Early February Panel Price Expectations
It’s time to predict the future, in an environment that might be slightly less politically volatile but seems to be changing on an almost weekly basis. That said, as we head into February and the Chinese New Year holiday, we note that while we expect a decline in panel shipments in 1Q ’21, there are a number of factors that must also be considered in understanding the CE picture for 1Q, especially in the display space.
Due to the particular situation that the world finds itself in due to COVID-19, particularly in the US, demand for notebooks, tablets, and monitors has been unusually strong since 2Q of 2020. We expect that to continue through 1Q, and likely into 2Q, until restrictions such as limited indoor dining are reduced (Hopefully by May or June based on current expectations).
While we expect quarterly y/y comparisons to moderate as the year progresses, we see continued upward pressure on panel and CE device prices generally, less from demand and more from capacity limitations that lead to shortages. We see February panel prices up again as foundries allocate resources toward large, profitable devices, and turn their focus away from less profitable but industry ‘essential’ products. This lack of silicon capacity not only limits quantities, which in turn, limit end product production, but also creates situations where foundry customers move from contract level negotiations to bidding wars that exacerbate the price situation.
This follows a similar pattern in the display space, where large customers can ensure display quotas by increasing order sizes while smaller customers must pay higher prices and raise the price bar further. As the shortages get worse, which we believe will be the case in February, we expect panel producers to face some limitations as to production levels. We don’t expect this to mean that utilization rates will decrease substantially, as we expect that most panel producers will use what we expect could be lower shipments to large customers (shortage and seasonally related) to bring smaller customers, whose orders might have been backlogged due to large customer demand, up to quota. We expect this ‘gap filling’ will keep panel producers active during February, which is usually the slowest month of the year. In fact we know of a number of producers in China that are offering unusually high incentives and bonuses if workers stay on-site during the holidays.
All in, while shipments might decline, we expect panel prices to rise again in February, but more due to shortages than from demand. We expect notebook panel prices to increase between 2.0% and 3.1%, while we expect monitor panel prices to rise between 2.6% and 3.0%. TV panel pricing is a bit more convoluted, as we expect component shortages to continue to affect production, particularly on the glass substrate and driver side, while demand should weaken a bit this month. Samsung Display’s (pvt) decision to keep its remaining large panel LCD fabs open for the remainder of the year helps capacity a bit, adding ~1m 55” TV equivalents back into the system this year, but that is less than 1% of total TV panel yearly production, so it is not a game changer, while substrate glass could see some allocation due to issues at NEG (5214.JP) and Asahi (5201.JP).
This pushes us to expect TV panel prices to increase between 3.7% and 4.5% this month, despite the slower shipment growth, which would put aggregate TV panel prices 74.4% above the 2020 TV panel price low point, 75.6% above 2019 TV panel year-end price, and 8.3% above 2020 year-end TV panel prices. While TV set pricing does not track panel pricing on a monthly or even quarterly basis, there is only so much component cost that set manufacturers can absorb, and adding in the rising cost of base metals and other components, TV set manufacturers will have little alternative as to raising set prices. While many new TV sets have been announced thus far this year, most of those sets have not been released, nor have prices. It should be relatively easy for set manufacturers to build higher component costs into new sets by justifying higher prices with new features or new technology, but if the panel and component price trends continue to increase, we would expect TV set prices to increase throughout the year. There is a point at which this becomes visible to the average consumer, as it did with smartphones, and demand will weaken and TV panel prices will moderate, but at least for now (February), that is not the case.
Due to the particular situation that the world finds itself in due to COVID-19, particularly in the US, demand for notebooks, tablets, and monitors has been unusually strong since 2Q of 2020. We expect that to continue through 1Q, and likely into 2Q, until restrictions such as limited indoor dining are reduced (Hopefully by May or June based on current expectations).
While we expect quarterly y/y comparisons to moderate as the year progresses, we see continued upward pressure on panel and CE device prices generally, less from demand and more from capacity limitations that lead to shortages. We see February panel prices up again as foundries allocate resources toward large, profitable devices, and turn their focus away from less profitable but industry ‘essential’ products. This lack of silicon capacity not only limits quantities, which in turn, limit end product production, but also creates situations where foundry customers move from contract level negotiations to bidding wars that exacerbate the price situation.
This follows a similar pattern in the display space, where large customers can ensure display quotas by increasing order sizes while smaller customers must pay higher prices and raise the price bar further. As the shortages get worse, which we believe will be the case in February, we expect panel producers to face some limitations as to production levels. We don’t expect this to mean that utilization rates will decrease substantially, as we expect that most panel producers will use what we expect could be lower shipments to large customers (shortage and seasonally related) to bring smaller customers, whose orders might have been backlogged due to large customer demand, up to quota. We expect this ‘gap filling’ will keep panel producers active during February, which is usually the slowest month of the year. In fact we know of a number of producers in China that are offering unusually high incentives and bonuses if workers stay on-site during the holidays.
All in, while shipments might decline, we expect panel prices to rise again in February, but more due to shortages than from demand. We expect notebook panel prices to increase between 2.0% and 3.1%, while we expect monitor panel prices to rise between 2.6% and 3.0%. TV panel pricing is a bit more convoluted, as we expect component shortages to continue to affect production, particularly on the glass substrate and driver side, while demand should weaken a bit this month. Samsung Display’s (pvt) decision to keep its remaining large panel LCD fabs open for the remainder of the year helps capacity a bit, adding ~1m 55” TV equivalents back into the system this year, but that is less than 1% of total TV panel yearly production, so it is not a game changer, while substrate glass could see some allocation due to issues at NEG (5214.JP) and Asahi (5201.JP).
This pushes us to expect TV panel prices to increase between 3.7% and 4.5% this month, despite the slower shipment growth, which would put aggregate TV panel prices 74.4% above the 2020 TV panel price low point, 75.6% above 2019 TV panel year-end price, and 8.3% above 2020 year-end TV panel prices. While TV set pricing does not track panel pricing on a monthly or even quarterly basis, there is only so much component cost that set manufacturers can absorb, and adding in the rising cost of base metals and other components, TV set manufacturers will have little alternative as to raising set prices. While many new TV sets have been announced thus far this year, most of those sets have not been released, nor have prices. It should be relatively easy for set manufacturers to build higher component costs into new sets by justifying higher prices with new features or new technology, but if the panel and component price trends continue to increase, we would expect TV set prices to increase throughout the year. There is a point at which this becomes visible to the average consumer, as it did with smartphones, and demand will weaken and TV panel prices will moderate, but at least for now (February), that is not the case.
Aggregate TV Panel Pricing & ROC - 2019 - 2021 - Source: SCMR LLC, IHS, Company Data
RSS Feed