Si LCD rose against the market trend. Why is this?

a-Si panel prices rise 40%

The global smartphone market is becoming saturated and is continuing to decline. According to a Counterpoint report, global smartphone shipments reached 366 million units in the third quarter of 2020, a year-on-year decrease of 4%. The decline in China's smartphone market was even more obvious. According to IDC data, China's smartphone shipments in the third quarter of 2020 were approximately 84.8 million units, a year-on-year decrease of 14.3%.

Despite the poor performance of the smartphone terminal market, smartphone panels have grown against the market trend. According to Qunzhi Consulting survey data, global smartphone panel shipments in the third quarter of 2020 were approximately 500 million pieces, up approximately 7.4% year-on-year, reaching the highest single-quarter shipment value since the fourth quarter of 2018.

The main driving force behind this wave of panel market growth is not LTPS LCD or rigid OLED, but a-Si LCD. In the third quarter, the demand for LTPS LCD and rigid OLED was weak, and prices also showed a clear downward trend. However, the mobile phone a-Si LCD market began to show signs of warming up in May, and in June, the price of mobile phone a-Si LCD began to bottom out and rebound. Qunzhi Consulting's report pointed out that in the third quarter, with the shortage of TDDI, the price of TDDI continued to rise, and the price of mobile phone a-Si LCD modules also rose. So far, the price of mobile phone a-Si LCD has risen by about 30%-40%.

Why are a-Si panels increasing in price?

The price increase of mobile phone a-Si LCD is not directly driven by the single smartphone market, but is also affected by indirect factors such as driver chips, IT panels, the epidemic, and the Huawei ban.

The recovery of overseas market demand is one of the most obvious reasons for the price increase of mobile phone a-Si LCD. The Qunzhi Consulting report pointed out that thanks to the recovery of demand in the export market, the whole machine manufacturers have a clear strategy to replenish inventory, and have increased the demand for low-end products, which has led to the price increase of mobile phone a-Si LCD.

The shortage of driver chips indirectly drives up the price of mobile phone a-Si LCD. Tianma Marketing Director Liu Qingquan pointed out that various chips are out of stock in the second half of this year. Wafer foundries will give priority to the production capacity of chips with higher profits, while driver chips with lower profits are neglected, resulting in a shortage of driver chips in the market this year. At present, the price of driver chips has risen significantly, and the price of mobile phone panels has also risen, and the price increase cycle may be prolonged.

The a-Si LCD production line has shifted its production focus to IT panels, affecting the supply of mobile phone panels. Generally speaking, the mobile phone a-Si LCD panel production line also produces IT panels. Now, affected by the online economy such as remote work and online education, the IT market demand for notebook computers, tablet computers, monitors, etc. is very strong, showing double-digit growth, and the profit is relatively high. Panel manufacturers have shifted their production focus to IT panels, resulting in IT panels occupying most of the production capacity, reducing the production capacity of mobile phone panels, and making the supply even tighter.

If online economy such as remote work and online education becomes the norm in the future, the demand for IT panels will continue to grow and the supply of mobile phone panels will remain tight; if the demand for IT panels returns to normal levels or even shows signs of decline, panel manufacturers may reallocate production capacity and the tight supply of mobile phone panels will be alleviated.

Affected by uncertain factors such as the epidemic and the US Huawei ban, mobile phone manufacturers have increased their stock of mobile phone a-Si LCDs. At present, the epidemic is still not over and there is still uncertainty. If the epidemic breaks out again on a large scale, the production of mid- and upstream supply chain manufacturers will be affected. Therefore, in order to ensure the security of the supply chain, downstream manufacturers have adopted active stocking strategies, resulting in a significant increase in demand for mobile phone panels.

At the same time, the US ban on Huawei has not been completely lifted, which is also promoting other mobile phone manufacturers to increase their inventory. If the US continues to restrict manufacturers from supplying chips to Huawei, Huawei's mobile phone sales may decline from the second half of next year, and other mobile phone manufacturers will grab the market share vacated by Huawei phones. Therefore, mobile phone manufacturers such as Xiaomi, OPPO, and vivo have increased their expectations for mobile phone sales and increased their inventory of mobile phone panels.

In general, the high market expectations of mobile phone manufacturers are transmitted to upstream panels, which may multiply the demand for mobile phone panels. For example, if the mobile phone market only increases by 2%, the demand for upstream panels may increase by 10%, because every mobile phone manufacturer wants to grab 2% of the market share and increases the inventory. At present, mobile phone brands except Huawei have raised their market sales expectations for next year and increased the inventory of mobile phone a-Si LCD to varying degrees, resulting in the inability to fully match the sales of smartphones and the purchase of mobile phone a-Si LCD.

When will the price rise of a-Si panels stop?

Currently, the smartphone market is still sluggish. When will the price of mobile phone a-Si LCDs stop rising?

Generally speaking, the future price trend can be determined by following the changes in supply and demand in the a-Si LCD market. If the smartphone market grows and the demand for a-Si LCD increases, prices may continue to rise; otherwise, prices may fall.

However, the current demand for a-Si LCD is affected by multiple factors, and changes in any one of these factors may change the supply and demand situation of a-Si LCD. Therefore, most manufacturers now tend to predict the short-term market conditions of a-Si LCD.

An industry analyst said that as the peak season at home and abroad is coming to an end, mobile phone manufacturers' stocking demand will decrease, panel manufacturers are allocating production capacity, and the price of mobile phone a-Si LCD may stop rising after December.

Qunzhi Consulting is more optimistic about the mobile phone a-Si LCD market. Qunzhi Consulting's report points out that at this stage, the terminal is operating at a high inventory level. Under the market conditions of tight supply of 4G SoC and Driver IC, there is a risk of weakening demand in the Cell market. Therefore, the price of a-Si panels may stop rising in the first quarter of 2021.

In the longer term, the mobile phone a-Si panel market may stabilize, and price fluctuations will not be as large as in the past two years. An industry insider believes that the first quarter of next year is a low season, and the price of mobile phone a-Si panels may not rise, but the second quarter of next year will have important nodes such as May Day and 618, and the price of mobile phone a-Si panels may rise slightly at the end of the first quarter of next year, so the price of mobile phone a-Si panels will remain stable in the first half of next year, and there will not be a big fluctuation.