LCD panel manufacturers are likely to swing into the red again from this quarter as aggressive capacity expansion in China aggravates a supply glut and puts greater pressure on panel prices, IHS Markit forecast yesterday.
The increased capacity in the country is threatening to push the display industry into a new slump driven by overcapacity in the coming three years starting this year, the market researcher warned yesterday.
By 2022, China is expected to open 19 new fabs for the manufacture of large-sized TV panels, while about 20 new fabs in China are to join the production of small to mid-sized displays for smartphones, IHS Markit’s latest tally showed.
“Oversupply will be the biggest challenge faced by flat-panel makers this year,” said David Hsieh (謝勤益), a senior director at IHS Markit tracking the display industry. “Some panel makers already felt the pinch of oversupply and drifted into losses in February or March following a string of panel price reductions from the second half of last year.”
Historical industry data suggest that when panel supply outpaces demand by more than 7 percent, the industry enters a new down cycle, he said, adding that Markit data showed that supply last quarter exceeded demand by 7.5 percent.
Panel prices should fall between 3 and 5 percent this month, as excess inventory and new panel supply from China put pressure on prices, Hsieh said.
Last quarter, panel prices slid by 1 to 2 percent each month, he said.
Sixty-five-inch TV panels are to see the largest loss, as Chinese panel makers are to produce more 65-inch TV panels from their new fabs, the firm said.
The price of 65-inch TV panels should fall to US$250 per unit, from US$280, which is already lower than the lowest manufacturing cost of US$290, Hsieh said.
BOE Technology Group (京東方) in the first quarter launched a 10.5-generation plant, which could add 90,000 65-inch TV panels a month to the existing market, Markit said.
China Electronics Panda Crystal Technology Corp (中電熊貓) is scheduled to start operating two 8.6-generation plants later this year, it said.
The significant capacity growth would outstrip the increase in 65-inch TV ownership this year, the firm said, adding that the number of 65-inch TV sets would grow about 67 percent to 20 million units this year, from 12 million units last year.
In light of increasing oversupply, LCD panel makers might cut their factory utilization by 5 percent from this quarter to alleviate price pressure, Hsieh said.
Some companies could shut down factories or face pressure to consolidate their business in the second half of this year, he added.
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