Tightening supplies of LCD TV panels that continued throughout 2014 began to ease in the first quarter (Q1), according to the latest LCD Fab and Inventory Management Tracker from IHS Inc. (NYSE: IHS), the leading global source of critical information and insight. The rising inventory of TV panels will lead to lower prices in the second quarter (Q2) and third quarter (Q3) of this year. The LCD TV panel production/demand ratio rose from 2 percent under-supply in Q3 2014 to 1 percent over-supply in Q4 2014 and 4 percent over-supply in Q1 2015 and is expected to continue growing to 6 percent in Q2 2015.
The IHS LCD Fab and Inventory Management Tracker projects that the average time LCD panel makers’ TV panels remain in inventory before being shipped will gradually increase from 3.6 weeks in January 2015 to 4.3 weeks in May 2015. As the inventory increases, the prices of 32-inch, 40-inch, 55-inch and other key TV panel sizes will inevitably decline in Q2 2015 and Q3 2015.
Average selling prices (ASPs) for mainstream-size LCD TV panels, including 32-inch, 40-inch and 55-inch sizes, have softened since March 2015. Demand gradually declined as a result of inventory adjustments after the end of the 2014 holiday shopping season in 2014 and the Chinese New Year earlier this year. LCD panel output had been meeting demand, before last year’s holiday season promotions began.
Last year, LCD TV panel makers could not keep up with the surge in demand amid the popularity of larger screen TVs. As a result, the previously accumulated panel inventories continued to decrease from Q1 2014 to Q3 2014. In Q4 2014, panel production managed to outpace demand slightly, but inventory at both TV panel manufacturers and set makers remained below normal levels, due to rising year-end demand.
“LCD panel makers have put off plans for production line renovation and new technology applications, which were originally scheduled for last year, to this year because lines ran at full capacity meeting orders with strong TV panel demand last year,” said Alex Kang, senior analyst for large displays at IHS Technology. “Producers this year will adjust supply of some lines for renovation amid declining TV panel demand.”
Currency fluctuation is yet another factor affecting panel demand, especially in Eastern Europe, Russia, South America and other developing economies. Currency-exchange rate changes have forced TV prices to rise, which in turn has hampered consumer purchasing.
“The industry is now worried about a potential oversupply this year if weakening demand turns out to be more than a seasonal factor and continues through the third quarter,” Kang said. “TV set makers are considering lowering TV sales targets and downsizing orders for panels amid sluggish consumer sales caused by foreign exchange volatility.”
