Panel Prognostication
Yesterday we noted the panel price changes that have been taking place across the display industry this year. Today we look at both how those panel prices have affected sales and shipments and how that sets up possible scenarios for 2022. Fig. 1 shows the relationship between large panel display industry sales and aggregate large panel prices[1], which track quite closely over the last few years, with the January/February period each year being the most out of sync, due to the Chinese New Year Holiday. As large panel prices began to rise in 1Q 2020, sales increased rapidly, peaking in July of this year, and began to decline as aggregate large panel prices declined.
Fig. 2 shows the same relationship between large panel industry sales but substitutes TV panel process for an aggregated overall price. Industry sales can be seen beginning to decline in July, but at a slower rate than the decline in TV panel prices. Fig. 3, which shows the relationship between large panel industry sales and IT panel prices, explains why the decline in industry sales is not declining as quickly as TV panel prices, as the slower decline in IT panel prices is acting as a buffer, but as we noted yesterday, also increases the industry’s sensitivity to IT panel prices. To confirm that conclusion, we show Figs. 4 – 6, which show the relationship between large panel industry sales and large panel shipments, TV panel shipments, and IT panel shipments respectively. With both TV and IT shipments relatively stable, the increase and decrease seen in industry sales over the last two years comes from price increases rather than variability in unit demand, with industry sales now more dependent on stable IT panel prices.
[1] While we aggregate all four panel types, creating a combined dollar value, it is a reference number only.
Fig. 2 shows the same relationship between large panel industry sales but substitutes TV panel process for an aggregated overall price. Industry sales can be seen beginning to decline in July, but at a slower rate than the decline in TV panel prices. Fig. 3, which shows the relationship between large panel industry sales and IT panel prices, explains why the decline in industry sales is not declining as quickly as TV panel prices, as the slower decline in IT panel prices is acting as a buffer, but as we noted yesterday, also increases the industry’s sensitivity to IT panel prices. To confirm that conclusion, we show Figs. 4 – 6, which show the relationship between large panel industry sales and large panel shipments, TV panel shipments, and IT panel shipments respectively. With both TV and IT shipments relatively stable, the increase and decrease seen in industry sales over the last two years comes from price increases rather than variability in unit demand, with industry sales now more dependent on stable IT panel prices.
[1] While we aggregate all four panel types, creating a combined dollar value, it is a reference number only.
Large Panel Industry Sales vs. Aggregate Large Panel Price - Source: SCMR LLC
Large Panel Industry Sales vs. TV Panel Prices - Source: SCMR LLC
Large Panel Industry Sales vs. IT Panel Price - Source: SCMR LLC
Large Panel Industry Sales vs. Large Panel Shipments - Source: SCMR LLC
Large Panel Industry Sales vs. TV Panel Shipments - Source: SCMR LLC
Large Panel Industry Sales vs. IT Panel Shipments - Source: SCMR LLC
More directly, we can use the same panel price data to compare against individual panel producers to see how sensitive each are to TV and IT panel price changes. We note that there are certain exceptions to the data, as capacity expansion at some of the Chinese producers has a significant influence on sales, above and beyond panel prices, while the opposite is the case for South Korean panel producers, particularly Samsung Display (pvt), who have been pointedly reducing their large panel capacity. We note that Fig. 7 – Fig 13 show large panel sales only; devices below 9” are not included in totals.
AU Optronics (2409.TT) and Innolux (3481.TT) are both Taiwan based panel producers with relatively stable and mature capacity, however AUO has been shifting capacity from TV panels to IT panels, particularly in 3Q of this year, when the share of AUO’s sales from TV panels declined from 26% to 22% and panel sizes between 10” and 20” increased from 37% to 42% of sales, and while AUO’s sales have been declining since July, they have been less affected by the steep decline in TV panel prices. Innolux however saw a greater share of sales from TV panels (32%) in 3Q and saw a larger drop in overall sales as a result, pointing to a higher dependence on TV panel prices.
LG Display (LPL) and Samsung Display are both reducing large panel LCD capacity on an overall basis and therefore have a lessening dependence on both TV and IT panel pricing. LG Display (Fig. 9) generated 32% of sales in 3Q from TV panel shipments but that also includes OLED TV panels, which carry a higher ASP than LCD panels and would offset declining LCD TV panel production and lower TV panel prices, leaving LG Display with stable LCD sales for the latter half of this year. Samsung Display (Fig. 10) has been more aggressive in shuttering its large panel LCD production, maintaining only one large panel LCD fab at the request of parent Samsung Electronics (005930.KS) and shifting much of that idled capacity to small panel OLED production and its new QD/OLED line. While LCD large panel sales are much lower than last year, the lack of exposure to large panel LCD price decreases has helped to maintain large panel sales at a stable level for 2H ’21, especially as they are producing almost only for a dedicated customer, Samsung Electronics.
AU Optronics (2409.TT) and Innolux (3481.TT) are both Taiwan based panel producers with relatively stable and mature capacity, however AUO has been shifting capacity from TV panels to IT panels, particularly in 3Q of this year, when the share of AUO’s sales from TV panels declined from 26% to 22% and panel sizes between 10” and 20” increased from 37% to 42% of sales, and while AUO’s sales have been declining since July, they have been less affected by the steep decline in TV panel prices. Innolux however saw a greater share of sales from TV panels (32%) in 3Q and saw a larger drop in overall sales as a result, pointing to a higher dependence on TV panel prices.
LG Display (LPL) and Samsung Display are both reducing large panel LCD capacity on an overall basis and therefore have a lessening dependence on both TV and IT panel pricing. LG Display (Fig. 9) generated 32% of sales in 3Q from TV panel shipments but that also includes OLED TV panels, which carry a higher ASP than LCD panels and would offset declining LCD TV panel production and lower TV panel prices, leaving LG Display with stable LCD sales for the latter half of this year. Samsung Display (Fig. 10) has been more aggressive in shuttering its large panel LCD production, maintaining only one large panel LCD fab at the request of parent Samsung Electronics (005930.KS) and shifting much of that idled capacity to small panel OLED production and its new QD/OLED line. While LCD large panel sales are much lower than last year, the lack of exposure to large panel LCD price decreases has helped to maintain large panel sales at a stable level for 2H ’21, especially as they are producing almost only for a dedicated customer, Samsung Electronics.
AU Optronics Sales vs. TV & IT Panel Prices - Source: SCMR LLC, Company Data
Innolux Sales vs. TV & IT Panel Pricing - Source: SCMR LLC, Company Data
LG Display Sales vs. TV & IT Panel Prices - Source: SCMR LLC, Company Data
Samsung Display Sales vs. TV & IT Panel Prices - Source: SCMR LLC, Company Data
Chinese panel producers are a different breed when it comes to large panel LCD production as they have been increasing large panel LCD capacity at a rate of over 30% this year. This makes the charts a bit more difficult to read, but even BOE (200725.CH), the largest of the Chinese LCD panel producers, saw a moderate decrease in sales over the last few months, a result of its shift away from TV panel production, while Chinastar (pvt) was a bit more affected by the drop in TV panel prices, as they have been a primary source for parent TCL (000100.CH), who has been quite aggressive in developing its TV set business, especially in the US. Chinese producer HKC (0248.HK) has been ramping capacity, which we believe obscures the effect of large panel price reductions, and Sharp (6753.JP), owned by Foxconn (2354.TT), saw a big jump in sales in September but a big drop the next month as TV panel prices continued to decline.
The data points to an increasing dependence on IT panel prices for many of the major LCD panel producers, and while TV panel prices continue to decline, we expect less pressure from those price declines and an increased sensitivity to IT panel prices. With the influence of the Omicron variant of COVID-19, we expect some renewed interest in notebook demand, as student laptop programs that had been winding down now look to potentially extend into 2022, which would keep IT panel demand higher than expectations, but if the variant proves less contagious or limited by current vaccines, IT panel prices would continue to slowly decline. We don’t expect a rapid drop off in IT panel prices, such as was seen with TV panels, but the increased dependence on IT panels makes even relatively small price declines more troubling. The ideal scenario for panel producers would be for stable IT panel prices and slowly increasing TV panel demand, a result of lower TV panel prices passing through the ecosystem, but we expect that is a lot to hope for given the unusually large number of variables the display industry faces again in 2022.
The data points to an increasing dependence on IT panel prices for many of the major LCD panel producers, and while TV panel prices continue to decline, we expect less pressure from those price declines and an increased sensitivity to IT panel prices. With the influence of the Omicron variant of COVID-19, we expect some renewed interest in notebook demand, as student laptop programs that had been winding down now look to potentially extend into 2022, which would keep IT panel demand higher than expectations, but if the variant proves less contagious or limited by current vaccines, IT panel prices would continue to slowly decline. We don’t expect a rapid drop off in IT panel prices, such as was seen with TV panels, but the increased dependence on IT panels makes even relatively small price declines more troubling. The ideal scenario for panel producers would be for stable IT panel prices and slowly increasing TV panel demand, a result of lower TV panel prices passing through the ecosystem, but we expect that is a lot to hope for given the unusually large number of variables the display industry faces again in 2022.
BOE Sales vs. TV & IT Panel Prices - Source: SCMR LLC, Company Data
Chinastar Sales vs. TV & IT Panel Prices - Source: SCMR LLC, Company Data
HKC Sales vs. TV & IT Panel Pricing - Source: SCMR LLC, Company Data
Sharp Sales vs. TV & IT Panel Pricing - Source: SCMR LLC, Company Data
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