The latest global TV display supply shortage could continue to be an issue in the third quarter of 2016, which is the most critical timing for TV makers looking to refill the panel pipeline for the upcoming holiday sales season. In response to rising display prices, TV brands are becoming more aggressive in securing the panels they will need in the second half of the year, according to IHS Markit.
TV industry concerns about supply chain dynamics – in particular the shrinking supply base for 40-inch panels – as more panel makers are considering shutting down fabs that are either idle or no longer competitive. In the second half of 2016, leading global TV brands Samsung Electronics and LG Electronics are planning to purchase 46.6 million units of TV panels in total, up 12 per cent year on year.
The six leading Chinese TV makers plan to increase their panel purchasing by 27 per cent year over year in the third quarter to reach 19.7 million units. Hisense, TCL, Konka, Changhong and Haier, which are actively expanding their global stances, are especially big purchasers; in comparison to Skyworth, which is carrying a relatively larger panel stock. However, to control inventory, they are expected to buy 19 million panels in the fourth quarter, which is 2 per cent less than what they purchased in the previous quarter.
“Not all the panel suppliers are able to fill the rising demand from their TV customers, considering constraints on supply and capacity utilisation,” said Deborah Yang, director of display supply chain research and analysis at IHS Markit. “Basically, panel supply will be allocated based on price negotiations, TV makers’ business outlook and the state of the supply-chain supply relationship. Display manufacturers have limited supply and a strategy to hold supply-chain bargains, to optimise panel prices, to improve revenue flow.”
According to the IHS Markit TV Display Intelligence Service, strategic panel supplier negotiations for 40-inch, 43-inch, 45-inch and 49-inch panels, as well as the product positioning and cost competiveness of 49-inch 50-inch, 55-inch, 60-inch, 65-inch and 70-inch and larger displays — are critical for late 2016 and 2017. Chinese panel makers are expanding their supply of 32-inch to 49-inch displays and 55-inch displays although with some product quality and reliability concerns still remain. The supply of larger sizes, in particular 55-inch and 65-inch UHD models are falling short of demand for TV makers, as outputs are somewhat constrained by tight capacity and lower yield rate.
“Chinese TV manufacturers are carrying some inventory, and overall they are not pressured to hunt for panels with any urgency,” Yang said. “However, what keeps them buying is strategic reasons to mitigate the risk of future panel supply constraints and to achieve their aggressive domestic Chinese and overseas shipment targets for the second half of this year.”
Because Hisense, TCL, Skyworth and other Chinese TV makers have set aggressive shipment targets to grow market share this year, and plan to grow their businesses outside the domestic Chinese market, they still need to buy more panels in the second half of this year. Even if they have more panels in stock now, ongoing panel-supply issues mean their major competitor, South Korean TV brands, will increase panel demand in the third quarter of this year. China’s top six TV makers will have to refill panels aggressively, though inventory adjustments might be necessary sometime in the fourth quarter.