Demand Scenario Update

Demand Scenario Update
​

In March (3/15/21), (3/16/21) we noted a number of supply/demand scenarios that built out our data on unit volumes for a number of CE products.  While this exercise was more of an attempt to correlate a number of data sources, it turned out to be far more focused on demand than supply, given the unusual circumstances that the COVID-19 pandemic has caused.  Now that we have actual data for the first two quarters of the year, we went back to see how each of the four scenarios performed, with the purpose not of proving whether we were right or wrong but to try to assess whether the 1st half results actually fit into any ‘normal’ scenarios.
The demand data was constructed from four CE categories, notebooks, monitors, TVs, and tablets, which encompasses almost all of large panel display production.  Smartphones, AR/VR, watches, and most foldable devices are not in the calculations as they are considered ‘small panel’ devices that are produced under their own demand characteristics.  Small panel production in terms of units, represents between 65% and 72% of the total, but between only 16% and 19% of panel revenue, and despite the high unit volumes, is a small part of total panel area, with TV representing ~70% of panel production area.
Each of the supply/demand scenarios was based on 2020 data and seasonal norms and then tweaked by adjusting the ratios.  The four scenarios were named according to the balance between supply and demand and the outlook each schema had on a quarterly basis.  In this note we are only looking at the demand side of the scenario, although the results below reflect the performance of the entire scenario.

In terms of unit volumes, the best of the four scenarios was low by 3.7% and the worst low by 21.3%, with all four predicting unit volume lower than actual 1H unit volumes.  There was no consistency in 1Q/2Q results in the scenarios, with two performing better in 1Q and two in 2Q.  Scenario 4 (Avalanche), which represented a steep drop in demand resulting in a substantial capacity oversupply, performed the worst across the board, but performed the best in the TV category specifically, predicting shipments within 1% and 2% of actual results in 1Q and 2Q respectively, while seriously underestimating shipments in all other device categories.  Scenario 1 (Slow Burn), which represented slightly weaker demand and modest oversupply in capacity, predicted monitor unit volume the most accurately, within 2.5% to 3.2% of actual, but joined all three other scenarios in mis-forecasting notebook unit volume.  The table below summarizes the results with each scenario.

​In terms of these scenarios, while we certainly look at the monthly and quarterly results, these scenarios were built around full year results, and we expect 2H to be both different from 1H and different from the ‘typical’ 2H, so we reserve judgement on how well the scenarios performed until we have full year data.  That said, on a general basis we underestimated the strength of demand in the 1st half, particularly with notebooks, which have continued to outperform our expectations as to unit volumes, but the 2nd half presents its own challenges, some of which are a continuation of those seen in the 1st half and others are new, such as the potential for declining TV panel prices.  We will update again after we have actual 3Q data, but being off by 16.4m panels out of 441.4m is not too bad…