What Does Taiwan Know?
To say that 1Q was not a typical quarter for the display space is an understatement, and we expect something similar in 2Q as the current US administration seems to change course on trade on a daily basis. Inventory stocking and pre-tariff buying have altered typical buying patterns as can be seen in the table below, which shows the monthly sales (NT$) for AU Optronics (2409.TT), Taiwan’s largest panel producer. Our expectations, prior to yesterday’s tariff course adjustment, was that large tariff related price increases would begin to show as previous landed inventory begins to wind down (end of April/early May), with panel producers seeing a more accelerated slowdown as brands hold back or reduced new orders as prices rise.
The fact that there was a date when the new tariffs were to be enacted was at least an anchor point where brands could make decisions about how to deal with new tariffs, but with yesterday’s 90-day hold, that anchor date has moved again and leaves brands in a quandary about how consumers will react to the postponement, in order to plan production and shipments for 2Q and beyond. This goal-post movement will elongate the ‘tariff cycle’ that has already changed the typical production patterns for the display space, particularly for those producers that feed major brands in the US, so whatever we thought might happen soon is now spread across a wider window..
The fact that there was a date when the new tariffs were to be enacted was at least an anchor point where brands could make decisions about how to deal with new tariffs, but with yesterday’s 90-day hold, that anchor date has moved again and leaves brands in a quandary about how consumers will react to the postponement, in order to plan production and shipments for 2Q and beyond. This goal-post movement will elongate the ‘tariff cycle’ that has already changed the typical production patterns for the display space, particularly for those producers that feed major brands in the US, so whatever we thought might happen soon is now spread across a wider window..
Given the circumstances, we would still expect brands to pause or slow production and shipments, but for a relatively short period of time, while they try to make sense of the administration’s tariff volatility, but the real question is how consumers will react. There has certainly been signs that some consumers had been buying CE products in anticipation of expected price increases in March, and the table above, albeit specific to a single large panel producer, illustrates that pull-in buying, or at least production that could facilitate that buying, has helped 1Q sales results. However, the increased Chinese tariffs and the remaining 10% across-the-board tariffs still overhang much of the CE space and the more general anxiety over the potential for a tariff-related economic slowdown still remains.
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