Panel prices in the third quarter without signs of recovery

BOE and Huaxing Optoelectronics successively put into production. AUO Kunshan's 8.5-generation line was approved. With the previous approvals of LG D and Samsung, the panel production capacity in China continued to expand substantially. The eradication of "screen neck" is a long-term hope for the domestic color TV industry. The launch of new projects and approved information also infuse stimulants into the upstream and downstream industry chains. In fact, from the second quarter of this year, China’s overall large-size panel production has surpassed Japan, becoming the third largest panel supplier in the world.

However, high-profile expansion can hardly conceal market worries. The long-term supply of LCD panels has been oversupply, and prices have continued to decline since May last year. Major manufacturers have reduced their production and insured prices. From the current point of view, prices in the third quarter have still not shown signs of recovery.

The weak demand for panel prices dropped again and panel prices fell again. Guotai Junan research data show that in early August LCD TV panel prices fell, a drop of 2-8 US dollars.

Since May 2010, LCD panel prices have entered a decline channel. Although they have picked up in the second quarter of this year, due to the lack of market demand in the third quarter, prices of large-size TFT-LCD panels stopped rising in mid-June. In the third quarter, the panel price is still falling.

"It is not a problem of supply but a problem of demand," said Zhang Bing, manager of China for DisplaySearch.

DisplaySearch released at the end of July the global television market report pointed out that due to the continued sluggish market in developed countries, global television shipments in 2011 was 3% lower than expected, to 252 million units. “In developed markets such as North America, Western Europe, and Japan, CRT TVs have been widely replaced by flat-panel TVs. We expect market demand to slow in 2011.” In addition, in the first half of 2011, the growth rate of the Chinese flat-panel TV market was only 7%. For the first time below 10%.

Zhang Bing said that the strongest demand for TVs in the whole year is the fourth quarter, pushed back to the panel, and the strong demand is in the third quarter. “We hope that the panel price in the third quarter can stabilize or rebound. Otherwise, in the fourth quarter and the first quarter of next year, corporate pressure will still be great.” Unfortunately, at present, there is no sign of stabilizing prices in the third quarter.

It was at this moment that the mainland faced the counter-trend. The domestic panel industry joined the war situation. Following the BOE Beijing 8.5 production line officially put into production at the end of June, the mainland's second high-generation panel project was formally put into operation. On August 8th, the 8.5-generation LCD panel project launched by TCL Corporation under the supervision of Shenzhen Huaxing Optoelectronics Technology Co., Ltd. was launched. Put into production. BOE, which was previously put into operation, is now adjusting the yield rate.

In addition, the NDRC recently approved the 8.5th generation T FT-L CD panel production line of AUO (Kunshan) Co., Ltd. After completion, it can form a production capacity of 75,000 pieces per month for 2200m m×2500m m panels. The project is expected to be put into production in the fourth quarter of next year.

However, it is difficult to conceal the market's concerns with the sound of construction. Liu Buchen, an appliance expert, said that China’s two senior generations can be described as “untimely.” "The global color TV industry has undergone profound changes. Flat-panel TVs have completely completed their replacement of CRT TVs and entered a period of 'zero growth.' Late local panel companies have failed to catch up with the last bus."

It is reported that Taiwan and South Korea panel makers including AUO, Chi Meidian, LGD isplay, and Samsung Electronics' LC D division have lowered their 2011 capital expenditures. Relatively speaking, the Chinese mainland panel makers do the opposite. As a result, the industry is also worried that the global panel industry will continue to be turbulent, and the short-term days of the mainland panel makers may be too bad.

The quarterly report released by the industry in the dry seasons of recent AUO, Chi Mei, and Samsung Electronics shows that the net losses for the quarter reached RMB 2.4 billion, RMB 2.9 billion, and RMB 1.27 billion respectively. On August 8, AUO released data showing that in July this year, its turnover increased by 4.7% compared with June, and decreased by 15.8% compared with the same period of last year.

Compared with the panel giants Samsung, LGD, and Chi Mei, BOE and Huaxing Optoelectronics have no competitive advantage, and lack production experience and sufficient technical support. Huaxing Optoelectronics also stated its risk in the project launch announcement. There is still a certain gap between the overall asset size and the capital strength compared with them, and the ability to withstand the industry downturn is weak. In addition, as the local T FT-LC D industry is in its infancy, some raw materials and spare parts still need to be imported, which will face challenges in raw material price fluctuations and exchange rate fluctuations.

On the other hand, the potential for overcapacity may give rise to the ambiguity of the panel “biscuit price”. The trend of panel prices mainly depends on supply and demand. The production capacity of the two high-generation lines in the mainland has reached 10 million. Zhang Bing said that this is difficult to digest on the demand side. In this sense, there will be greater pressure on prices. However, at the same time, it pointed out that production capacity does not equal supply. In the past one to two years, it has reduced production insured prices. Actual production does not equal production capacity.

Liu Buchen said that once the local panel is put into operation, it will face price cuts. If BOE and Huaxing Optoelectronics have to follow the low-cost route, the recovery cycle of huge investment will be greatly extended, and even cause huge losses.

Zhang Bing believes that the simultaneous growth of production and market is crucial. For enterprises, the first is to solve mass production problems and reduce costs. The second is to solve market problems and form a good strategic supply relationship with downstream brand companies, especially domestic brands and OEM companies. "Depending on price competition, it is difficult for companies to obtain support."