The Outlook
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On a longer-term basis, we expect 2026 to be a mixed year, with display shipment growth within a range between -2.4% and +0.5%, with the lean toward the negative.  This will reflect on panel producer utilization rates, which we expect to be lower than this year, especially early in the year.  We do expect area growth in 2026 to be between 2.5% and 3.7% as ultra-large displays (~100”) grow as a percentage, but we caution that we expect average area growth to slow over the next few years as physical limitations keep ultra-large sets from growing larger.  On the plus side of the average panel area equation is  less fab depreciation and cost reductions for Ultra-large panels, which should make them more viable to the average customer.  On the minus side are the physical size limitations that these panels require.
Conclusion: Display Panel Market Shifts to Rational Supply Management Amid Demand Volatility
The October display panel shipment data reflects a swift correction in the consumer electronics (CE) market, shifting from two months of unusual strength to a sharp 15.8% month-over-month decline. This drawdown was driven by a combination of weakening consumer spending and an inventory correction by CE brands that had over-ordered in prior months.
Crucially, the response from dominant panel producers, particularly in China, signals the continuation of a strategic pivot toward rational supply management. By reducing fab utilization instead of aggressively cutting prices to maintain market share, a past practice enabled by generous government subsidies, manufacturers are prioritizing stable profitability over volume at all costs. This is a fundamental change in market dynamics, suggesting a healthier, more mature industry outlook less susceptible to catastrophic price collapse or sharp upward movement.
Looking ahead, the market faces a mixed-growth environment in the longer term. While unit shipments are forecast to see minimal to negative growth in 2026, the Area Shipment metric is expected to show positive growth (2.5% to 3.7%). This divergence confirms the continuing trend of larger-sized displays (e.g., 100" ultra-large TVs) driving the average yearly panel size higher, albeit with physical and cost limitations keeping some of that growth in check..
We focus on this trade-off: weak unit demand points to consumer conservatism, but the strategic reduction in supply and persistent area growth indicates a disciplined market structure that is better equipped to support panel maker financials despite the cyclical headwinds.  While we expect these factors to support a more stable display space in 2026 real consumer demand will drive shipments with a somewhat negative outlook for the 1st quarter.  Inventory levels coming out of the Christmas/New Year holidays will play into that equation, but we are still to early into the holiday season to estimate early 2026 inventory levels.

Panel sales out of Taiwan for September were strong as expected, but that only tells a part of the story as it was well-known that on a general basis brands were filling inventory levels in anticipation of the upcoming holiday season.  That said, October demand for CE product in general has been weak and we already mentioned that a number of major panel producers have scheduled utilization cutbacks for this month in order to tighten supply/demand balance.  This lessens the value of the September and 3Q data as we expect a change for October.   Here’s the September and 3Q sales data for the three Taiwanese panel producers:

Based on 5-year averages, October is typically a down month (m/m) for the two large panel producers and an up month for Hannstar, as they are primarily a small panel producer and September is typically (5-year average) the month with the highest number of smartphone releases.  Here’s what October panel sales typically look like for the three Taiwanese panel producers, so we are not expecting October to be better than the averages based on the utilization rate cuts and weak demand.

The US National Defense Authorization Act (H.R. 3838 -119th Congress) is a massive appropriations bill that sets policies and authorizations for fiscal 2026 for the DOD, security programs for the Department of Energy and the Maritime Administration, and authorizes appropriations for the Defense Nuclear Facilities Safety Board and the Naval Petroleum Reserves.  Most importantly here, it modulates the US defense acquisition system to expedite the delivery of capabilities and materials to our Armed Forces.  The House of Representatives recently passed an amendment to this vast appropriations bill that could have relevance to the CE space.
While the final wording has yet to be published, what we have seen indicates that the bill could bar the Armed Forces from purchasing displays, particularly ‘advanced displays’, such as OLED or more specialized display modalities, if they are backed by the Chinese or Russian government.  Again the exact wording is important and yet to be revealed, but that could easily mean that any Chinese display producer that is receiving government subsidies could be considered to be ‘supported’ by the Chinese government and banned, and we believe all Chinese panel producers receive at least some government subsidies.
Using this amendment, the government could ban all display purchases from Chinese panel producers, giving an advantage to Samsung Display (pvt), LG Display (LPL), both based in South Korea, Sharp (6753.JP), based in Japan, and AU Optronics (2409.TT) and Innolux (3481.TT), both based in Taiwan, along with a number of small panel producers outside of China.  More specifically,  relating to OLED, the amendment would allow the US to ban both large and small OLED displays from all six Chinese OLED producers.  While the DOD categorizes display purchases by program, making it difficult to get a total display spending budget for a particular year, estimates for this year are substantially over $1b. Whether the US government will choose to use this amendment as a bargaining chip in its ongoing trade negotiations with China is yet unknown, but they have it in their pocket if the need it.

As panel producers begin production for the upcoming holiday period, they are negotiating with brands for next year’s shipments.   Rather than the rigid contracts that were the mode used years ago, current contracts are flexible and build in clauses that can adjust to changing economic conditions, and tend to include both long-term agreements for more generic panels, and shorter-term metrics for more specialized panels.  Samsung Electronics (005930.KS) is the largest purchaser of LCD TV panels as their display production affiliate Samsung Display (pvt) does not produce LCD panels, and purchases over 40m TV set panels from suppliers each year.  With 8 major LCD panel producers, Samsung has TV set panel production contracts with most, if not all, TV set panel producers.  Depending on the size of the producer, Samsung can represent between 5% and 30% of the producer’s capacity for the year, making these negotiations quite important and critical to the profitability of panel producers.
Years back BOE (200725.CH) was high of Samsung’s list as China’s largest LCD panel producer and among the lowest cost producer for many panels, however competition for Apple’s display business and conflicts over incentive fees reduced BOE’s share of Samsung’s LCD TV panel purchases to between 3% and 4%.  However, after a few visits from BOE officials talk out of South Korea indicates that Samsung and BOE might have settled their differences, giving BOE a chance at bringing it supply contracts with Samsung back up.  Expectations are for BOE to have a roughly 4% share of Samsung’s TV panel purchases next year, but if the settlement rumor proves true, that share could increase to as much as 10% next year. 
Samsung has an additional consideration next year.  LG Display (LPL), a supplier of LCD TV set panels to Samsung, sold their Gen 8.5 LCD fab in Guangzhou, China to Chinastar (pvt), which will reduce LG Display’s share of Samsung’s TV set panel business next year, but at the same time it creates another problem for Samsung.  Now that the Guangzhou fab is owned by Chinastar, who is already Samsung’s largest LCD TV panel supplier, that LGD supply contract is now Chinastar’s, and that pushes Chinastar over Samsung’s ‘production maximum’ .
We expect Samsung settled the conflict with BOE, in part, to give it the option to reduce its dependence on Chinastar and increase it reliance on BOE, leading to the current negotiations.  The production maximum mentioned above is not a legal or financial point, but one of risk, with too much of Samsung’s TV set panel purchases coming from one supplier a dangerous position that has hurt Samsung in the past.  By increasing BOE’s share, Samsung can reduce Chinastar’s share and reduce its overall supplier risk. 
OMDIA breaks out estimates for Samsung’s LCD TV set panel purchases for 2024 and this year, which we show below, along with our forecast of share under two BOE scenarios.  Scenario A is our current forecast, using a conservative share for BOE, while Scenario B is more aggressive, with Samsung reducing Chinastar’s share by increasing BOE’s.  It is too early to tell how this will play out and Samsung does not have to make a final decision yet but given the number of units Samsung is expected to purchase next year (40m+) the stakes are high.

Taiwan’s three major panel producers saw an unusual variance in performance for August.  The largest of the three, AU Optronics (2409.TT) saw a 17.3% m/m increase in sales ($809.68m US), although down 9.2% y/y and almost right on target against the 5-year sales average for August.  On a cumulative y/y basis, AUO is up 0.6%, essentially flat with last year.  Innolux (3481.TT), saw sales decline 3.0% m/m but up 1.0% y/y, although down substantially against its 5-yr. average for the month.  On a cumulative y/y basis Innolux is up 4.6%.  Hannstar (6116.TT) is a different entity as it is primarily a small panel producer.  Hannstar saw a m/m decline in sales of 3.9% but a 38.4% increase in sales on a y/y basis, indicating how poor last year was for the small panel market.  That said, Hannstar’s results were still significantly below its 5-year average, but again, on a cumulative y/y basis, Hannstar was up 25.4%.
All in, AUO continues to keep a close handle on balancing its panel production and maintaining a steady revenue flow and will likely see easy comparisons for the next two months based on the weakness seen in 3Q and early 4Q last year.  Full year results will depend on the build into the holiday period and so far brands have remained mildly optimistic, pointing to a flat to slightly up year for AUO.  Innolux seems to have found a groove this year, with monthly results slightly above last year, but again, the full year for Innolux will depend on the next two months, particularly September, as last year September was the strongest month in the back half, which must be duplicated for Innolux to stay ahead of last year.  While Hannstar is certainly ahead of last year’s results, the back half of this year does not look particularly strong from a demand perspective unless you are a producer for Apple (AAPL), which we do not believe Hannstar is.  It will certainly be a better year than last but still a poor showing against the company’s 5-year averages.

​Last week we noted that Taiwanese panel producers AU Optronics (2409.TT) and Innolux (3481.TT) had been ‘suggesting’ to employees that they might extend their weekends or holidays as demand for CE products, particularly TVs, slowed in 2H.  Many companies have cited the tariff related pull-ins as the cause for the reduced demand, and while panic has not set in yet, suggestions of this type are becoming more common, along with caution concerning 2H expectations.
This puts a number of panel producers who were basking in profitability during the early part of this year in a more questionable position for the full year.  This cautious attitude seems to have spread a bit to South Korea where LG Electronics (066570.KS) is offering voluntary retirement packages to workers in its MS Division (Media & Entertainment Solutions) that is responsible for TV set and appliance sales.  The packages are surprisingly generous, with severance of up to 3x current salary (based on tenure), along with tuition support for children..  Such packages are being offered to those over 50 years old or those with poor performance records, something the company has not done since 2022 and 2023.
LGE saw some impact from weaker TV set demand in 2Q, with operating profit taking a more than 46% drop y/y, leaving the MS division as the only one that saw an operating loss for the quarter.  As both LGE and Samsung Display (pvt) no longer produce LCD TVs, they are dependent on Chinese and Taiwanese producers for TV set displays and modules.  The tariff uncertainty and the control over pricing that Chinese LCD panel producers have over the market have made it difficult for LGE to compete with Chinese brands in many markets, and as demand slows, LGE’s  ‘early retirement opportunities’ seems to indicate another road of belt tightening as 3Q develops.   Most pure play CE companies are feeling at least some pressure as they move closer to the holiday season, unless they happen to have a finger in the AI ecosystem.
To us the bigger question is  not 3Q, but whether the tariff mishigas will continue in 2026.  If that is the case and we get another year of tariff deadlines, postponements, and threats, we do expect that affected companies will begin to accept this ‘new order’ and resign themselves to the fact that they will have to pass on the tariff costs to consumers, rather than eat the cost in the hope that things will be resolved soon.  We are hoping this scenario does not play out and most tariff issues are resolved this year, but with more than 3 years to go with the current administration, there is always the chance another bogey will appear and disrupt the CE space once again.

As we have noted previously, pull-in panel buying to avoid tariff changes has been rampant this year, particularly in 2Q.  While Chinese LCD panel producers remain relatively quiet, Taiwan’s two LCD large panel suppliers have indicated that they expect a weak 3rd quarter and potentially a weak 2H.  AU Optronics (2409.TT) saw both June (↓9.3% m/m & ↓13.1% y/y) and July (↓4.6% m/m & ↓15.9% y/y) large panel sales weaken, while Innolux (3481.TT) saw weak sales in June (↓1.1% m/m & ↓1.2% y/y) but better results (↑4.1% m/m & ↑9.1% y/y) in July, although those results also include non-display sales.  Utilization rates among large panel producers fell below 80% in June and are expected to average ~75% in 3Q, and while that is not panic level, it is weaker than the upper 80’s and even low 90’s that were seen in 1H.
Both Taiwanese large panel producers have been encouraging non-production line employees to extend vacations, going as far as suggesting three days off every two weeks and extending official holidays by a day or two, neither of which have been popular with employees.  Of course the company-speak is for “a flexible business strategy” and a need for personnel to “recharge” to maximize productivity and efficiency in the future, but it is obvious that there does not seem to be enough demand to maintain utilization levels as they were earlier in the year.  As LCD panel producers struggle to maintain profitability prices for their most profitable panels, those for TV sets, continue to decline, with relatively little demand to sustain current pricing levels in 3Q.  Perhaps US inventory levels will come down a bit before the holidays, allowing utilization to rise a bit before the holidays but demand does not seem to be there yet.  Again, not at the panic stage but certainly keeping a few panel managers up at night.

Not surprisingly May was another uneventful month for Taiwanese panel producers as the ever volatile trade situation leaves both producers and consumers with little understanding of what to expect.   CE product status quo seems to be to keep inventory levels in the US relatively high, despite weak demand, anticipating a potential change in the current tariff situation.  As we get closer to July, when the most recent tariff postponement is  set to expire, we expect shipments to increase to get them over the US border by July 9, although some are beginning to doubt whether the ‘reciprocal’ tariffs will ever be implemented, at least for our more significant trading partners.
Panel sales in Taiwan, which are reported monthly, indicated that May m/m sales for the two large panel producers (AU Optronics (2409.TT) and Innolux (3481.TT)) were between -1.4% and +4.5%, relatively minor changes,  and with little or no change in May panel pricing, shipments also look to be flat, leading to another month of watching and waiting.   Given that inventory levels remain on the high side in the US, we expect brands will maintain current or slightly lower production levels until the 9th of July, before planning the seasonal holiday build.  Much will depend on the ongoing tariff situation, but we expect there will be less of a rush to build holiday inventories this year than last, and given the recent reductions in CE product forecasts for the year, we expect brands to remain cautious, regardless of the tariff situation .  

The three panel producers in Taiwan, given the fact that they are required to report monthly sales, tend to be a precursor to general display industry trends, and as such we track sales data for all three.  On a general basis AU Optronics (2409.TT) and Innolux (3481.TT) are oriented toward large panel production while Hannstar (6116.TT) is oriented toward small panel production, although all three do both.  In April the general trend was for relatively flat sales m/m, although AUO saw m/m sales decline by 10.5% after a strong March.
While each of the three producers have their own sales patterns, the general trend last year was for a weak 1Q and progressive improvement through September.  This will make y/y comparisons more difficult going forward this year, which have already turned negative for both large panel producers.  As we have noted, there has been some non-linearity this year as CE brands pull in orders to move product into the US to avoid potential tariffs, which we expect will continue until the next ‘tariff deadline’ in early July.  Inventory levels in many CE products remain high for the same reason, which could affect production later in the year if there is no incremental demand as the holiday season unfolds in September.

To say that 1Q was not a typical quarter for the display space is an understatement, and we expect something similar in 2Q as the current US administration seems to change course on trade on a daily basis.  Inventory stocking and pre-tariff buying have altered typical buying patterns as can be seen in the table below, which shows the monthly sales (NT$) for AU Optronics (2409.TT), Taiwan’s largest panel producer.  Our expectations, prior to yesterday’s tariff course adjustment, was that large tariff related price increases would begin to show as previous landed inventory begins to wind down (end of April/early May), with panel producers seeing a more accelerated slowdown as brands hold back or reduced new orders as prices rise.
The fact that there was a date when the new tariffs were to be enacted was at least an anchor point where brands could make decisions about how to deal with new tariffs, but with yesterday’s 90-day hold, that anchor date has moved again and leaves brands in a quandary about how consumers will react to the postponement, in order to plan production and shipments for 2Q and beyond.  This goal-post movement will elongate the ‘tariff cycle’ that has already changed the typical production patterns for the display space, particularly for those producers that feed major brands in the US, so whatever we thought might happen soon is now spread across a wider window.. 

Given the circumstances, we would still expect brands to pause or slow production and shipments, but for a relatively short period of time, while they try to make sense of the administration’s tariff volatility, but the real question is how consumers will react.  There has certainly been signs that some consumers had been buying CE products in anticipation of expected price increases in March, and the table above, albeit specific to a single large panel producer, illustrates that pull-in buying, or at least production that could facilitate that buying, has helped 1Q sales results.  However, the increased Chinese tariffs and the remaining 10% across-the-board tariffs still overhang much of the CE space and the more general anxiety over the potential for a tariff-related economic slowdown still remains.