Samsung Suspends TV Panel Orders
Samsung Electronics (005930.KS) is said to have suspended orders for LCD TV panels from its suppliers for between 30 days and 45 days according to a number of sources in South Korea. This comes after it was widely noted that Samsung had reduced its TV set shipment plans for the year a 2nd time, from an original 53m – 54m units to 45m units and then to the current 40m units, as inventories grew to 2x pre-pandemic levels while demand slowed. The original estimations would have built in an increase over last year’s 50m units, which was 10% above the shipment rate in 2020.
While the impact will be different for each of Samsung’s suppliers, we expect Samsung’s monthly order rate to be between 3.3m and 3.75m panels, which would represent between 5.8% and 6.6% of monthly panel production based on most recent data, and with an average price of $76 (TV panel ASP) a value of between $250.5m and $285m, would represent between 5.0% and 5.6% of large panel sales on a monthly basis. Given that the 5 suppliers most likely affected would represent ~69.2% of monthly large panel industry sales, we expect the impact to be significant for BOE (200725.CH), Chinastar (pvt), HKC (248.HK), AU Optronics (2409.TT) and Innolux (3481.TT), but again, specific impact by company would depend entirely on order concentration and the type and price of the panels ordered as we are using an average price across all panel sizes. Those with orders for 65” and larger panels, which carry a price considerably above the average would see a greater impact. We expect BOE and Chinastar, both of whom have Gen 10.5 LCD panel fabs which specialize in large panel production would see the biggest impact.
As we have noted previously, much will depend on how quickly TV panel and set inventory can be reduced to more normal levels, which would entail a period of watching demand in a steady state environment (June) and then gauging how much discounting is necessary to bring those levels in line. As raw material and component prices have risen, offsetting some of the declines in panel prices, TV set brands will likely tread softly when it comes to discounting, at least at the onset, but we suspect if normal levels have not been reached by the end of July, we will see even more aggressive discounting and the potential for Samsung’s cuts to extend into the first two weeks of August, exacerbating the potential impact to LCD large panel producers. That said, we expect at least a modicum of stability by September but worry that at the first sign of even modest demand improvement at the set level, panel producers will increase utilization to bail out what is shaping up to be a weak 3Q.
While the impact will be different for each of Samsung’s suppliers, we expect Samsung’s monthly order rate to be between 3.3m and 3.75m panels, which would represent between 5.8% and 6.6% of monthly panel production based on most recent data, and with an average price of $76 (TV panel ASP) a value of between $250.5m and $285m, would represent between 5.0% and 5.6% of large panel sales on a monthly basis. Given that the 5 suppliers most likely affected would represent ~69.2% of monthly large panel industry sales, we expect the impact to be significant for BOE (200725.CH), Chinastar (pvt), HKC (248.HK), AU Optronics (2409.TT) and Innolux (3481.TT), but again, specific impact by company would depend entirely on order concentration and the type and price of the panels ordered as we are using an average price across all panel sizes. Those with orders for 65” and larger panels, which carry a price considerably above the average would see a greater impact. We expect BOE and Chinastar, both of whom have Gen 10.5 LCD panel fabs which specialize in large panel production would see the biggest impact.
As we have noted previously, much will depend on how quickly TV panel and set inventory can be reduced to more normal levels, which would entail a period of watching demand in a steady state environment (June) and then gauging how much discounting is necessary to bring those levels in line. As raw material and component prices have risen, offsetting some of the declines in panel prices, TV set brands will likely tread softly when it comes to discounting, at least at the onset, but we suspect if normal levels have not been reached by the end of July, we will see even more aggressive discounting and the potential for Samsung’s cuts to extend into the first two weeks of August, exacerbating the potential impact to LCD large panel producers. That said, we expect at least a modicum of stability by September but worry that at the first sign of even modest demand improvement at the set level, panel producers will increase utilization to bail out what is shaping up to be a weak 3Q.
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