Short-term Headlines or Things to Come?
A Taiwanese technology daily, known for its somewhat misleading headlines and extreme forecasts (our opinion), has published the headline “Tablet shipments to slip below 30 million units in 1Q 23”, an ominous prediction that looks to strike fear into the hearts of those that participate in the CE space and set a negative tone for the 2023 year. We find this a bit headline a bit misleading in that it gives little or no perspective as to what such a prediction actually means.
If we look at quarterly tablet shipments over the last six years, the trend is a bit difficult to see as tablet shipments tend to be volatile, and not always seasonal, but when viewed on a yearly basis, it seems more obvious that tablet shipments had flattened during the two years before the COVID-19 pandemic. During the two years before the pandemic (2017 – 2018) the quarterly rate of tablet shipments was 35.4m units, while during the pandemic (2Q ’20 – 2Q ’22) the quarterly average was 41.1m units, 18.9% higher. As the pandemic winds down, we would expect tablet shipments to return to pre-pandemic levels, which would imply a rate close to that 35.4m units/quarter that we mentioned above. That said, it can be seen in Figure 1 that there have been a number of quarters when tablet shipments fell below 30m units, both before and during the pandemic, so while a prediction of ‘less than 30m units’ for 1Q is a bit troubling, it is not out of line with past history and is likely reflective of both the winding down of COVID, and the global inflationary macro environment.
Our bigger concern however is less about the level of tablet shipments in 1Q and more about whether tablet brands have reduced expectations with suppliers, particularly panel producers, and whether panel producers will maintain the low panel production levels needed to balance supply and demand. After a poor 2022, panel producers will have a strong desire to push prices or production to generate some momentum early in the year. Figure 3 points to the fact that in pre-pandemic years, tablet panel production was, for the most part, behind tablet shipments, which should drive panel prices higher, however this was not the case as tablet panel prices declined (Figure 4), more in keeping with the slow deterioration of demand through the end of 2019.
In 2020 tablet panel producers stepped up production, matching demand closely and tablet panel prices increased rapidly. That said, we believe this was more of a function of strong demand, rather than a closer balance between tablet demand and tablet panel supply, and as the tablet demand peaked at the end of 2020, panel producers continued to oversupply, causing tablet panel prices to decline in 2Q ’21, along with other IT product prices. During 2022, tablet panel production was closely matched to demand, yet panel prices still declined, more likely picking up the long-term declining trend that had been interrupted by the pandemic. If panel producers take time to respond to the lower tablet shipment levels expected for 1Q (Figure 5 & Figure 6), tablet panel prices will decline further, rather than level off as they seem to be doing in recent months.
If we look at quarterly tablet shipments over the last six years, the trend is a bit difficult to see as tablet shipments tend to be volatile, and not always seasonal, but when viewed on a yearly basis, it seems more obvious that tablet shipments had flattened during the two years before the COVID-19 pandemic. During the two years before the pandemic (2017 – 2018) the quarterly rate of tablet shipments was 35.4m units, while during the pandemic (2Q ’20 – 2Q ’22) the quarterly average was 41.1m units, 18.9% higher. As the pandemic winds down, we would expect tablet shipments to return to pre-pandemic levels, which would imply a rate close to that 35.4m units/quarter that we mentioned above. That said, it can be seen in Figure 1 that there have been a number of quarters when tablet shipments fell below 30m units, both before and during the pandemic, so while a prediction of ‘less than 30m units’ for 1Q is a bit troubling, it is not out of line with past history and is likely reflective of both the winding down of COVID, and the global inflationary macro environment.
Our bigger concern however is less about the level of tablet shipments in 1Q and more about whether tablet brands have reduced expectations with suppliers, particularly panel producers, and whether panel producers will maintain the low panel production levels needed to balance supply and demand. After a poor 2022, panel producers will have a strong desire to push prices or production to generate some momentum early in the year. Figure 3 points to the fact that in pre-pandemic years, tablet panel production was, for the most part, behind tablet shipments, which should drive panel prices higher, however this was not the case as tablet panel prices declined (Figure 4), more in keeping with the slow deterioration of demand through the end of 2019.
In 2020 tablet panel producers stepped up production, matching demand closely and tablet panel prices increased rapidly. That said, we believe this was more of a function of strong demand, rather than a closer balance between tablet demand and tablet panel supply, and as the tablet demand peaked at the end of 2020, panel producers continued to oversupply, causing tablet panel prices to decline in 2Q ’21, along with other IT product prices. During 2022, tablet panel production was closely matched to demand, yet panel prices still declined, more likely picking up the long-term declining trend that had been interrupted by the pandemic. If panel producers take time to respond to the lower tablet shipment levels expected for 1Q (Figure 5 & Figure 6), tablet panel prices will decline further, rather than level off as they seem to be doing in recent months.
Aggregate Tablet Shipments - 2017 - 2022 - Source: SCMR LLC, various
Aggregate Yearly Tablet Shipments - Source: SCMR LLC, various
Comparison - Tablets Shipped vs. Tablet Panels Shipped - Source: SCMR LLC, various.
Comparison - Tablet Shipments, Tablet Panel Shipments, Tablet Panel Price - Source: SCMR LLC, various.
1Q Tablet Shipments (Units) - 2017 - 2022 w. Outside Forecast - Source: SCMR LLC, OMDIA, Witsview, RUNTO
Shipments - 2017 – 2022w. Outside Forecast – Source: SCMR LLC, OMDIA, Witsview, RUNTO
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