January Display Indicators

2/24/2021

January Display Indicators

January is usually a weak month for the display industry, as December of the previous year is usually the last month for production for Chinese New Year, along with the New Year holiday in the West. Based on a 5 year average, the typical December to January m/m decline in display industry sales has been -8.6%, with a low of -15.2% (Jan ’20) and a high of +0.3% (Jan ’18). Before minor corrections, January 2021 saw a sales decline of 2.0% across the large panel display industry, slightly less than what we were expecting (-4%). Typical February large panel display sales declines are -8.1%, but as January was considerably better than the 5 year average, we expect the same for February, which we expect to be down ~3%. March however is typically a big recovery month on a m/m basis, both due to pent-up demand following weakness in January and February, and the return of workers to plants after the Chinese New Year holiday.

Large Panel Display Revenue - 2019 - 2021 YTD - Source: SCMR LLC, OMDIA, Company Data

Breaking down the decline by panel type, on a unit shipment basis, monitor panels saw the biggest m/m decline at -10.3%, followed by TVs at -8.4%, notebooks at -0.9% and tablets, which grew 1.2%. While units in total were down 4.5%, continuing panel price increases offset almost half of the unit volume decline. On a regional basis large panel sales break down as the table below indicates, however Fig. 2 gives a better understanding of how the share of revenue across the large panel display space has changed over the last 2+ years, with Korean large panel LCD producers reducing production capacity and Chinese large panel producers increasing production capacity.

Display Industry Large Panel Revenue Share - Korea/China - Source: SCMR LLC, OMDIA, Company Data

Nanjing and 51% of their Gen 8.6 fab in Chengdu and Samsung Displa (pvt) has sold its Gen 8.5 plant in Suzhou to TCL (000100.CH)/Chinastar (pvt). These two transfers, while they will not have a major effect on industry capacity overall, will make a big difference to the share and capacity of both sellers, as can be seen in Fig. 3, with BOE and Chinastar seeing offsetting increases as the transfers are made this quarter. Given that Samsung Display is developing a QD/OLED fab, which we expect will not be in a high-yield mode until 2022, we expect little improvement in Samsung Display’s large panel LCD sales this year, and could see further curtailment of LCD production if panel price increases flatten out, while the fate of Panda’s remaining Nanjing LCD fabs depends on performance and the China Electronics Corporation (State), who is a controlling entity.
All in, it was a better than expected January for the large panel display space, and a continuation of the ‘new normal’ we have seen since the outbreak of COVID-19, which we expect will continue into this month and potentially March. That said, there are two factors that we are watching closely, the first being the effect of component shortages, and the second being a lessening of the effects from COVID-19 on a global and local basis. Thus far component shortages have been more of a talking point than one that has made an appreciable difference to the overall LCD display space, and we expect some of that talk is a result of companies double ordering to ensure they will have adequate supply. The increased demand for monitors, notebooks, and tablets, a result of remote learning and work-at-home focus, has thrown the CE supply chain into disarray, making years of industry long-term planning irrelevant, but while we ponder when things will return to normal, we also have to gain perspective on what that normal will look like. Next week (hopefully) we will match up our demand scenarios with our capacity estimates for the year and present a few of the possible outcomes and how they will affect the CE space, particularly display companies. Stay tuned.