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© werner de coster dreamstime.com Analysis | November 06, 2013

Dropping supply eases Q1’14 NB panel price drops?

According to the latest LCD panel price survey by WitsView, the NB panel prices in Q1 next year may ease drops and stabilize as panel makers plan to largely cut supply.
Some Wedge panel prices may reach bottom in Q4 this year, while the LCD TV panels continue to drop and may reach bottom in March and April next year, depending on panel makers’ utilization adjustments. As for monitor panels, some sizes show small price drops in this traditional slow season even with panel makers’ trimming supply, which relies on utilization adjustments for easing price drops.

NB Panel Price Trend

As NB panels hold lower profits and the end demand shows no signs of recovery, the 2103 NB panel shipment drops significantly with a forecast of 178 million units, declining 21-22% YoY. Panel makers remain conservative on the 2014 NB panel business plan, and the annual drop will reach as much as 25% based on top five (SDC/LGD/INX/AUO/BOE) panel makers’ initial business plan. As panel makers continue to carry out differentiations on products specs, including the high resolution and the wide-viewing angle, the structural short supply will emerge in H1’14, which helps ease panel prices if the capacity reduction is taken into account.

Besides, the slimness and power-saving remain the long-term goal for products, and as panel makers plan to cut Wedge type panel supply in 2014, and consumers prefer low-priced models, brands will increase inventories in hands on the psychological fears of short supply, leading to a slightly tight panel supply and demand of the sizes such as the 15.6”.

Monitor Panel Price Trend

As the sales of smart phones and tablets stir largely consumers’ demands for mobile devices, the LCD monitor shipment continue to trim. On profit concern, panel makers strategically cut the monitor panel supply since last year and keep this year’s market balanced. According to WitsView’s survey, the 2014 LCD monitor panel supply will continue to decline to 145 million units, dropping 10% YoY. The overall monitor panel prices will still depend on the demand and supply in the TV market and panel makers’ utilization adjustments.

LCD TV Panel Price Trend

As the LCD TV has the open cell as the main shipping type, the panel makers maintain profitability based on the current cost structure even with the deeper-than-expected price drops. To secure the cost advantages, the utilization must remain high, lifting the panel glut supply pressure, especially the 55”- and-above products seeing intensifying competition with the newly added G8.5 capacity. The 65” panels will see price war declaring early in the current quarter. Panel makers’ ability to gain profit will clearly be challenged from Q3.

The key lies in if panel makers can appropriately control the operation of new and old capacities, which would help trim the Q1 panel prices. With the new models being launched in March and the restocking demands for China’s May 1st holidays and World Cup Games, the prices of the range 32”-42” may stabilize in March and April. As SDC and BOE’s G8.5 fabs in Suzhou and Hefei will be operational, the prices after May are hard to foresee. Contrarily, if panel makers hold the utilization as elevated as now, the price may continue to decline to Q2 with the new capacities. As brands and retail channels cannot bear the price losses, the demand may freeze in H1’14, which would be too late to reduce production.

WitsView research director Burrell Liu says that the 2013 large-sized panel (7” with 1024x600 and up) is expected to see a glut ratio rising to 9.8%, a more apparent oversupply than that in 2013. With China’s subsidy policy ending, slow global economic recovery, and panel makers’ utilization showing no adjustments according to market changes, the market will see another oversupply along with the new capacities. Panel makers, seeing profits narrowing, have indeed to handle carefully the situation and think about the solutions.

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