Vacations in Taiwan?
As we have noted previously, pull-in panel buying to avoid tariff changes has been rampant this year, particularly in 2Q. While Chinese LCD panel producers remain relatively quiet, Taiwan’s two LCD large panel suppliers have indicated that they expect a weak 3rd quarter and potentially a weak 2H. AU Optronics (2409.TT) saw both June (↓9.3% m/m & ↓13.1% y/y) and July (↓4.6% m/m & ↓15.9% y/y) large panel sales weaken, while Innolux (3481.TT) saw weak sales in June (↓1.1% m/m & ↓1.2% y/y) but better results (↑4.1% m/m & ↑9.1% y/y) in July, although those results also include non-display sales. Utilization rates among large panel producers fell below 80% in June and are expected to average ~75% in 3Q, and while that is not panic level, it is weaker than the upper 80’s and even low 90’s that were seen in 1H.
Both Taiwanese large panel producers have been encouraging non-production line employees to extend vacations, going as far as suggesting three days off every two weeks and extending official holidays by a day or two, neither of which have been popular with employees. Of course the company-speak is for “a flexible business strategy” and a need for personnel to “recharge” to maximize productivity and efficiency in the future, but it is obvious that there does not seem to be enough demand to maintain utilization levels as they were earlier in the year. As LCD panel producers struggle to maintain profitability prices for their most profitable panels, those for TV sets, continue to decline, with relatively little demand to sustain current pricing levels in 3Q. Perhaps US inventory levels will come down a bit before the holidays, allowing utilization to rise a bit before the holidays but demand does not seem to be there yet. Again, not at the panic stage but certainly keeping a few panel managers up at night.
Both Taiwanese large panel producers have been encouraging non-production line employees to extend vacations, going as far as suggesting three days off every two weeks and extending official holidays by a day or two, neither of which have been popular with employees. Of course the company-speak is for “a flexible business strategy” and a need for personnel to “recharge” to maximize productivity and efficiency in the future, but it is obvious that there does not seem to be enough demand to maintain utilization levels as they were earlier in the year. As LCD panel producers struggle to maintain profitability prices for their most profitable panels, those for TV sets, continue to decline, with relatively little demand to sustain current pricing levels in 3Q. Perhaps US inventory levels will come down a bit before the holidays, allowing utilization to rise a bit before the holidays but demand does not seem to be there yet. Again, not at the panic stage but certainly keeping a few panel managers up at night.
Figure 1 - Au Optronics - Monthly Sales - 2018 - 2025 YTD - Source: SCMR LLC, Company Data
Figure 2 - Innolux - Monthly Sales - 2018 - 2025 YTD - Source: SCMR LLC, Company Data
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