The author is an analyst of NH Investment & Securities. He can be reached at email@example.com. -- Ed.
Affected by the spread of Covid-19, LCD panel prices are rising amidst unfavorable LCD production conditions at Chinese panel manufacturers. We expect LCD panel prices to remain favorable for the time being. Although Korean panel manufacturers are reducing their exposure to the LCD business, they should still enjoy some benefit from the boost to LCD panel prices.
LCD panel prices to remain favorable in near term
Given the impact of Covid-19, we believe that utilization rates at Chinese LCD panel manufacturers are sluggish. In detail, the average utilization rate for global LCD panel makers in February is likely to drop to around 70% (vs our previous forecast of 82%). And, global LCD panel production in February will also likely fall at least 12% (16mn m² → 14mn m², panel size basis) compared to our previous projection. Of note, as Covid-19 continues to disrupt LCD panel production, LCD panel prices are continuing to climb.
As LCD panel makers are now in a position to enact preemptive price hikes, it is highly likely that LCD panel price increase will sustain for some time. However, upon any weakening in Covid-19 effects, LCD panel prices are likely to decline. We note that two Chinese 10G facilities (BOE B17 and CSOT T7) are planned for operation in 2020, with an expected combined contribution to global LCD supply of 13% (8G-conversion basis).
Korean panel manufacturers to see some benefit, despite declining LCD business
With LCD panel prices trending upwards in the near term, Samsung Display and LG Display (LGD) should enjoy some benefit. However, as both firms have been reducing production capacity for LCD TVs from 2H19, such benefits are unlikely to be significant. Samsung Display’s major LCD TV panel facilities include L7-2, L8, and Suzhou, and the company is suspending some L8 production lines. In the event of complete L8 facilities shutdown, Samsung Display’s LCD TV production capacity will likely shrink from 509K/month to 214K/month. Meanwhile, LGD’s LCD TV panels are mainly produced at its P7, P8, and Guangzhou plants, and the firm is now suspending operations at both P7 and P8. If the P7 and P8 plants shut down completely, LGD’s LCD TV production capacity is estimated to fall from 438K/month to 210K/month.