Taiwan Panel Sales – June/2Q and More - Supply Chain Market Research

Taiwan Panel Sales – June/2Q and More

7/9/2021

Taiwan Panel Sales – June/2Q and More

All three primary Taiwan panel producers have released June preliminary results, which finalizes 2Q sales and shipments. For the two Taiwanese panel producers that have broad offerings in large panel products (AU Optronics (AUOTY)) and Innolux (3481.TT)), total sales were up 5.7% and 0.4% m/m, while still showing strong y/y results in June, up 57.1% and 30.3% respectively. Hannstar (6116.TT), which is primarily a small panel producer, saw its sales for June decline by 11.1% m/m but are up 81.6% y/y. For 2Q AU Optronics and Innolux saw q/q gains of 15.3% and 11.2% while Hannstar saw a smaller gain of 2.3%. All three saw substantial 2Q y/y gains of 50.6%, 39.5% and 120.6% respectively.

Panel prices, particularly large panel prices continued to rise through June and for the entire quarter giving panel producers sales momentum regardless of unit volumes, and as the quarter progressed, panel producers continued to shift production toward the categories seeing the most rapid increases and the highest demand. Given that capacity at the three panel, producers in Taiwan did not change appreciably during 2Q, price increases and mix were the two significant variables. That said we calculated weighted averages using industry mix norms to calculate the average price increases seen for those with more typical mix, which would exclude Hannstar in this case, given its focus on small panel production. Based on the weighted averages for 2Q, sales should have increased by 13.2% q/q, which indicates that AU Optronics outperformed what would be our ‘industry norm’ while Innolux was a bit shy.

As panel producers head into the 3rd quarter however, there are questions as to how panel demand and panel pricing will play out for the remainder of the year. As we believe large panel sales make up over 85% of total industry panel sales, the real focus is on panels for monitors, notebooks, and TVs, which have seen very significant price increases over the last year as noted above. As June large panel total panel industry data is not yet available, we make an estimate of $7.72b for June, which would put 1H at $42.894b. Based on share of total sales averages for 1H and 2H, 1H sales should represent 47.6% of full year sales, leaving 2H to generate 52.4% of total yearly large panel sales. This would imply 2H large panel sales of $47.22b, and put the year at $90.113b, and almost 42% increase over last year. While this is certainly not an impossible scenario, especially given the compounded effect of large panel price increase over the last 6 months, it would entail a continuation of those price increases throughout the year and that is a bit more of a problematic assumption.
While demand on an overall basis is certainly better than last year’s 1H, when COVID-19 lockdowns were in full effect, we expect overall CE demand will slow in the 2nd half. The basis for this supposition comes from an improving global COVID-19 contagion rate due to vaccines, leading to less onerous social practices, the higher prices of CE devices generated by rising panel and component costs, the demand pull-in that has been driving increased volume, and some inventory over-stocking that has inflated demand. This is offset by component shortages, which can allow panel producers to maintain progressively higher panel prices, but in the face of slower or no demand growth, we expect some of those shortages to lessen as the year progresses.
As we have noted previously, we are beginning to see anecdotal evidence of slowing CE demand and perhaps a less frantic inventory management philosophy from brands and while we expect this will take some time to filter through the CE space, we note that even assuming typical seasonality, y/y comparisons will become progressively more difficult and we expect investors to look more closely at individual CE companies, rather than make assumptions that a rising tide lifts all boats. Of course timing is everything and COVID-19 is still a significant variable, but the CE space looks more like shades of gray rather than black and white today.