Heavyweight! Panel factory shutdown plan, full exposure

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來源：Omdia、WitDisplay

A Chinese panel maker will suspend production of liquid crystal display (LCD) panels for up to two weeks to celebrate next month's National Day. Production is expected to be reduced to counter the effects of the recent drop in panel prices.

According to a recent report, BOE has decided to suspend production for a fortnight at four factories that specialize or mainly produce LCD panels for TVs, including ‘B9’, ‘B17’, ‘B10’ and ‘B19’, employees will be off from 26 September to 9 October; ‘B4’ will cease operations for 12 days; ‘B5’ and ‘B8’ will be closed for seven days. ‘ will be closed for 7 days.

TCL China Star Optoelectronic has also decided to shut down production for 14 days (4 factories) where a high proportion of TV LCDs are produced or where only TV panels are produced, and factories producing small and medium-sized LCDs will cease operations for 7 days (1 factory). HKC will also shut down its TV-only LCD plants and mixed IT and TV LCD plants for 13 to 14 days (4 plants).

Omdia announced that LG Display will also participate in the shutdown, but this is reportedly untrue.LG Display is in talks with China Star Optoelectronic to sell its Guangzhou LCD plants (GP1 and GP2).

This year's National Day holiday runs from 1 October to 7 October. The National Day is China's biggest golden holiday, and like the Lunar New Year, many companies and factories are closed for the holiday. However, this shutdown is longer than in previous years. It is understood that last year, during the National Day holiday, BOE and China Star Optoelectronic suspended production for about 10 days.

Once operations return to normal, the situation since last February is expected to repeat itself. During the Lunar New Year period (10-17 February), Chinese panel makers suspended LCD production for up to 20 days. In particular, equipment used to run even when LCD production was halted, but in the case of the February holidays, all processes were reportedly halted.

LCD prices then rebounded. According to the falling alarm salt data, the average selling price of 55-inch UHD LCD rose for four consecutive months to $124 in February, $127 in March, $130 in April and $132 in May.

LCD panel prices fell again in the third quarter. the DSCC estimates that prices for 55-inch LCDs fell from $132 in June to $131 in July and $129 in August, with an average transaction price of $126 this month and $123 next month. However, if Chinese panel makers stop panel production at the end of this month, prices could rise again starting next month.

An industry source analyzed that with the plant closed for up to two weeks, China's control over the price of LCD panels is being further strengthened.

Samsung Display to exit LCD business completely by 2022. If LG Display's large LCD factory in Guangzhou is sold, Chinese panel makers will have the power to negotiate prices with South Korean companies such as Samsung Electronics and LG Electronics.

An industry source said, ‘In the past, Samsung Electronics and LG Electronics used Korean panels for their high-end LCD TVs, but in the future, these products will also use Chinese panels.’

From the second quarter of 2024 to the third quarter of 2024, mainland Chinese manufacturers purchased display panels in large quantities, but from the third quarter of 2024 onwards, they were cautious about their purchasing plans.

In the second quarter of 2024, panel purchases by mainland China's first-tier TV manufacturers increased by 3 per cent sequentially and declined by 6 per cent year-on-year, which was about 4 per cent lower than the previous forecast. Influenced by rising display panel prices and strong demand, the second quarter of 2024 saw a peak procurement season for display panels.

However, mainland Chinese TV makers are mindful of the risk of increased inventories as the second quarter of 2024 was not as strong as expected. Coupled with unsuccessful price negotiations such as the Market Development Fund (MDF), some display panel makers are reluctant to reduce display panel prices as requested, which is a concern for mainland Chinese TV makers. In addition, due to the slow recovery of the global market, especially China's market demand is low, the North American market margins decline, coupled with the third quarter of 2024 TV sales is less than expected, the risk of high inventory is difficult to resolve, the Chinese mainland TV makers of the third quarter of 2024 purchasing plan a cautious attitude. Nonetheless, they are still working on stacking up their 2024 shipments.

In the third quarter of 2024, display panel purchases by mainland China's Tier 1 TV makers are expected to remain high, although slightly lower than previously forecast. Omdia forecasts purchases to be down 1% sequentially but up 4% year-on-year (Exhibit 1), some 6% lower than its previous forecast.

In the fourth quarter of 2024, panel demand from tier-1 TV makers in mainland China is expected to decline, given the imminent end of seasonal demand, the risk of falling panel prices, and the importance of inventory management.

Increased display panel purchases by Korean manufacturers in Q2 2024; falling demand in Q3 2024.

In the second quarter of 2024, display panel purchases by South Korean TV OEMs increased by 11% YoY, which is higher than the level of the past two years, but still well below the level of 2021. South Korean TV makers are expected to increase their display panel purchases in the third quarter of 2024. However, in July, both Samsung and LG Electronics' Q3 2024 shipment plans became increasingly conservative, dropping a total of 10 per cent compared to their previous forecasts. As a result, their Q3 2024 procurement plans were reduced from their previous forecasts, down 6 per cent sequentially and 5 per cent year-on-year (Figure 2).

In the fourth quarter of 2024, Samsung and LG Electronics' display panel purchases are expected to decline. They remain conservative on market demand and hope to keep inventories at healthy levels by the end of the year.