The TV business has been a difficult one this year, with a weak Chinese market leaving growth to come from North America and Europe.  However as lockdowns are reduced the necessity for TV has diminished and coupled with rising prices has left the TV space with little to get enthusiastic about.  Large panel producers have been moving production to more profitable large panel products such as monitors and notebooks and while this would typically tighten the market and sustain panel prices, as we noted yesterday, TV panel prices have begun to fall.  While this is good for set manufacturers, potentially alleviating some of the cost escalation they have seen over the past year, we are less enamored of the generic TV space this year, while more open to growth in the OLED TV space, where panel production is limited to one supplier and is therefore a bit less prone to the competitive nature of the display business.
There are many good points relative to large panel OLED displays, and a number of issues, but from the standpoint of overall picture quality, they are still considered the pinnacle of TV commercial technology.  OLED TVs are more expensive than their LCD brethren, and do face direct and indirect competition from quantum dots and mini-LED technologies, but at least for now, we look at OLED TVs as Wagyu beef against the skirt steak of most LCD TVs.  As LG Display (LPL) is the supplier of almost all large panel OLED displays and LG Electronics (066570.KS) is the premier OLED brand, we look at the company’s current line of OLED TVs, which were announced in late March to see how pricing has changed so far this year.
While there are many LG OLED TVs available on Amazon (AMZN) and sites like Best Buy (BBY) or Costco (COST), we are only looking at the current year’s models, all of which will have a model format that looks like this: 

Therefore all 2021 models will be either G1, C1, or A1, so when hunting through sites for an OLED TV bargain, remember to check the year code to make sure you are getting this year’s models.  Pricing for such sets is usually highest on release, although pre-order deals can make a significant impact on initial set prices, but on a general basis, it is usually best to wait at least 3 – 4 months before buying new models, as prices tend to decline during the summer months.  
 As noted, because LG Display is essentially the only producer of OLED TV panels, OLED TV panel pricing sees far less price competition than with LCD TV panels, however over the last few years, as LG Display increased production and consumers became familiar with OLED TVs, there has been a bit more sensitivity toward set and panel pricing., more a result of improvements in LCD technology rather than direct OLED TV competition.   LG Display has also made improvements in its production methodology and built out capacity at its Guangzhou, China OLED fab, which has helped them to lower costs.  How much of that savings gets passed on to customers remains within LGD, but OLED TV set prices have certainly declined over the last few years as the number of sizes increases (both smaller and larger).
LG Display, likely at the request of LGE, introduced 48” OLED TVs last year, creating a lower price point that has attracted consumers by lowering the OLED TV entry bar to ~$1,200, with short-term discounts by some retailers bringing the price down to just under $1,000, with 48” 4K TVs ranging in price from ~$1,200 to as low as $332 for comparison.  This has caused gamers to look at 4K OLED TVs as potential oversized monitors, with LG promising to release an even smaller (42”) OLED TV specially designed for gamers later this year.  However it looks like LG has postponed that release until 2022 to avoid it getting lost among sets being released for the 2021 holidays and is now expected to preview the new size at CES next January.  LG already includes a few features that gamers desire, such as 120 Hz refresh rate, Dolby (DLB) Vision Gaming, but will add direct support for gaming consoles to the 42” model.

​With weaker TV panel prices expected in 2H, OLED TVs will have a tougher time competing against LCD and its variants, but we expect there could be a very different OLED TV market developing in 2022 and 2023.  If Samsung Display (pvt) is successful in developing a process for producing RGB OLED TVs (see our note 8/2/21, 8/16/21), LG Display could face significant competition and price pressure.  While we expect costs for even this new OLED process to be high at the onset, just the fact that there will be a new large panel OLED producer will change the OLED TV market, with consumers likely seeing lower priced product.  Much will depend on Samsung Display’s process and whether they are able to solve the myriad of potential problems that arise when moving from pilot lines to mass production lines, but we expect consumers will benefit.

TV set demand has been a disappointing this year, as China TV demand has been weak for some time and the North American market, which had been the strongest region last year and early this year, has also been slowing.  TV set producers have been facing a number of problems, particularly the rapid rise of LCD panel prices, which are the most costly single component of most sets, and overall higher component prices, which have forced set brands to raise prices an offer fewer discounts to attract customers.  That said, the 2nd half is typically the stronger as brands build inventory for the holiday season, and while demand might be weaker than brand targets might have predicted late last year, they typically buy more large LCD panels in 3Q and 4Q than in the first two quarters.
Typical large panel shipment growth has been 13% (5 year average) on a half/half basis and typical (5 year average) growth in large panel shipments in 3Q (q/q) has been 8.7%.  While headlines might read that TV vendors are increasing panel procurement in 3Q, the numbers tell a bit of a different story.  Large panel procurement is expected to be up 4.4% in 3Q, just below half of the 5 year average and will be down 8.0% on a y/y basis, with only three of the top TV brands seeing a q/q increase and only two seeing y/y increases.  Samsung Electronics, one of the three increasing panel purchases over 2Q levels, has been unable to meet its panel requirements due to component shortages, while Xiaomi (1810.HK), who has been growing its TV business despite the slowdown, seems to have over anticipated that growth last quarter and will see a decline in large panel purchases of 36% q/q, despite still being up 20% y/y.
While many LCD panel producers have reduced their exposure to the TV panel market, it is still a significant revenue generator for producers and is an even more important part of capacity utilization given the size of TV panels, so the impact of relatively weak TV panel sales is considerable.  More importantly it gives some indication as to which brands have built set inventory that now might be a bit ahead of realistic sales expectations or that their earlier set targets were too high.  Here’s how the data looks for 3Q panel procurement:

Samsung Electronics (005930.KS) never ceases to amaze, now adjusting the prices of their latest line of Mini-LED/QD TVs for the eighth time since the line’s release on May 20.  Most of the price changes have been in the highest price tiers, but in this round, they got down to the bottom tier for the first time.  Of the 33 models in the new line that we track, 1 (3%) model is priced higher than original pricing, while 11 (33%) are flat and 21 (63.6%) are down.  22 (66.6%) of the 33 are at their lowest price point while 1 (3%) is at its highest price point.  Among the 8K Mini-LED/QD sets in the Samsung line up, the average decline from original pricing is 13.9%, while in similar 4K Mini-LED/QD sets the decline is 11.2%.  When looking at sets that are only QD (no Mini-LED), the average decline is 6.3%, with high-end QD sets down 9.7% and low-end QD sets down 3.5%.  Across the entire line of Mini-LED/QD and QD only sets, the average price has declined 9.0% from original pricing.
Samsung’s price changes in this new line, which is its first to contain retail level Mini-LED/QD sets, have been unusual, and we have noted previously that we believe Samsung’s initial pricing was more of a test given the lack of comparables (TCL (000100.CH)) was the only other TV brand with Mini-LED TV product and was not available in the US).  Subsequent to Samsung’s release, LG Electronics (066570.KS) also released its line of Mini-LED/QD TVs at comparable or lower prices, pushing Samsung to rethink some of its original price points.  Of course the true motivator in the TV space is moving units and keeping inventory lean at all levels, so the constant price adjustments seem to indicate that Samsung is still searching for pricing that will allow it to meet internal targets.  
At this early point in the Samsung Mini-LED/QD TV set lifecycle we doubt that component pricing has much to do with set pricing, at least at the top end of the line, but the recent price reductions at the bottom of the line, where component price increases would have the greatest effect, are indicative of the general slowdown in TV set sales and the need to attract consumers with lower prices, despite the effect on margins.  We expect that Samsung still has some margin ‘room’ on its Mini-LED/QD sets , but lowering prices on the bottom of the line when costs are rising seems a bit desperate to us.

​Xiaomi (1810.HK) is an exceptional company, growing rapidly over the last few years to become the 2nd largest smartphone brand last quarter.  That is not an easy thing to do against the marketing power of Samsung and Apple (AAPL), but the company developed a very savvy on-line marketing program that essentially started the concept of ‘spot’ sales that drew significant attention to a product that would normally have been low on the list of consumers.  The company now has a very diverse smartphone line and a number of other CE oriented products, but has just expanded their TV line to include three new OLED versions that have set the price bar a bit lower than most are used to.  The obvious objective is to stimulate OLED TV sales and broaden the Xiaomi TV appeal to those who want what would be a higher quality set, but in typical fashion, Xiaomi has used low prices to attract attention rather than competing directly with other OLED brands for the premium buyer.
The sets are still expensive in Xiaomi terms, but are considerably lower priced than those produced by LG Display, Sony (SNE) and others.  Without going into a detailed comparison of the features, mostly because all of the data is not yet available, the company’s 55” OLED model will sell for $771 (US) which compares to ~$1,300 for a Sony or LG model, most of which are last year’s models.  The 65” Xiaomi OLED set will sell for ~$1,80 as compared to ~$1,800 similar sets from LG, and the Xiaomi 77” model will sell for ~$2,625 against prices between  $2,800 and $3,300 for similar sets from others.
Again we note that these are price comparisons and don’t relate to feature sets and model characteristics, but we note that the only supplier of OLED TV displays is LG Display, so the panel price for Xiaomi and competitors would be the same or more depending on the quantity.  If somehow Xiaomi is getting OLED TV panels from a Chinese supplier (not likely), the cost would likely be much higher given that LG Display’s yield, after years of production, would likely be far higher than a new producer.
Will Xiaomi’s entry into the OLED market begin to make the technology more popular in China?  Perhaps, but Chinese consumers have been lukewarm toward the technology to date, likely because of a lack of local brands, but Xiaomi could help to give OLED TV a bit more momentum on the Mainland with such aggressive pricing.  That said, the company has yet to revel whether these TVs will be released outside of China, and if so, at what price, so we expect relatively little impact on OLED TV brand share over the next year, but Chinese brands have a particular focus on share and a company like Xiaomi can withstand some losses in the OLED TV segment against it profitable mobile business and that could sustain such prices for some time.  If Xiaomi OLED TVs stay local, the impact would be light, but that’s just what was thought of their smartphones years ago….

Way back in 2013 when both Samsung (005930.KS) and LG Electronics (066570.KS) showed OLED TVs at CES, it looked like it was going to be a two-man race for dominance in the space, however in one of the more significant decisions in the display space over the last twenty years, Samsung decided that they would not pursue OLED TV production, citing what it called the inferior quality of the WOLED process and the lack of a cost-effective process for producing OLED TVs using the RGB process.  Samsung remained the biggest proponent of small panel OLED, which uses the RGB FMM (Fine Metal Mask) process to create three color pixels, but left the OLED TV space to rival LG, who is the dominant producer (essentially the only producer) of OLED TV panels.
As we have noted many times, Samsung’s affiliate, Samsung Display is pursuing the development of an alternative process for producing large size OLED TV panels (see above), but is still in the development stage and will likely not begin mass production until next year, and then on a relatively limited basis.But it seems that SDC is not putting all of its eggs in one basket and while working toward the finalization of its QD/OLED project, is exploring another alternative that could change Samsung’s attitude toward OLED TV by allowing it to produce large panel OLED TVs using the FMM process they use when producing small panel RGB OLED displays.
Using fine metal masks to produce small panel OLED displays on Gen 6 fabs works, but while the masks are extremely rigid, when they are used in larger generation fabs, they sag enough that the sub-pixels do not align properly, which has limited their use to Gen 6 fabs or smaller.  That said Samsung and tool supplier Ulvac (6728.JP) have developed a deposition system that rather than sits horizontally (where gravity works against the larger FMM) the deposition system is vertical, which negates the gravitational effect on the fine metal mask, and according to our friends at OLED-A, would allow fine metal masks to be used in a Gen 8.5 OLED fab.
Currently Samsung is evaluating the tool (produced by Ulvac) which would not only allow them to produce RGB OLED large panels but would ween them from deposition tool supplier Canon Tokki (7751.JP) who controls the OLED deposition tool market.  What makes this more interesting, if it pans out, is that the process, which mirrors SDC’s small panel OLED display process, would not require a color filter, which would reduce brightness, would not require quantum dot color conversion, would not require a ‘cut’ process[1], and would likely be cheaper than QD/OLED, and SDC has idle Gen 8.5 capacity that it could more easily convert to such a process than building greenfield lines for other large panel display modalities.
Of course, this is all based on considerable conjecture as the heart of the project, the deposition tool, is under evaluation, and if acceptable, would be quite expensive given its one-off nature.  That said, if, and there are still many potential ‘ifs’, Samsung is able to bypass the FMM issue and is able to produce large panel OLED displays using the RGB process, it will represent a big challenge for LG Display and could be a boon for OLED material suppliers, but we expect that we are still quite far away from this potential process being used in a mass production setting.  That said, it seems that SDC is serious enough to have worked with, and likely funded some of the new tool’s development, and while that does not guarantee its implementation, it certainly gives it a way in a very large door.


[1]   When large OLED panels are produced, while the substrate is Gen 8, the deposition steps require the panel be cut in half or in quarters, which means more expensive deposition tools or slower and therefore more expensive processing.

​We remember when TV channels signed off at midnight.

We remember UHF.

We remember before VCRs, when you had to be ready to watch a show when it was being broadcast.
But our kids don’t remember any of that.  They only know cable or streaming and don’t really get the concept of broadcast TV, and while they take large screen TVs for granted, they are just as happy to watch a movie on a 6.5” smartphone screen.  OK, we are sounding like the old guy yelling at the neighborhood kids to get off the lawn, but the world of content viewing has changed quite a bit over the years.
Nielsen (NLSN) has been measuring consumers since the 1920’s and the company’s founder was the ‘inventor’ of market share calculations, an outgrowth of their data collection services, which started with radio and migrated to a variety of consumer goods and eventually television.  The company has recently begun to produce a new report called “The Gauge” that tracks TV screen time as it relates to both streaming and ‘linear’ (broadcast & cable) TV.  Given that many of our kids view TV through wireless or IP based services, we were surprised to find that streaming was not the largest viewing service, and data from the last two months indicates that m/m changes are quite small, despite a variety of influences like sports and seasonality.  Further, the competitive elements of the streaming segment itself are broken out in Fig. 3.
While the data Nielsen shows is not particularly granular, they did indicate that as the end of the seasonal broadcast season is May, June saw that segment decline, with that share picked up by both cable (sports) and streaming (new content), and while individual new streaming content titles themselves do not usually move the needle significantly, that new content does drive consumers to explore that particular content platform, which can lead to a bit of share gain.  Noted were Disney’s (DIS) “Loki” and “Raya & the Last Dragon”, which moved to Disney+ ‘free’, and Netflix (NFLX) released “Manifest” and “Sweettooth” that helped move them up a notch.    If Nielsen is kind enough to supply such data[1] on a monthly basis, we will track and post.


[1] All other TV includes AOT (ALL Other Tuning), VOD, Streaming through a cable set top box, Gaming, and other device (DVD Playback) use.   Streaming via cable box is included in the ‘All other’ group.  Streaming data comes from a subset of TV households in the National TV panel, while linear sources are based on viewing from the overall TV panel.  Hulu includes Hulu Live.  YouTube includes YouTube TV.

​With the Olympics about to start, the question of how much influence do events such as the Olympics or the FIFA World Cup have over TV sales.  Historically marketing in front of such events has been intense, with the objective of convincing consumers that their puny 42” TV is just too small for getting the full impact of such events, and an upgrade to an 86” 4K TV is the least that would influence friends to come over and watch.  We have seen data that takes both sides of the question, but have yet to be convinced that in the general scheme of things, such events can make an appreciable difference over the course of a year.  Overall economic factors seem to be a far more influence on TV sales, along with price, and with global TV shipments between 210m and 220m for the last 5 years, such major events don’t seem to move the needle.
As the Olympics are in Japan this year, we took a closer look at TV shipments in Japan, as the COVID-19 pandemic will be keeping spectators at home rather than in the stands, with the thought that perhaps that might actually stimulate TV sales, and while TV shipments in Japan in 1H were up 21.0% y/y, there is so little consistency in the y/y numbers going back 5 years that no conclusion can be drawn.  What the data did show however is that Japan TV shipments have been increasing over the last few years (Fig. 1), and May and June were both up 14.9% and 11.3% y/y respectively this year, but again there is little consistency in the historical data for those months.
While the trend is up for TV sales in Japan, the trend for OLED TV shipments has been even stronger, increasing from 14,000 in January 2019 to 74,000 in June of this year, representing a share increase from 4.4% at the start of the period (1/2019) to 14.1% in June of this year.  We note that Japan is a relatively small portion of global TV shipments, between 2.2% and 2.5% over the last few years, and with Japanese TV brands being favorites on the island, slow OLED adoption by traditional Japanese brands other than Sony (SNE) has hampered OLED adoption.  With LG Display’s (LPL) increased OLED TV panel capacity, we would expect OLED TV share in Japan to continue to increase as traditional Japanese TV brands are able to secure enough product to justify OLED advertising programs and set production.

Since May when Samsung (005930.KS) released much of its Mini-LED/QD TV line, we have tracked model pricing.  This has given us insight into both the initial pricing and how that was received by consumers, and how Samsung has adjusted those prices to both try to stimulate sales and compete with offerings from other brands.  Earlier this month we posted what we thought were Samsung’s last round of price changes, which increased rather than decreased for the first time.  At that point we figured that Samsung had found a sweet spot for the Mini-LED/QD line and that prices would hold at that point at least for a while. 
We were wrong, and it looks like Samsung is still looking for the optimal price point for the line and has returned to reducing prices back to their lowest points, and some with first time discounts.   While this data is particular to Samsung TV pricing in the US, we expect a similar situation in other countries as Samsung searches for the right pricing.  We note that Samsung is now competing with LG Electronics (066570.KS) as we noted in our last update, and has always been competing with TCL (000100.CH), who was the first to offer Mini-TV sets, is on their 3rd iteration, and has been the low price leader in the space.
The pricing data reveals a number of points.

• 21 (63.6%) of the 33 models we track have seen discounts from their original price
• 16 (48.5%) of the 33 models we track are at their pricing low point, which implies 76.2% of those that have received a discount from their original price are at their low point.
• 1 (3.0%) of the 33 models we track is higher than its original price.
• All Mini-LED/QD models have received discounts.
• 11 (73.3%) of the 15 Mini-LED/QD models we track are at their lowest price points
• 5 (83.3%) of the 6 8K Mini-LED/QD models we track are at their lowest price points
• 6 (66.7%) of the 9 4K Mini-LED/QD models we track are at their lowest price points
• The average discount from original prices for the 8K Mini-LED/QD models is 14.3%
• The average discount from original prices for the 4K Mini-LED/QD models is 15.0%
• The average discount for models that are only 4K (no Mini-LED) are as follows:

            High-end  -0.7%
            Mid-price  -1.1%
            Low-price  -0.5%
 

• Among the Mini-LED/QD models discounts by size are as follows:

            85” -18.0%
            75” -14.9%
            65” -13.3%
            55” -14.6%
            50” -6.7%
Based on what we have seen so far, we expect the original Samsung Mini-LED/QD pricing premise was “Let’s start high and see what happens.”   Within a month of what was a relatively limited release in the US, Samsung began to discount selected models every two to three weeks.  While a few models saw price drop earlier this month, many that had been discounted, some a number of times, saw modest price increases.  This led us to the conclusion that Samsung had found a spot where volumes met their expectations and were testing the waters to see if they had any leeway to push Mini-LED/QD set prices up a bit.  We expect that the introduction of LG’s Mini-LED/QD line changed the picture, giving consumer a choice, which in both 8K and 4K Mini-LED/QD models was equal to or lower than Samsung’s models.
 
Logically, Samsung needs to better compete with LG’s offerings and therefore seems to have returned to discounting to find a more competitive level.  Given that the cost of the Mini-LED backlight modules is still a large variable given the relatively low unit volumes, we expect there is  considerable play in Mini-LED/QD set margins, allowing Samsung to continue to adjust pricing.  While we expect retailers are passing weekly sales data to Samsung, along with sales data from its own website, we are surprised that pricing has varied as much as it has, and when compared to Samsung’s recent QD only offerings, which have seen no discounting in most cases, and a single round of small discounts in others, the number of discounts in such a short period of time for the Mini-LED lines seem to indicate that Samsung is still chumming the waters until it gets a bigger bite.    

On 6/08/21 we noted that expectations for the Chinese 6/18 shopping holiday were diminished as TV panel and set prices continue to rise globally, making usual holiday discounts less available as TV brands struggled to keep margins from declining.  We also noted that what we believe was a false sense of optimism among TV set producers in China had built inventory levels into the 6/18 holiday, increasing the risk of a slowdown if that inventory was not sold through.  According to early data comparing the extended period leading up to and including the holiday, on-line unit volumes declined as noted below, while on-line sales value increased by 25.7% y/y.  Off-line units also declined by 26.9% y/y and off-line sales value declined by 5.2%.

While we would typically view an increase in sales value as a positive, especially when viewed with the ASP increases seen above, however when unit volume data is added, the conclusion becomes less positive.   While the value of holiday sales grew 12.2% y/y and ASP’s grew 43.2%, unit volumes fell by 21.5%.  Given the optimistic view that Chinese TV brands held going into the holiday, this would imply that not all inventory was sold and the typical inventory refresh following large shopping holidays could be less than expected or eliminated.
While much of global demand will still rely on the US TV market, given its strength over the last few quarters, we have seen weakness in the US TV market recently (see our note 6/22/21) as COVID-19 restrictions are lifted and US government subsidies are ended.  While the effects of weaker TV demand globally will take some time to filter through the supply chain, we expect panel producers will continue to shift production away from TV and toward monitors and notebooks.  That said, we would expect to see TV panel price increases diminish as we noted in our note last Friday (6/25/21), with only driver or other component shortages pushing brands to hold excess inventory.
While it is still early to predict the environment during the 2021 holiday season, given the number of variables facing the CE space currently, just the data above seems to be pointing toward price elasticity being the biggest determinant for the holidays., where a 43.2% increase in ASP led to a 21.5% drop in unit volume, and while that ASP rise led to a 12.2% increase in sales value, keeping TV brands at least somewhat satisfied, the unit volume weakness will have a more profound effect on the TV supply chain, and could help to alleviate some of the component shortages that have helped to push prices up. 
The TV space does not operate in a vacuum, so as noted above, panel producers will continue to shift production to those products with the highest return, which tends to be smaller display products, meaning monitors and notebooks.  The gaming monitor space is growing and there are still country-wide programs that require notebooks or Chromebooks, but any disturbance in demand for those products would begin to show as lower panel production utilization, which is typically not the case during the holiday build period.  Perhaps the industry can scrape by this season but our Magic 8 Ball is moving

From This:

To this:

​While the quarter is not quite over, it looks like US TV sales are heading down and the channel fill that helped to boost March sales does not look like it will materialize this quarter.  Expectations for June are for ~2.3m units, which would put US TV sales for 2Q at just under 7.8m units, down 24.2% q/q   Channel purchases are expected to be ~8.7m units for the quarter while sales are expected to be 7.8m, leaving near-term inventory of .9m units.  Last quarter channel purchases were ~9.3m units, while sales were 10.3m, leading to what we estimate was between .3m and .3m in incremental channel purchases in April.
That said, if our expectations for June are correct, the Q monthly sales average has declined to 2.59m from 3.42m units/month in 1Q.   Some of the strength in 1Q can be attributed to stimulus checks but we believe the US vaccination program has allows consumers to return to at least a semblance of what was a normal lifestyle, which includes being out of the house and away from a television, lessening the need to replace, upgrade, or enlarge existing installations.  Should the next two months continue that lower trend, if would signal a return to pre-pandemic levels, and while 3Q and 4Q are typically the seasonally better quarters, this holiday season could prove a bit difficult given the rapidly rising prices of TV display panels and components.
TV set manufacturers and retailer seem to be becoming a bit more realistic about their expectations for the full year, while IT product producers are still looking for the rocket ride to continue.  There are some signs that notebook demand is slowing, but it is hard to discern whether it is demand driven or supply limited due to component shortages, but as we head into the summer months and a bit of normalcy returns, at least in the US, we should get a better understanding of the split between the two.  Other regions that do not have the luxury of the high availability of current COVID-19 vaccines might take longer to return to patterns seen pre-COVID, but once the data confirms the trends in the US, it will likely set the tone for other regions.