Chinese Makers Expected to Lower Panel Prices
The author is an analyst of NH Investment & Securities. He can be reached at j.ko@nhqv.com. -- Ed.
We believe that panel prices will close this year on a decline, expecting LCD panel prices to slip from the start of the holiday shopping season in November. China’s LCD industry appears to now be entering its heyday. Going forward, Chinese panel makers are likely to offer low panel prices to set makers as it is essential to establish an entry barrier as they enter the oligopoly stage.
LCD panel prices to close 2020 in decline
LCD panel price rise is expected to slow toward 4Q20, turning downward thereafter.
In 3Q20, LCD panel prices rose as set makers increased their panel purchases in preparation for end-year holiday shopping (Black Friday in the US, the Gwanggun Festival in China, etc). We estimate that major TV set makers’ panel purchases climbed 34% q-q during the quarter, exceeding 50mn units. In 3Q20, we believe that on an area basis, LCD demand expanded around 10% q-q, exceeding supply growth of about 8% q-q. However, with low seasonality to be in play on both the supply side and the demand side, the uptrend in LCD panel prices is unlikely to sustain in 4Q20. Although it is difficult to predict the exact timing of the decline in panel prices, they are highly likely to begin falling from the start of the holiday shopping season in November. Expecting the likely 4Q20 drop in LCD demand to surpass the decrease in supply, we estimate that LCD demand will fall around 5% q-q, with supply growth to narrow 2% q-q.
Chinese LCD industry enters heyday
The global LCD industry appears to have entered an oligopolistic phase centered upon China. This oligopoly is being accompanied by a decrease in the number of LCD makers. In fact, China Star acquired Samsung Display’s Suzhou LCD facility in Aug 2020, and BOE acquired CEC Panda in Sep 2020. Moreover, Chinese players are known to be planning to continue expanding capacity and making new investments with the aim of increasing their M/Ss. Of particular note, the combined global market share (by production capacity) of China Star and BOE is projected to climb from 34% this year to 40% in 2021.
In addition, Chinese makers are expected to lower their LCD panel prices, in turn leading to set makers’ appetite for Chinese-made LCDs. We view such price cuts as being essential for Chinese makers if they are to build high entry barriers now that they have reached the oligopoly stage.