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Market Watch

Global LCD Panel Market Sliding into Oversupply as Production Continues to Exceed Shipments

December 04, 2013

Ricky Park Ricky Park Director, Display Outlook
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An increasing disparity between the large number of liquid-crystal display (LCD) panels being produced worldwide and what is actually shipped out to panel buyers will result in definite oversupply by the end of 2013, with grave negative implications carrying over for the market next year, according to a new LCD Fab and Inventory Management report from IHS Inc. 

Global production of large-sized LCD panels used for televisions, monitors, notebooks and tablets will reach an estimated 34.1 million square meters (msqm) by the end of the fourth quarter. However, shipments will be 2 percent lower at 33.4 msqm, translating into a glut of panels for the market by year-end.

The projected difference at the close of the fourth quarter represents a widening of the gap already in place during the third quarter. However, the variance at the end of September had been much smaller at less than a hundredth of a percentage point, which makes the expected deficit in shipments for the fourth quarter even more serious. In the third quarter, production area had exceeded shipment area by just roughly 200,000 square meters—three times less than the surfeit of 700,000 square meters anticipated for the final quarter of the year.

For most of the year panel production has been exceeding actual shipments, but the market achieved a turnaround in September when shipments surpassed production by nearly 5 percent. The positive outcome resulted from a deliberate slowdown in production by panel makers, with fab utilization 3 percent smaller than in August.

Panel makers, however, are expected to ramp up their production for the final quarter of the year to cash in on the holidays. Such a move, in turn, will reverse the market’s gains and lead once more to an excess in production, especially because slower demand this year is being forecast, cutting into overall shipments. Compared to market demand, LCD production by panel makers will be relatively overheated.

In the TV panel sector, for instance, the excess in production will cause stockpiles to climb. Accumulated inventory area for TV panels at the end of December will reach an estimated 9.0 msqm, up from 8.7 msqm at the close of September. The same trend is expected in monitor and notebook panels. Here total inventory area during the same period will jump from 2.7 msqm to 3.2 msqm.

The rise in inventory will act to drive down LCD panel prices in the fourth quarter. Just as important, inventory days by December will likely exceed five weeks, the highest level ever for the year on a monthly basis.

The combined effect of all these movements is sure to be felt next year in a negative fashion, IHS believes. With panel demand slowing and inventory accumulating, the glut of panels will only worsen, and more dire adjustments will then need to be made to bring production and shipments into balance.

The surplus in production this year contrasts sharply with the market’s performance during the same time last year. For the final quarter in 2012, shipment area exceeded production area by nearly 600,000 square meters—a net positive for the space.

Among panel makers, LG Display is currently the most aggressive in decreasing fab utilization rates, down 14 percent in September compared to August. LG rival Samsung Display, meanwhile, increased its utilization but kept the rate under 80 percent for a conservative approach according to the maker’s standards.

The only panel suppliers to increase fab utilization rates were China’s BOE and CSOT, keeping them at a range between 94 and 97 percent, in preparation for the year-end as well as Chinese New Year celebrations.

Read more >> Year-end panel inventory to rise sharply YoY

Research by Market
Large Displays
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