Category: - Supply Chain Market Research - SCMR LLC

Supply Chain Market Research - SCMR LLC

April in Taiwan

5/9/2025

April in Taiwan

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.

Figure 1 - AU Optronics - Monthly Sales - 2018 - 2025 YTD - Source: SCMR LLC, Company Data

Figure 2 - Innolux - Monthly Sales - 2018 - 2025 YTD - Source: SCMR LLC, Company Data

Figure 3 - Hannstar Monthly Sales - 2018 - 2025 YTD - Source: SCMR LLC, Company Data

Mending Fences?

4/28/2025

Mending Fences?

Samsung Electronics (005930.KS) and BOE (200725.CH) are rivals, not quite directly but Samsung Electronics’ affiliate Samsung Display (pvt) competes head-to-head with BOE in the small panel display market and to a lesser degree in the large panel TV space. As we have noted, Samsung Display has been at loggerheads with BOE over IP issues and after a recent partial win concerning BOE’s misuse of Samsung trade secrets and IP, Samsung Display continues to fight BOE in the courts. That said, Samsung Electronics also has issues with BOE. As the largest TV set producer, Samsung Electronics, requires that those who use “We supply to Samsung Electronics” in their advertising, pay a royalty. In 2022 BOE, who was the second largest supplier of TV panels to Samsung in 2021, refused to pay and Samsung has reduced BOE’s share as a TV panel supplier considerably since that time as they continued to battle over the royalty situation.
It seems that the President of Samsung Electronics TV division is scheduled to visit China in the middle of May, and BOE officials are expected to visit Samsung in Korea, with both expected to try to negotiate an agreement between the two on both panel prices and royalties. The idea is that BOE can either lower panel prices to compensate Samsung or can leave panel prices the same and pay the royalty.
While this seems reasonable, it might not be to BOE, who is also a major supplier to LG Display (LPL), Samsung’s local rival. LGD has recently sold it’s last LCD TV panel plant (Guangzhou, China) to Chinastar (pvt), also a supplier to both Samsung and LG (066570.KS). The large panel product that was being purchased from the LGD Guangzhou fab before the sale, would now become purchases from Chinastar. Samsung has an internal requirement that no supplier of key materials can represent more than 30% share, and that means that it will have to maintain that 30% restriction, keeping it from purchasing panels from the Guangzhou fab now under the Chinastar banner. While there are other large panel producers, such as AUO (2409.TT), Innolux (3481.TT), HKC (248.HK), and CHOT (pvt) that Samsung already buys panels from, Samsung tends to go with suppliers that have large capacity, leading to a secure supply, without violating the share limit..
At least to a degree, this puts BOE in the catbird seat or at least gives it some room to negotiate with Samsung, as Samsung Display is out of the large panel LCD business and supplies only QD/OLED TV panels to its parent which make up only a small portion of Samsung’s TV panel needs. This leaves Samsung Electronics to outsource all of its LCD TV panel purchases. As they cannot increase purchases from Chinastar without overstepping their limit, BOE is the obvious choice if they can come to an agreement over royalties.

Looking Back

4/22/2025

Looking Back

Normally, when we look at monthly display panel sales, they are ~5 weeks old[1] and represent the totals for the previous month. While we do the same this month, it seems a long time has passed since March, making those metrics seemingly less relevant. As CE brands spent much of March pulling forward production and shipments to beat the Trump ‘Liberation Day’ deadline, it is difficult to look at the data the same way it is normally used. That said, large panel shipments were ~73m units, up 11.1% m/m and up 6.0% y/y, while total shipments were 5.1% above the typical (5-year) March shipment average. This put the quarterly shipment total at 202.3m units, 6.2% above typical, indicating that the quarter (Jan/Feb) was already about 1% above average.
In terms of sales, total large panel sales for March were ~$6.24b, up 12.7% m/m, but down 6.4% y/y, while on a YTD basis, sales were up 4.5% y/y. Among those panel manufacturers that are primary large panel producers, the biggest gainers in March were both South Korean producers, Samsung Display (pvt) and LG Display (LPL), up 57.9% m/m and 34.8% m/m respectively. This implies that while both South Korean panel producers accounted for only 21.5% of total panel revenue for March, they accounted for ~38% of March large panel sales growth. SDC feeds parent Samsung Electronics (005930.KS) QD/OLED TV set and OLED monitor line, and, as much of the Samsung’s TV line is assembled in Mexico before shipping to the US, we expect these were rush orders to beat the early April deadline. LG is basically the same in the TV space.
Now that the deadline has been pushed out until July, we expect April large panel shipments will better reflect actual demand and inventory levels but given the capricious nature of comments from the President and White House, it is still difficult to predict what path consumers and CE companies will take in the short-term. At our gut level, we feel that as negotiations with potentially heavily tariffed countries continue, the WH spin will be positive and while the reality of the outcomes is questionable at best, consumer sentiment on trade will improve through May and early June. That said, the offset will be increasing prices of both components and CE products as old inventory is sold, and higher tariffed goods take their place. This leaves us, once again, in a net neutral position for the next month (May) and a slight negative bias for the CE space in 2H thus far, as consumer pre-tariff buys and higher prices weaken typical holiday demand.

[1] 2 weeks from previous quarter mid-point and 3 weeks into following quarter.

Large Panel LCD Industry Sales - 2020 - 2025 YTD - Source: SCMR LLC, OMDIA, Witsview, IHS, Company Data

Panel Pricing – April

4/22/2025

Panel Pricing – April

It is easy to tell that the postponement of the most severe tariffs is better than if they had been implemented. It is certainly better for CE brands who will not incur additional massive increases in cost and absolutely better for consumers, who will only have to incur the tariffs on Chinese goods and the broader ‘token’ 10% across-the-board tariff hike. However for anyone trying to run a CE business, at almost any level, the inability to plan both short-term and long-term strategies with little or no understanding of the US government’s plan for trade, makes their own planning almost impossible.
The only area where there seems to be some actual demand, not surprisingly, is the server space, where monitors are a necessary adjunct. However many monitor panel producers are still losing money on monitor panels and are reducing production whenever possible, leaving Chinese producers to pick up the slack. This has led to slight monitor price increases but was offset by weak pricing for notebooks and TVs, where tariff issues continue to keep brand demand weak. Pricing pressure overall has been modest, but brands will be looking for some panel price concessions as they absorb higher tariff costs, and that means both up and down the supply chain. Whether panel producers are willing to share in some of the tariff pain is still an open question, but at some point, the cost of components, both at the panel level and the module level, will add to their cost burden as it has for brand level products.
We expect addition stocking pull-ins as we get closer to the end of June, which, as we have previously noted, sets a poor tone for the 3rd and 4th quarters, typically the better half of the year for the CE space. The only hope right now is that those consumers who did not jump in and buy before the last tariff announcements might now feel the urge before July, assuming the potential for higher prices. We believe that most CE brands are looking to share tariff price increases with the supply chain, but those negotiations are ongoing and will have to account for the potential for additional tariffs in July, making price negotiations even more difficult than usual.
That said, we believe that while China will still remain a tariff focus, we expect most of the broad ‘reciprocal’ tariffs recently proposed will not be put into effect as promises of trade balancing are made, but whether those promises are fulfilled remains questionable. Right now, we expect panel prices to remain relatively flat for May as most take a wait and see approach to near-term planning.

What Does Taiwan Know?

4/10/2025

What Does Taiwan Know?

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.

Resurrection

3/24/2025

Resurrection

Sony (SNE) has announced a new technology that is thought to be a potential game changer for the display industry. There is a problem with that thought however as not only did Hisense (600060.CH) announce a TV with similar technology in January, but Sony itself introduced a analogous product over 20 years ago. The idea is similar to the concept behind Mini-LED TVs, which have been keeping LCD technology competitive in their race against OLED technology.

Liquid crystal, the technology behind LCD TVs, acts as a gate, allowing or blocking light from an LED backlight from reaching a color (RGB) phosphor or quantum dot converter. The brightness of the LED backlight is quite important, but because the number of pixels in a 4K TV is ~8.3 million, each LED in the backlights must illuminate a number of pixels. If some of those pixels are ‘off’ and some are ‘on’ the LED light behind the ‘off’ pixels can bleed through the liquid crystal and cause the black points (the ‘off pixels’) to be gray.

Over the years, as LED technology was refined and improved, TV set designers used smaller LEDs that helped to reduce that ‘bloom’ common to older LCD sets. Now, Mini-LED TV sets can have thousands of zones (a zone is just a small group of LEDs that act as one) which helps to reduce the gray issue, but unless there is an LED in the backlight for every pixel, those issues will still exist (it’s been tried). OLED displays are different in that they are self-emissive, meaning they directly emit light, without a backlight, so when they are off, they are black. There is some light ‘bleed between adjacent pixels in OLED displays but the contrast ratio (the difference between the blackest black and the whitest white), is almost infinite in OLED displays which sets them apart.

But what about color? In an LCD display, the LED backlight is typically white and when it passes through the liquid crystal it hits a red, green, or blue dot of phosphor and becomes one of three parts of an LCD RGB pixel. The quality of the color in an LCD display is governed by the quality of the LED backlight and the phosphors, while in an OLED display, the quality is based on the purity and efficiency of the emissive materials themselves. If one were to strip off the ‘image’ part of an LCD display, the LED backlight would look like constantly moving areas of light and dark that follow the brightness of the images, while an OLED display has no backlight.

Sony has taken things one step further. Instead of squeezing more white LEDs into the backlight (adding zones) they are using three (Red, green, and blue) LEDs and a lens instead of a white LED. This allows the backlight to control brightness (on/off) as it did in the previous example but also allows the 3 LED combination to create backlight color that reduce the burden on the phosphor by giving the backlight itself color

Conceptually this is a great idea, and one that Sony used in 2004 (46” set for $10,000) when it released the Qualia 005, the first RGB backlite TV set. However, at the time, LEDs were large and had color uniformity issues. They produced a lot of heat, and the complexity of the electronics needed to disassemble an image into ‘color zones’ and adjust 3 (RGB) LEDs instead of one white one, along with the brightness of each, was a stretch for 2004 electronics. However Sony did not forget the idea and just announced a high-density RGB LED backlight system that it expects to commercialize sometime this year.

Figure 6 - Sony Qualia 005 (2005) - Source: obsoletesony.substack.com

The good news is that LEDs are much smaller, although Sony has yet to give details about LED size, the number of zones, the details of each zone, and the electronics can handle the image processing (AI & ML), but some of the old problems still exist. The cost will be a very big factor as instead of 5,000 white LEDs, the RGB system would contain 15,000 LEDs (RGB) and a lens, and instead of controlling the brightness of 5,000 white LEDs, the system will have to control the brightness of 15,000 LEDs (5,000 is just an example, we expect there will be more zones as the Hisense set has at least 10,000 zones). LED uniformity, while certainly better than 20 years ago, gets more difficult to maintain as LEDs get smaller, and as LEDs age, their uniformity also changes, so the sheer number of LEDs needed makes the complexity of building such devices far more onerous and expensive.
So does this mean that Sony is going to let the idea of an RGB LED backlight TV wither on the vine again? No, we expect it will make it way toward the top of the Sony premium TV line and will compete with other OLED and potentially Micro-LED offerings. Hisense, the first to introduce a Mini-LED TV, will also showcase the technology, but at least for a while it will take its place in the ultra-high quality color world of video editing monitors and those with dollars to spend on the best of the best, while the rest of us palookas have to settle for Mini-LED, OLED, or QD/OLED sets. If we are wrong and Sony has found a way to produce RGB LED backlight systems for a reasonable price, we will be in line to try one, but with so many potential display technologies on the horizon, time is of the essence.

Saved by the State

1/28/2025

Saved by the State

Last week we noted that panel pricing for 2024 was up 0.2% y/y for the year, with relatively stable pricing for notebooks and monitors and a bit more volatility for TV, tablet and mobile panel pricing. Figure 2 shows that monthly panel sales were both strongest and most ahead of 5-year sales averages in 2Q, with 6 out of 12 quarters above the averages and 5 below (August was flat against the average) for the year. This tracks against 50.5% of yearly panel sales in 1H and 49.2% in 2H, the opposite of the norm of 48.7% in 1H and 51.3% in 2H (5-yr. avg.).

Figure 1 - Panel Pricing 2024 - Variance from 5-Year Norm by Type - Source: SCMR LLC

As to individual company sales performance in 2024, all large panel producers saw panel sales increase in 2024 except Innolux (3482.TT), who saw sales decline by 1.2%. On a y/y basis Samsung Display (pvt) was the leader, expanding shipments and sales of their QD/OLED panels, and while SDC gained share in the large panel space in 2024, their share of the large panel market remains low (4.4%). Chinastar (pvt) saw the biggest sales gain y/y at 31.5% but will see its sales and share expand again in 2025 when they close on the purchase of LG Display’s (LPL) Guangzhou, China large panel fab. While all four Chinese large panel producers saw sales increases, only BOE (200725.CH) and Chinastar saw share gains in the large panel space. 2025 will also see the end of Sharp’s (6753.JP) participation in the large panel space as they lease their Gen 10 LCD fab in Sakai, Japan to Softbank (9434.JP) to use as a data center, after years of disappointing sales and operational losses.
All in, while the first half of 2024 was stronger than 2H, the Chinese government was responsible for keeping large panel producers from ending the year on a more sour note. Their “Swap Old for New” program, which included TV sets at the end of August, helped to stimulate enough Chinese consumer demand to put a halt to sliding TV panel prices, which peaked in July and began a rapid decent. The subsidy program offered consumers a subsidy of between 15% and 20% depending on the energy efficiency of the TV. And TV brands found ways of meeting the energy requirements without redesigning those sets that did not qualify.
The program continues into 2025, however it is unsure whether TV set demand in China for 2025 has been pulled into 2024 because of the subsidy program. If that is the case (we believe so), it has the possibility of causing large panel producers to overproduce heading into 1Q, under the belief that the ongoing subsidies will continue to stimulate set sales. In 4Q Chinese TV set brands Hisense (600060.CH) and TCL (000100.CH) increased sales targets and panel purchases as a result of the subsidy program. With Chinese New Year coming at the end of this month, it will be March before can get a read on actual TV set shipments in China. This issue, along with the potential for additional tariffs on Chinese goods, will be the drivers for large panel producers in the early part of the year, making it considerably more difficult to plan production, although we expect Chinese TV set brands will continue to target higher TV set sales and panel purchases until they receive some indication that they are no longer stimulating incremental demand. That would typically lead to a more conservative production stance in 2Q, but with the tariff wildcard and the possibility for a bit of overproduction in 1Q, it could go in almost any direction.

Figure 2 - Large Panel Sales Seasonality - 5-Year Average Monthly Sales v. 2024 Sales - Source: SCMR LLC

Panel Pricing Paralysis

1/24/2025

Panel Pricing Paralysis

December saw relatively little change in panel prices. TV panel pricing (↑0.2%) and mobile panel pricing (↓0.6%) were the only categories that saw any movement, and we expect little change in January as much of the CE space is waiting to see whether President Trump makes substantial changes in the US import tariff levels. Additionally, as Chinese New Year comes relatively early (Jan. 29) this year. Production demand for holiday inventory is mostly complete.

Looking at our final 2024 pricing statistics, while there were some large monthly price swings[1], primarily in TV panel prices (see Figure 1), but in total, panel prices were relatively stable, particularly toward the end of the year. Panel producers, for the most part, acted rationally, however less so in the TV panel segment, where the desire for higher prices relatively early in the year, without strong consumer demand, caused an inventory issue that required panel producers to cut utilization rates in 3Q. Given that Chinese panel producers control a majority of the large panel LCD market, the onus falls on them for the large positive swing in March and the negative one in August, and given that the upward push in large panel prices was not driven by demand, it was inevitable that it was unsustainable. By the end of the year TV panel prices were up only 2.0% y/y.
It is difficult to predict how panel prices will move in the 1st and possibly the 2nd quarters of this year as the potential for tariff changes that will affect demand in the US for CE products is, at this point, a bigger factor than the outlook for general CE product demand in the US. With only two LCD large panel producers outside of China, onerous tariffs on TV sets will determine whether Chinese panel producers will be profitable this year, and we expect they will have little choice but to raise set prices to offset additional tariffs. Consumers will see those landed price increases as inflationary, making it difficult to justify replacement cycle purchases, but the scale of the potential tariff changes is really the key as margins on LCD panels, particularly from Chinese producers are quite thin. Its just a waiting game until the big man makes up his mind.

[1] Figure 1 zeros all panel prices at the end of 2023 and shows the relative m/m movements in each type of panel

Figure 1 - 2024 Panel Price Relative ROC by Type - Source: SCMR LLC, OMDIA, Trendforce, RUNTO

Figure 2 - 2024 Aggregate Panel Pricing by Type - Source: SCMR LLC, OMDIA, Trendforce, RUNTO

Figure 2 - 2024 Aggregate Panel Pricing by Type - Source: SCMR LLC, OMDIA, Trendforce, RUNTO

Bulking Up

1/9/2025

Bulking Up

Not a Happy New Year

1/3/2024

Not a Happy New Year

The January 1 earthquake that hit the coast of Japan on January 1 caused severe damage to the Northern Coast of Ishikawa Prefecture, with the epicenter about 26 miles northeast of the town of Anamizu. This puts the Japan Display (6740.JP) Ishikawa LCD fab approximately 55 miles from the epicenter of the 7.5 magnitude quake, and while the magnitude at that distance was closer to 5.0 to 5.5 on the Richter scale, it was enough to cause a number of semiconductor fabs nearby to be shut down for inspection, particularly the Toshiba (pvt) Kaga fab, which is ~9.3 miles south west of the JDI fab, and has given no estimate for when it might reopen. While Japan Display has not commented on the status of the Ishikawa fab, we expect automated sensors at the fab, similar to those at the Toshiba Semiconductor fab, would have triggered an automated shutdown of sensative equipment to prevent damage and closing water and gas lines. If the impact of the quake was limited to a general shutdown, we would expect the production loss to be limited to ~2 days and the loss of some product that was on the line when the shutdown occurred, so the overall impact to JDI, at least at this juncture, is minimal.
The semiconductor fabs in Ishikawa Prefecture, in most cases, were automatically shut down and would require full inspection before restarting. Tower Semiconductor (TSEM), which has two fabs in Ishikawa Prefecture stated, “There was no impact or damage to the buildings and only minor damage to the facilities which had no impact on operations. The dedicated staff and response teams have worked to ensure operational safety and stability. Tools requalification is underway, combined with efforts to efficiently repair any damage to fab tools and in-line materials, while utilizing all available resources to minimize any potential disruptions to manufacturing and customer service.”
Taiyo Yuden (6976.JP), a supplier of MLCCs with a ~5% share stated, “No injuries to our group employees have been confirmed. In addition, our group's production bases, no major damage was confirmed to the building or production equipment. Production is expected to resume after equipment inspection work is through”. No word from Global Wafers (6488.TT), who has two production facilities about 100 miles from the epicenter, although local sources indicate that wafer production was halted and the lines are undergoing full inspection, with the same for Shin-Etsu (4063.JP), although silicon wafer growth using the CZ method is very sensative to vibration and can cause uneven crystal growth or stress defects. While 4” silicon wafers can be grown in 3 to 5 days, 8” wafers can take between 7 to 14 days, and 12” wafers between 14 to 28 days, so it will take quite a while to assess the damagefacing these wafer fabs.
All in, while the damage to smaller towns in northern Ishikawa was significant, most production facilities seem to be relatively unaffected, other than the typical automated shutdown, inspection and restart, which we expect, for those with no significant damage, will take a few days to complete. The loss of WIP is still unknown, and in the case of wafers production, could turn out to be a bit more significant, but it would seem that production losses will be limited to a week to 10 days on average so far. Not a disaster for the display and semiconductor industry, but not a happy new year in Ishikawa for others.

Picture Ishikawa Map

Figure 1 - Ishikawa Prefecture in Japan - Source: Google Earth, SCMR LLC

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