Panel Prices – The Year of the Black Hole
Black Hole Imagery - Source: NASA
December
December was another wishy-washy month for LCD panel prices, with little movement in either direction, which after a few years of unusually large monthly swings, is the second month of essentially little or no change in LCD panel prices, and a positive in our view. That is not to say we could see continued weakness in panel prices, especially given the spike in COVID cases in China as they reduce lockdown restrictions, but a bit less volatility is a good thing. It is difficult to judge whether the lesser COVID restrictions in China will unleash some pent-up demand or whether the higher infection rate will keep that in check, but data from the 12/12 shopping holiday in China (a subset of the more well-known 11/11 shopping holiday) indicates that TV shipments were down 8.2% y/y and sales value was down 15.8% y/y for the 12/12 holiday, even with TV set ASP declining 11.5% between the 11/11 holiday and the 12/12 holiday.
Notebooks and tablets did better than our December forecasts, pushing IT LCD (Monitor, Notebook, & Tablets) also above our forecasts, with the remaining categories within the forecasted range. We expect relatively similar results for January, with the total LCD panel prices between -0.3% and +1.5%. As a bargain hunting month in the US, we are modestly optimistic about overall LCD panel prices early in the 2023 year, but have already heard that one of three panel producers in Taiwan is expecting to see the company’s utilization rate increase from ~65% currently to 80% to 85% in the first quarter. This change alone would represent a 2.5% increase in industry capacity on a m2 basis, and while we would expect capacity decreases from South Korean producers to offset some of that expected increase, we expect other producers will also take the new year as a possible ‘better world’ and increase utilization rates.
As whatever stability the LCD panel space has seen over November and December has been driven by supply reductions rather than demand, we become more cautious when we hear that utilization is potentially increasing in the new year. Understandably, panel producers want to have an optimistic view and are looking for a better year than 2022 in 2023, but a slow implementation of utilization reductions last year (2022) was responsible for the difficulties the LCD panel space saw during what should have been its best quarter, so hopefully the same mistake will not be repeated in reverse. That said, panel producers are a competitive lot and do not always do what is good for the industry, so while we see a relatively flat January, we are on the alert for misplaced optimism going forward.
December was another wishy-washy month for LCD panel prices, with little movement in either direction, which after a few years of unusually large monthly swings, is the second month of essentially little or no change in LCD panel prices, and a positive in our view. That is not to say we could see continued weakness in panel prices, especially given the spike in COVID cases in China as they reduce lockdown restrictions, but a bit less volatility is a good thing. It is difficult to judge whether the lesser COVID restrictions in China will unleash some pent-up demand or whether the higher infection rate will keep that in check, but data from the 12/12 shopping holiday in China (a subset of the more well-known 11/11 shopping holiday) indicates that TV shipments were down 8.2% y/y and sales value was down 15.8% y/y for the 12/12 holiday, even with TV set ASP declining 11.5% between the 11/11 holiday and the 12/12 holiday.
Notebooks and tablets did better than our December forecasts, pushing IT LCD (Monitor, Notebook, & Tablets) also above our forecasts, with the remaining categories within the forecasted range. We expect relatively similar results for January, with the total LCD panel prices between -0.3% and +1.5%. As a bargain hunting month in the US, we are modestly optimistic about overall LCD panel prices early in the 2023 year, but have already heard that one of three panel producers in Taiwan is expecting to see the company’s utilization rate increase from ~65% currently to 80% to 85% in the first quarter. This change alone would represent a 2.5% increase in industry capacity on a m2 basis, and while we would expect capacity decreases from South Korean producers to offset some of that expected increase, we expect other producers will also take the new year as a possible ‘better world’ and increase utilization rates.
As whatever stability the LCD panel space has seen over November and December has been driven by supply reductions rather than demand, we become more cautious when we hear that utilization is potentially increasing in the new year. Understandably, panel producers want to have an optimistic view and are looking for a better year than 2022 in 2023, but a slow implementation of utilization reductions last year (2022) was responsible for the difficulties the LCD panel space saw during what should have been its best quarter, so hopefully the same mistake will not be repeated in reverse. That said, panel producers are a competitive lot and do not always do what is good for the industry, so while we see a relatively flat January, we are on the alert for misplaced optimism going forward.
Aggregate Monitor Panel Pricing & ROE - 2019 - 2022 - Source: SCMR LLC, IHS, Witsview, OMDIA, RUNTO, Stone Ptrs.
Aggregate Notebook Panel Pricing & ROE - 2019 - 2022 - Source: SCMR LLC, IHS, Witsview, OMDIA, RUNTO, Stone Ptrs.
Aggregate TV Panel Pricing & ROE - 2019 - 2022 - Source: SCMR LLC, IHS, Witsview, OMDIA, RUNTO, Stone Ptrs.
Aggregate Tablet Panel Pricing & ROE - 2019 - 2022 - Source: SCMR LLC, IHS, Witsview, OMDIA, RUNTO, Stone Ptrs.
Aggregate Mobile Panel Pricing & ROE - 2019 - 2022 - Source: SCMR LLC, IHS, Witsview, OMDIA, RUNTO, Stone Ptrs
2022
Sometimes numbers speak louder than words and in the case of LCD display panel prices this year, the table below says pretty much the bulk of what needs to be said. Other than TV panel prices, which hit 2022 lows in September, and the categories in which TV panel prices are a part (‘Large Panel’ & ‘Total’), all panel categories are at their lows for the 2022 year and for the three-year period from 2020 to 2022. What the table does not tell is that the results are the same for the five-year period between 2018 and 2022, putting all categories, other than TV LCD panels, at their lows going back to January 2018, two years before the COVID-19 pandemic began, so the mantra of returning to pre-pandemic levels tends to soften the fact that panel prices are at lows that are in some cases, the lowest in 8 years.
Sometimes numbers speak louder than words and in the case of LCD display panel prices this year, the table below says pretty much the bulk of what needs to be said. Other than TV panel prices, which hit 2022 lows in September, and the categories in which TV panel prices are a part (‘Large Panel’ & ‘Total’), all panel categories are at their lows for the 2022 year and for the three-year period from 2020 to 2022. What the table does not tell is that the results are the same for the five-year period between 2018 and 2022, putting all categories, other than TV LCD panels, at their lows going back to January 2018, two years before the COVID-19 pandemic began, so the mantra of returning to pre-pandemic levels tends to soften the fact that panel prices are at lows that are in some cases, the lowest in 8 years.
We do note that the effects of COVID have had a major influence on panel prices, both to the positive and to the negative, but the one fact that seems to override the effects of COVID is that panel production is driven by individual companies that do not work toward a common goal. There is always the “…if they are doing it, we have to also do it…” short-term view that would seem to be a result of management looking at daily, weekly, or monthly numbers and making decisions without evaluating the near-term impact on the industry overall. This shortsightedness seems to drag out each cycle, as the hard decisions are put off, ”…to make sure the other guy doesn’t do better than us…”, even if such decisions are detrimental to the industry. This lack of industry coherence was quite obvious this year as many panel producers held off the utilization cuts that they knew were the only way to stem the tide of falling panel prices.
We do note that there were other factors at play, such as high component costs, especially early in the year, and the resulting pressure to raise prices to compensate, eventually raising the specter of a global inflationary environment. But many were predicting an end to Mr. Toad’s Wild Panel Price Ride late last year and early this year, yet panel producers continued to view the world with rose colored glasses, and have been paying the price most recently. It would seem that either panel producers have poor economic forecasters on staff, or managements pay little attention to them, likely the latter, but the industry only seems to respond when hit repeatedly over the head. The CE space overall is relatively poor at responding to economic indicators, so we don’t put the entire onus on panel producers as they must respond to customer requests, which can also be contrary to logic or the health of the industry, so we struggle to see a solution to the problem, which tends to be made worse by governments who support industry growth with subsidies, regardless of the consequences. It’s a complex ecosystem that seems to find itself back in the same position every few years, albeit with a bit of CE matter being sucked into a black hole. While black holes are among the most destructive forces in the universe, it seems most would know enough to stay as far away as possible. JOHO
We do note that there were other factors at play, such as high component costs, especially early in the year, and the resulting pressure to raise prices to compensate, eventually raising the specter of a global inflationary environment. But many were predicting an end to Mr. Toad’s Wild Panel Price Ride late last year and early this year, yet panel producers continued to view the world with rose colored glasses, and have been paying the price most recently. It would seem that either panel producers have poor economic forecasters on staff, or managements pay little attention to them, likely the latter, but the industry only seems to respond when hit repeatedly over the head. The CE space overall is relatively poor at responding to economic indicators, so we don’t put the entire onus on panel producers as they must respond to customer requests, which can also be contrary to logic or the health of the industry, so we struggle to see a solution to the problem, which tends to be made worse by governments who support industry growth with subsidies, regardless of the consequences. It’s a complex ecosystem that seems to find itself back in the same position every few years, albeit with a bit of CE matter being sucked into a black hole. While black holes are among the most destructive forces in the universe, it seems most would know enough to stay as far away as possible. JOHO
Aggregate Large Panel LCD Pricing - 8 Years - 2015 - 2022 - Source: SCMR LLC, IHS, OMDIA, Witsview, Stone trs. RUNTO
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