LCD panel prices continue to plummet, and the decline may continue until the second quarter of next year

Since the second half of this year, with the cooling of market demand and the gradual easing of upstream component shortages, panel manufacturers have increased their production capacity, the supply and demand pattern of LCD panels has begun to reverse, the market has turned from prosperity to decline, and product prices have fallen sharply. After setting the largest monthly drop in history in September, LCD panel prices were still in a stage of sharp decline in October.

As Korean manufacturers postpone their exit from the LCD market and domestic manufacturers expand their production capacity, industry insiders expect panel prices to continue to fall until the second quarter of next year. However, one variable is whether the shortage of raw materials caused by power restrictions will affect panel manufacturers' production or price trends.

The industry is accelerating its reversal, and panel prices are plummeting

Since 2020, the epidemic has led to an increase in home demand, and the demand for LCD panels used in tablets, laptops, TVs and other fields has surged. In addition, the shortage of upstream components has affected supply, resulting in a continuous increase in LCD panel prices, which has continued to rise from May last year to June this year. The industry has also ushered in the longest price increase cycle in nearly 10 years.

However, as the tension in upstream raw material supply gradually eased, panel manufacturers continued to increase their production capacity. Coupled with the rapid decline in terminal market demand, the supply and demand pattern of LCD panels began to reverse, and LCD TV panel prices began to fall in July.

Dong Min, deputy secretary-general of the China Electronic Video Industry Association, told Jiwei.com, "With the increase in overall supply and the improvement of production efficiency, panel prices will generally spiral downward."

According to the latest quotes from WitsView, the prices of TV panels of all sizes have fallen across the board. Among them, the prices of 32-inch and 43-inch small and medium-sized TV panels, which started to fall in price in July, returned to US$44 and US$78 in October, down 21% and 23% month-on-month in October. The high point of the 32-inch panel in the middle of the year was US$88, and the price dropped by 50% in just a few months, directly halving.

Medium and large-sized TV panels also weakened, with 55-inch panels experiencing the heaviest decline, dropping by $40, or 21.6%, in a single month; 65-inch panels dropped by $30, or 12%. The 55-inch and 65-inch panels were priced at $145 and $220, respectively, at the end of October.

CINNO told Jiwei.com that the recent LCD panel prices, especially large-size LCD prices, have continued to fall rapidly, mainly because the panel prices and international shipping prices were previously high, and part of the overseas stocking demand shifted to the first half of the year, resulting in continued sluggish overseas demand in the second half of the year and an overall oversupply situation.

Faced with the rapid decline in panel quotations, AUO Chairman Peng Shuanglang admitted that in previous years, panel factories could still ship in October in time for the peak shopping season in Europe and the United States. This year, due to the shortage of materials and containers, which led to longer delivery times, demand for consumer products was weak, resulting in the early end of the peak season. Consumer TV panel prices have fallen sharply, and brand customers have also revised their orders.

As the market supply and demand reversed, TV manufacturers, as the demand side, also showed a tough attitude towards panel manufacturers. A terminal brand person said, "This high price is unacceptable. If you don't lower the price, you will cut the purchase volume in half." As the price of LCD panels continues to fall, it also affects the operating performance of manufacturers related to the panel industry chain.

According to statistics from Jiwei.com, although the net profit attributable to the parent companies of the two major panel manufacturers, BOE and TCL Technology, still maintained a relatively fast growth trend in Q3, it has declined significantly compared with the growth rate in the first half of the year. For example, the growth rate of BOE's net profit attributable to the parent company dropped from 1023.96% in the first half of the year to 430% in Q3, while TCL Technology also dropped from 461.55% to 175%.

BOE pointed out that in the third quarter, due to the congestion of sea transportation and the increase in logistics costs, the willingness of downstream customers to stock up was affected, and the prices of TV products underwent structural adjustments. TCL also said that in the field of large-size business, the prices of major products fell back from the high level in the third quarter due to the disturbance of logistics and demand in some regions of the world. In addition, due to the fluctuation of the upstream supply chain, the quarterly profit of the large-size business declined on a quarter-on-quarter basis.

In addition to panel manufacturers, module, polarizer, reflective film and terminal brand manufacturers also experienced varying degrees of decline. In particular, the net profit attributable to the parent company of polarizer manufacturer Shenzhen Textile dropped significantly from 10543.24% in the first half of the year to -91.91% in the third quarter.

Overall, as panel prices fell, the operating performance of panel manufacturers and industry chain companies was also greatly affected. Compared with the first half of the year, the growth rate of net profit attributable to shareholders of most manufacturers in Q3 narrowed or declined.

Terminal manufacturers' inventories are high, and the decline may continue until Q2 next year

At present, the supply-demand ratio of LCD panels continues to expand. Fan Boyu, deputy general manager of TrendForce's display research department, pointed out that the delay of Korean manufacturers' withdrawal from the TFT-LCD market and the launch of a new round of expansion plans by many panel manufacturers have gradually eased the market supply and demand. It is expected that the supply-demand ratio of large-size panels will increase from 5.4% this year to 7.3% next year.

It is foreseeable that panel prices will remain weak for some time. Whether they can create another opportunity for a rebound will test how panel manufacturers adjust their utilization rate, product mix and profit level.

"LCD panels have been in a state of sharp decline recently, especially in September, which recorded the largest monthly drop in history. It is expected that the decline in panel prices will narrow by November, but the decline or stable state of panel prices will continue for a while. At present, it will continue until the second quarter of next year." Dong Min told Jiwei.com, but one of the variables is the shortage of raw materials caused by power rationing, and how much impact it will have on panel supply.

According to data from Aworev, power restrictions in some parts of the country have caused the capacity utilization of LCD panel supply chain manufacturers to drop to around 60%, while the output of panel components and LCD modules has dropped by about 30%. However, it also said that China's panel factories have not been affected by power supply restrictions so far, but manufacturers are reducing production to cope with the continued decline in panel prices.

CINNO analysts also expressed a similar view that in order to cope with the decline in panel prices, panel manufacturers have begun to reduce their utilization rates. In addition, the impact of power restrictions on the upstream and downstream of panel manufacturers has begun to emerge, and it has become difficult to maintain high utilization rates.

Although panel manufacturers have begun to adjust their utilization rates to ease the pressure from oversupply and high inventory, the high inventory levels of terminal brands still affect market demand. Dong Min said, "In July this year, the inventory of terminal manufacturers was very high, and some leading brands almost reached a historical high. As they predicted that the panel price would fall, the leading brands also cleared their inventory. However, due to the preparation for National Day and Double 11, the current inventory is still at a high level."

Regarding the timetable for the withdrawal of Korean manufacturers and their impact on the LCD panel market, Dong Min said, "Samsung Display has withdrawn a lot of production capacity, with only one 8.5-generation line left in production, while LGD has not withdrawn yet. The impact of the change in business strategy of Korean manufacturers on the entire market is not just a reduction in supply, but a change in the overall market sentiment, which will amplify the difference between supply and demand."

In the face of falling LCD panel prices, BOE said it still maintains its judgment that the panel cycle is weakening. The current decline in TV market prices is actually a correction to the previous rapid price increases. The company does not want industry prices to rise or fall too quickly, but hopes to maintain relative stability.

TCL founder and chairman Li Dongsheng also stated at the performance exchange meeting that the cyclical fluctuations in the panel industry will be significantly weakened in the future.

Regarding the changes in the industry cycle, Dong Min said, "The panel industry is currently moving out of the off-season cycle, but it is actually quite difficult to fully move out of the cycle. With the recovery of terminal market demand, panel prices may stabilize and rebound after the second quarter of next year."