Market Insight

How long will the boom in the display market last?

February 22, 2015

Ricky Park Ricky Park Director, Display Outlook

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Why a sudden boom? 

The year 2014 had been a meaningful and remarkable year for the display industry. For the first time in four years, LCD fabs around the world ran above 90% of their full capacity. Panel prices started to rebound in the first half amid various demand-push factors. In results, many panel manufacturers began to see their profitability improving, which in return helped lift their stock prices.  

Panel makers received the windfall from not only better-than-expected increase in demand but also various manufacturing process issues.

On the demand side, pre-order demand ahead of the 2014 Brazil World Cup Games helped overall panel demand surge in the first half, and the rise in replacement demand in advanced markets, such as North America and Europe, kept panel demand increasing. The industry’s pullout from cathode ray tube (CRT) and plasma display panel (PDP) business, which spurred sales of LCD TVs, also lifted panel demand.  

The Mexican government’s free replacement of old TVs with new 23.6-inch TV sets for low-income families for transition to digital broadcasting created unexpected demand for 14 million TV sets across two years. Microsoft Corp.’s decision to end its support for the Windows XP operating system has accelerated much-delayed replacement in office PCs. 

However, the biggest boon came from the growing demand for bigger TV screens.

Consumers were tempted to replace their old flat panel TVs with new ones after prices have fallen enough and TV makers’ marketing pitch for a variety of choices from ultra high-definition (UHD) to curved and OLED TV features successfully kicked in. In results, replacement demand of old TVs with large TVs of 50-inch or higher screen size rose sharply. Individuals owning TV sets of a 50-inch or bigger screen took up just 8% in 2012, but the figure shot up to 18% in 2014. The growth in TV sets with larger screens also boosted growth in terms of area. On an area basis, demand for LCD TV panels accounted for 68% of the overall TFT-LCD panel demand in 2014. The LCD panel size growth was estimated to reach 17 million square meters, contributing to 80% of overall increase in TFT-LCD demand in area.

On the supply-end, output of new products such as UHD and curved displays increased, raising yield issues that often occur during early-stage production. The release of products with maximized glass efficiency and the introduction of multi model on a glass (MMG) manufacturing method also lowered production yield rates. Coupled with the decline in yields, the shift of electrode materials to copper (Cu) and oxide, as well as the employment of thin glass led to the reduction in capacity, causing tight supply at a time when demand was on the rise.   

Will the boom continue into 2015?

According to the recent forecast from IHS, the global gross domestic product will grow 3.0% in 2015 from 2.7% in 2014. However, the estimate has been pared from the earlier outlook of 3.3% growth. Economic experts also remain uncertain about this year’s global economy. The global economy’s prospects will likely hinge on the direction of volatile oil prices. 

Under such circumstances, moderate growth is expected in the display industry in 2015. Demand for large-area LCD panels including TVs, monitors, notebooks, and tablets, is forecast to grow about 1% year on year. However, in terms of area, growth will reach 7% on continued shift to bigger screens.  

The eighth generation fabs of BOE Optoelectronics Technology Co. (BOE), China Star Optoelectronics Technology Co. (CSOT), and CEC-Panda LCD Technology Co. (CEC) in China will be ready to mass produce in the second quarter of 2015. Thanks to an expected increase in capacity with the added production lines, net supply capacity in terms of worldwide large-area LCD panel design capacity will increase by 6% from 2014. <

Supply glut in terms of design capacity will be reduced by 1 percentage point from a year earlier, keeping the supply level unchanged from last year or even tighter. The losses from the traditionally slow season in the first half will be mitigated by the drop in inventory levels at panel manufacturers following the year-end boom, thereby helping preventing panel prices from dipping in the first quarter. 

However, fab utilization rate will likely stay above 90%. In addition, panel purchases are forecast to turn lower in the second quarter when set manufacturers are expected to roll out new models after finishing inventory pile up. In particular, contrary to aggressive panel purchasing by TV manufacturers that has been continuing into the first quarter, consumer demand for TV sets may fall short of expectations, likely leading the panel market outlook for the second quarter to turn bearish. However, overall panel demand and supply condition will likely stay manageable throughout 2015 for panel manufacturers. If panel makers respond promptly to any change in demand by adjusting inventory levels through flexible fab operation, they could be in an advantageous position even this year. 

Research by Market
Displays
Category
Large Displays
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