Back to Normal for Samsung TVs?
According to the Chinese trade press, Samsung is planning to resume ordering TV panels from suppliers after halting those orders in mid-June. While no sources were named or quoted the gist was that Samsung’s TV inventory, which ballooned to 16 weeks in June, was now at a more normal 8 weeks and the company was ready to place orders with its panel suppliers, BOE (200725.CH), Chinastar (pvt), Innolux (3481.TT), and AU Optronics (2409.TT). The sources go further in that they blame Samsung, the share leader in the TV market, as the reason for the downturn in the display space, as they ‘did not notify their supply chain for over a month’ when inventory levels became too high.
While we expect Samsung, as did most other brands, was want to acknowledge that the demand side was weakening, but to be accurate, the best indicator that TV demand was weakening would be the price of TV panels, which peaked in July 2021, and was certainly a visible sign to the entire display supply chain, including panel producers, who decided to continue to produce at levels that would maintain positive gross margins despite the obvious signs that something had changed. Additionally LCD capacity additions and greenfield expansion projects continued to be announced, financed, and constructed through much of the downturn and utilization rates that should have been cut in March, were maintained by almost all panel producers until they were forced to make those cuts in June.
It would be wonderful if Samsung was able to reduce 16 weeks of TV inventory down to 8 weeks in what amounts to 9 weeks during a highly inflationary period, but with the lower demand seen for many CE products in recent weeks, making that assumption still seems to be a bit of a stretch. More likely Samsung is doing what all TV brands typically do in late August and that is to begin ordering enough components to meet expected demand for the holiday season. Jumping to the conclusion that everything is back to normal in the TV space is ignoring what really caused the problem in the first place, over capacity and over-ordering, along with the assumption that the COVID induced out-performance of late 2020 and much of 2021 was the ‘new normal’. Optimism is OK but being overly optimistic carries the same number of potential negatives as does being overly negative.
While we expect Samsung, as did most other brands, was want to acknowledge that the demand side was weakening, but to be accurate, the best indicator that TV demand was weakening would be the price of TV panels, which peaked in July 2021, and was certainly a visible sign to the entire display supply chain, including panel producers, who decided to continue to produce at levels that would maintain positive gross margins despite the obvious signs that something had changed. Additionally LCD capacity additions and greenfield expansion projects continued to be announced, financed, and constructed through much of the downturn and utilization rates that should have been cut in March, were maintained by almost all panel producers until they were forced to make those cuts in June.
It would be wonderful if Samsung was able to reduce 16 weeks of TV inventory down to 8 weeks in what amounts to 9 weeks during a highly inflationary period, but with the lower demand seen for many CE products in recent weeks, making that assumption still seems to be a bit of a stretch. More likely Samsung is doing what all TV brands typically do in late August and that is to begin ordering enough components to meet expected demand for the holiday season. Jumping to the conclusion that everything is back to normal in the TV space is ignoring what really caused the problem in the first place, over capacity and over-ordering, along with the assumption that the COVID induced out-performance of late 2020 and much of 2021 was the ‘new normal’. Optimism is OK but being overly optimistic carries the same number of potential negatives as does being overly negative.
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