IHS revises TV, monitor, and notebook panel shipment forecast upward for the third quarter
Linda Lin, Alex Kang, Jason Hsu, Nick Jiang, and Kacie Cavanaugh
IHS has revised its TV panel shipment forecast upward for the third quarter, due to unexpected demand from the Mexican government’s new subsidy project of low-cost 24-inch TVs, along with the gradual pickup of replacement demand in Western Europe, North America, and Japan, according to a new report from IHS Technology (NYSE: IHS). As a result, IHS expects TV panel shipments to be 2.1 million units greater for the third quarter than previously forecast.
Although pre-stocking demand for notebook and monitor panels is gradually slowing, IHS has also revised these shipment estimates upwards due to continued demand from the expiration of Windows XP.
In the third quarter, TV makers piled up inventories in preparation for year-end demand. Entering the hot season of the third quarter, TV panels are showing the strongest and most stable demand among all applications, thank to pre-stocking for China’s National Day sales promotions at the beginning of October, along with the upcoming Black Friday and holiday sales in the US in November and December.
Korean TV panel makers intend to maintain their fab utilization rates at the current high level into the beginning of the fourth quarter, as they expect demand to rise from their major TV brand customers.
Mexican government low-cost subsidy program
The Mexican government has announced a subsidy program to provide low-cost 24-inch digital TVs to low-income households for free, creating unexpected demand for smaller TV panels in the third quarter. As Innolux is the primary supplier of the required panels for this program, it has gained the greatest benefit amongst the various panel suppliers.
China’s TV market
Developments in the China market will have significant impact on the second half demand for TV panels. Unlike last year, IHS has forecast that panel purchases by Chinese TV vendors will soar in the third quarter as the inventory levels remains stable. Still, there are concerns that the inventory level may rise too much as the domestic demand in China is projected to recover only slowly.
TV demand in China has begun to pick up after it plunged following the termination in 2013 of the government’s subsidy program for energy-efficient products last year. Chinese TV makers have been enhancing their marketing campaigns in cooperation with their distribution channels to stimulate the domestic appetite for TVs amid a weakening traditional seasonal effect.
Demand from Chinese TV makers continued to be strong in the third quarter, although set makers lack confidence that TV panel supplies will remain stable in the fourth quarter. As a result, the Chinese panel makers plan to increase their inventories until China’s National Day holiday. However, if set sales for the National holiday are sluggish, Chinese TV maker may reduce their planned panel purchases in October.
Inventory levels will rise slightly with the end of the National Day holiday, as panel buying declines. Export demand generally softens in the fourth quarter leading the panel supply in China to exceed slightly demand with panel shortages forecast to ease in October.
The price promotion of UHD TV and larger TVs is continuing to play an important role in the second half demand. China TV brands, in particular, are focusing more on UHD TV sales in the second half and are planning aggressive promotions to boost domestic market demand. As a result, the brands hope to increase sales of those products that have higher profits, to make up for the profit loss from slowing unit sales. August, China TV brands hit the record high in monthly UHD TV panel purchasing.
IHS has revised notebook panel shipments up 4.3 million units, for the third quarter, even as replacement demand is gradually slowing. Demand remains stronger than expected as the tight supply of the second quarter seems to have eased somewhat.
The main driving force of notebook demand is still coming from commercial replacement due to the expiration of Windows XP, and, from the consumer side, the low priced $249 models. However, pre-stocking demand is not as strong as in the first half of this year. Therefore, fourth quarter demand is expected to slow, depending on the sustainability of commercial replacement demand.
After the rush replacement demand in the first half of 2014, the notebook pre-stocking may stabilize after the completion of the back to school hot season in the third quarter.
Although slowing in the third quarter, the expiration of Windows XP continues to fuel the refresh of PCs in the commercial market. However, the price gap between desktop PCs (with a standalone monitor) and low cost notebooks is so narrow that replacement demand has been stronger in the notebook market, than in monitor market. As a result, monitor panels demand did not get as much of a bump in replacement demand as did notebook panels. However, replacement demand continues stronger than expected so IHS has revised its third quarter panel forecast up 1.3 million units.
On the other hand, IHS has reduced its forecast for tablet panel shipments. The growth rate of the tablet market has been slowing as the market has matured and is nearing saturation and the delay in Apple’s new product launch schedule, as evidenced by the lack of new tablets at Apple’s September event, has significantly impact the tablet market. As a result, IHS has revised its outlook for tablet panels down a significant 14.4 million units for the third quarter.
Korea’s panel makers expect demand to rise from their major brand customers for tablet panels. IHS expects Apple’s tablet panel purchasing will begin to recover at the end of the quarter as it prepares to launch its new iPad and/or iPad mini. This will give the tablet market a much-needed boost.
These findings are available in the report entitled, “LCD Shipment Database” from the Displays service of IHS Technology.