[Text/Observer Network Lu Dong]
Reducing production is a common practice in cyclical industries to cope with falling prices, and the panel industry is no exception. After expectations of halting the decline in the first quarter of 2022 failed, LCD panel manufacturers began to reduce production line utilization rates in the second quarter. However, demand has weakened significantly due to epidemics, wars and other reasons, which has offset the effect of production cuts to a certain extent. As panel prices for most sizes continue to fall, the entire industry appears to have hit its “darkest moment.” In order to alleviate the pressure of falling prices and inventory, the market generally expects panel manufacturers to continue to increase production cuts.
html On June 12, Li Yaqin, general manager of the panel industry research organization "Qunzhi Consulting", said in an interview with observer network that panel manufacturers, especially those in mainland China, are indeed currently reducing production in multiple categories. According to industry-wide data calculations, panel factories will continue to reduce production throughout the third quarter. Compared with full production levels, the reduction will be about 20%. She also mentioned that before panel factories in mainland China cut production, panel factories in South Korea and Taiwan had begun to cut production in advance in the second quarter, so it is now an industry-wide production reduction phenomenon.Coincidentally, a report released by the industrial research organization "RUNTO" on June 8 showed that Chinese mainland panel manufacturers BOE (BOE), CSOT (CSOT), Huike (HKC) have Starting from June, the amount of mother glass for large-size panels will be significantly reduced. Among them, BOE decreased by approximately 25%, CSOT decreased by approximately 20%, and HKC decreased by approximately 20%. The agency believes that June-July, when the Chinese market has a big 618 promotion, local governments have launched consumption stimulus policies, and the U.S. market is ushering in the "Independence Day" promotion, it will be the last time for China's large-size panel manufacturers to launch substantial production cuts to save the market. The best time window.
Picture source: Luotu Technology
"The cyclical fluctuations in the panel industry are still quite severe, especially television (TV) panels," Li Yaqin told Observer.com. Historically, the panel industry's boom cycle is about three quarters. That is, it rises for three quarters or falls for three quarters. Starting from June 2020, the epidemic has brought about demands for home office, online education, etc., boosting the explosive growth of the overseas consumer electronics industry. The entire panel industry has also ushered in a 13-month "super upward cycle". The main panel industry has Product prices more than doubled.
However, with the saturation of terminal consumer demand and the fading of epidemic dividends, panel prices have undergone structural adjustments since the second half of 2021, and the prices of TV and IT LCD (liquid crystal panel) products have fallen to varying degrees. Entering 2022, the Russia-Ukraine conflict has led to continued rise in energy prices, high global inflation, repeated epidemics in China, supply chain chaos and other factors. The demand for consumer electronics has been further suppressed, and the shipments of mobile phones, laptops, , TVs and other terminals have All experienced declines to varying degrees, and news of downstream order cuts spread frequently, ultimately leading to the failure of expectations that panel prices would stop falling in the first quarter of this year, and instead entered a round of "ultra-long price decline cycles."
BOE’s Secretary of the Board responded to the panel market. Source: Shenzhen Stock Exchange Interactive
Observer Network found that since the cycle reversal in the third quarter of last year, the prices of LCD TV panels of various sizes have fallen by more than 50%. Taking the 32-inch panel as an example, the average price from May to June 2021 was US$87/piece, but now it is only US$30/piece, a drop of as much as 65%. But prices haven't stopped falling yet. Qunzhi Consulting predicts that the average price per piece of LCD TV panels in four sizes of 32-inch, 43-inch, 55-inch and 65-inch will drop by US$2, US$2, US$4 and US$10 respectively in June. CINNO Research even predicts that if prices continue to fall until July, they may fall below panel factory material costs.
LCD panel price trend Source: Dongguan Securities June 2022 research report
Affected by this, the operating pressure of panel manufacturers has increased sharply, and the stock price performance has also continued to be sluggish. The first quarter report of 2022 shows that BOE’s revenue increased by only 0.40% year-on-year, and its net profit attributable to its parent company fell 16.57% year-on-year; TCL Technology’s revenue increased by 26.18% year-on-year, and its net profit attributable to its parent company fell 43.73% year-on-year. In the same period in 2021, the net profits of the two increased by 413% and 129% year-on-year respectively. In Taiwan, China, the revenue of two panel manufacturers Innolux and AU Optronics fell by more than 30% year-on-year in May.
Stock price trend of listed panel manufacturers in mainland China
Li Yaqin told Observer.com that the downward trend in panel prices started in the TV category in June last year, and then gradually spread to monitors, mobile phones, laptops and other categories, forming a downward trend in the entire industry, giving panels The factory caused relatively large loss pressure. Especially for the TV category, prices have been falling for twelve or three months, and mainstream specifications have fallen below cash costs (referring to the costs after deducting depreciation, management, R&D, and sales expenses), putting great pressure on manufacturers to lose money. . Therefore, in the "darkest moment" when demand shrinks more than expected and the peak season is not prosperous, it is relatively rational and correct for panel manufacturers to choose to reduce production. It can not only stop losses in time, but also help market prices stabilize and prevent them from falling to worse Case. Data released by
Luotu Technology shows that in June, panel factories in mainland China reduced production mainly in the 8.5-generation, 8.6-generation and 10.5-generation LCD panel production lines. The total reduction in production volume was approximately 31,500 pieces, and the production reduction rate reached 25%.
Among them, BOE’s 8.6-generation line B19 in Chengdu reduced the production volume of glass substrates by 60,000 pieces, a decrease of 40%, while the 8.5-generation lines including B4, BIl0, B8, BS, etc. reduced the total production volume by 80,000 pieces. The decrease reached 15%; as for the 10.5-generation line B9, the production volume decreased by 55,000 pieces, a decrease of 30%; for TCL Huaxing , the 8.5-generation line T1 and T2 reduced the production volume of glass substrates by 20,000 pieces, reducing The width is 10%; the production volume of the 10.5-generation T6 and T7 lines has been reduced by 40,000 pieces, a decrease of 25%; the production volume of the 8.5-generation line T10 in Suzhou has also been reduced by 60,000 pieces, a decrease of up to 50%. .
8.6 generation line panel economic cutting diagram (data map)
"This summer is the most difficult moment in the history of the global large-size panel market," Luotu Technology mentioned that mainland China's TV panel factories accounted for 10% of global shipments in April The rate reached a historical high of 68%, an increase of 8 percentage points from the same period last year. Therefore, the production changes of mainland panel factories will have an immediate impact on the overall market, and TV panel prices are likely to enter a countdown to stabilization.
In early May, TCL Technology Chairman Li Dongsheng said that from September 2021 to now, the price of main panels has fallen by half. "I don't know when the downward cycle will be the turning point. I think it is now close to the bottom." He also mentioned that in the face of this year's severe economic situation, TCL will appropriately control the pace of development. "TCL Huaxing's non-TV and mobile phone panel business will account for a significant increase in revenue in 2021, and will further increase this year."
Huike said Completed IPO coaching during industry downturn. Omdia statistics show that in the global LCD TV panel market in 2021, Huike ranked third with a share of 14.4%, BOE ranked first with a market share of 23.2%, and TCL CSOT ranked third with a share of 15.7%. two. Ranked next are Innolux from Taiwan and South Korean company LGD. According to industry insiders, 2021 is the best time for Huike to go public. This year is not very favorable, and there may be a problem of low valuation now.
BOE’s panel production and sales in 2021
In addition to mainland panel manufacturers, Korean manufacturers have also recently reported one after another about production cuts.
On May 27, Samsung Display 's 8.5-generation line is undergoing final production. It is expected that after producing the last batch of LCD panels for Samsung TVs (VD) in June, it will officially turn off the lights and close the factory, ending the 30-year-old TFT- LCD production history. Samsung Display originally planned to shut down its LCD panel business at the end of 2020, but due to the surge in LCD panel prices during the COVID-19 epidemic, the plan was postponed. In addition, LGD’s LCD panel production capacity is also rumored to be withdrawn this year. From the perspective of the industry, "this means that Korean companies are starting to lose money again."
Regarding the withdrawal of Korean companies from LCD, Li Yaqin told Observer.com that on the one hand, mainland China has been rapidly expanding LCD production capacity in the past decade. As the production capacity of local panel factories continues to grow, the scale effect is stronger than that of Korean companies. Coupled with local materials, The equipment and other supply chains are gradually maturing and are more competitive than Korean factories in terms of efficiency and cost. On the other hand, Korean manufacturers are also actively deploying OLED production capacity out of considerations of not being in love with the LCD field.
At present, Samsung is still the world's largest supplier of small and medium-sized OLED panels. It mainly provides OLED screens for smartphones, personal computers, etc., and its share is significantly ahead of mainland Chinese manufacturers such as BOE. Samsung Display Vice President Cui Quanyong said this year that it will expand OLED applications from high-end to mid-range markets. In the field of large-size displays, it plans to use QD OLED panels to ensure its leadership in the high-end TV and monitor markets. LGD also proposed as early as last year that in terms of OLED, it will actively seek new revenue sources other than TVs based on a diversified product lineup from ultra-large to medium sizes and an expanding customer base.
Li Yaqin pointed out to Observer.com that from the current stage, OLED is definitely a more complex technology than LCD. At present, LCD technology is very mature. Whether it is equipment, material supply chain, or yield, it is better than OLED. As for the OLED production line, especially in terms of large size, many materials and equipment are immature, the yield rate is also in the process of breakthrough, and the technical roadmap is not as clear as LCD. Korean factories do have a leading advantage in this regard, and they will continue to do so in the future. Accelerate investment and layout in the OLED field.
Comparison of LCD panel structure and OLED panel structure Source: Observer.com
Although many major panel manufacturers have reported production cuts, the supply side is only one factor that affects prices after all, and whether demand can be boosted is also very critical. Overrivo, a third-party organization, believes that this round of TV panel price reductions has lasted for nearly a year. However, due to rising fuel prices, high shipping costs, and no significant price reductions in upstream semiconductors and other links, machine manufacturers are still facing greater cost pressure. Brands Factory forecasts for global TV demand this year are conservative.
But there are also positive signs. Since June, after some parts of the country have experienced epidemic lockdowns, social activities in the two major cities of Shanghai and Beijing have returned to normal, which has contributed to the recovery of consumer demand. In addition, Shenzhen also announced the launch of home appliance purchase subsidies in May. According to sales 15% of the price is subsidized. In addition, since June, Beijing has also distributed green energy-saving consumption voucher packages worth RMB 1,500 per month on online platforms such as JD.com, Suning, Dazhong, and Gome. On May 31, the Ministry of Industry and Information Technology also announced that it would hold subsequent activities such as sending home appliances to the countryside to further promote the consumption of bulk commodities.
According to the Luotu Technology report, after the relevant stimulus measures were introduced, e-commerce channels and TV brand manufacturers immediately launched ultra-low prices, directly breaking through the previous historical lows. 55-inch, 65-inch, and 75-inch TVs were as low as 1,299 yuan and 1,999 yuan. Yuan, 2,999 yuan, and the super-large 86-inch and 98-inch sizes have been refreshed to 5,555 yuan and 14,299 yuan. During the first wave of promotions from May 31st to June 1st at 24:00, e-commerce market sales increased by 50%. Luotu Technology has judged that throughout the 618 cycle, TV online sales are expected to grow by approximately 20%.
Overall, although the world is still facing many real problems such as wars, epidemics, inflation, and high inventories, the large production cuts by panel manufacturers and the 618 promotion have released signals that the market needs to rebound. Luotu Technology believes that at least the sentiment has begun to correct, and panel factory quotations will stick to June; starting from July, the price of panels below 55 inches will gradually stabilize, and it is possible to continue to consolidate or increase in a small area in August; above 65 inches The trend of large-size panels still needs to be observed based on the digestion progress of global machine inventory before making a judgment.
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