After falling every month since June, panel prices have finally stabilized. Notebook PC panel prices have been flat since October, TV panel prices have been flat since November, and monitor panel prices have stopped falling this month.
This stabilization in pricing is due to several factors. First, many panel prices are approaching the cash cost of manufacturing. Most panel makers have been losing money since Q3’10 and need to balance their desire to increase market share and fill their factories against profitability. Over the past quarter, panel makers have carefully controlled capacity utilization to limit inventory. At the same time, good sell-through in Q4’11 has reduced downstream inventory.
This combination of low utilization and low inventory is likely to keep prices flat over Q1’12, but whether panel prices will increase depends on demand. On the upside, Chinese TV companies are building inventory in preparation for the 2012 Chinese New Year, which falls in January. With panel prices flat, some feel that there is little risk to holding depreciating inventory, which also encourages demand. In addition, growing demand for tablet PC panels is leading to a shift in utilization, with TV fabs being repurposed to produce smaller tablet PC panels.
On the downside, notebook PC and monitor demand is currently limited by the hard disk drive shortage caused by the Thailand floods, and key European markets are heading into a recession. More fundamentally, there are debates about whether panel prices can increase based on a short-term growth in demand. Since the last cycle bottomed out in mid-2010, there have been two short-lived price increases, in Q4’10 and Q2’11. However, each time, weakness in demand cut short the price increases.
Will it be different this time?
Some expect panel price increases in January, especially since there is already a tight supply of some LCD TV panel sizes. Looking at the TFT LCD supply/demand history, it is very uncommon for panel prices to stay flat for long. For now, we have the four “low” phenomena: low panel prices, low capacity utilization, low channel inventory, and low confidence on demand.
Some believe the current tightness is due to Chinese New Year preparations and a few aggressive LCD TV brands, but worldwide TV demand in Q1’12 is still unclear. Therefore, even though many set makers are longing for a price increase, it is not clear whether panel prices will increase. With industry conditions at a standstill, panel prices are unlikely to fall, and the only question is whether demand will emerge to tilt the balance toward price increases.
David Sheih is vice president, greater China market for DisplaySearch and is a noted expert in TFT LCD and LCD TV research and analysis throughout Asia.
This article was reprinted with permission from DisplaySearch and originally appeared here.