"Will this 618 shopping season be the worst season? At least, from the perspective of the display industry, you can make a conclusion without waiting for the final sales!" Faced with LCD panels with a price drop of more than half in the past 12 months and a production line with a maximum production capacity reduction of 50%, the display industry is in a "cold wind".
From expansion to production restrictions, it has come a bit "explosive"
In February 2022, Taiwan's AUO Optoelectronics said it would invest in the construction of a new 8.5-generation LCD panel line; in the second half of last year, Huaxing Optoelectronics' Guangzhou 8.6-generation line just started construction; in May, Shenzhen Tianma announced that its stake in Hefei project will build an 8.6-generation panel line...
. In this round of expansion of new lines and the old lines in the context of continuous expansion of production from 2020 to 2021, some LCD panel products have fallen close to the cost line in June, and some display panel companies have significantly reduced production. According to data from Luotu Technology (RUNTO), panel manufacturers BOE, CSOT, and Huke (HKC) have significantly reduced the amount of mother glass tablets since June. Among them, BOE was reduced by about 25%, CSOT was reduced by about 20%, and HKC was reduced by about 20%. Typical examples include BOE's 8.6 generation line production cuts by 40% and Huaxing Optoelectronics' Suzhou's 8.5 generation line production cuts by 50%! South Korea's Samsung will close its last LCD panel line in June...
However, reducing production capacity has not really saved the industry's price trend. On the eve of 618, the price of Xiaomi TV 50-inch fell to 1,299 yuan, 58-inch fell to 1,399 yuan, and 75-inch 2,999 yuan, both of which created a "historical low" for TVs of the same size. In fact, according to industry data, the mainstream size of large-size LCD panel products has basically fallen by about 50%, or even more since 2021.
On the one hand, it is still talking about "expanding production", and on the other hand, it is the production restrictions and price drop that are coming soon. This kind of change is quite "roller coaster" in the first half of 2022. Analysts pointed out that until the end of the first quarter, most panel companies did not expect such great pressure on the "demand side" to come. On the cost price and even price below the cost price, this 618 color TV and other display products are destined to be a "must loser on the industry side" pattern regardless of the "sales volume".
structural demand changes, superimposed on long-term trends and new technologies to replace
"Demand is shrinking!" This is the most direct feeling in the display industry, especially the LCD panel industry. Among them, the most obvious reason is: starting from June 2020, the new crown epidemic has brought about demand for home office and online education. Coupled with the loose monetary QE policies of Europe and the United States, it has promoted the explosive growth of the overseas consumer electronics industry, and the entire panel industry has also ushered in a 13-month "super upward cycle" - super-prosperity consumption, which is naturally an overdraft for the future. It is no surprise that demand has fallen now.
However, this is not just the reason for the overdemand demand in the panel industry, but more structural factors are also fermenting together: for example, the increase in OLED panel production capacity has greatly squeezed the demand for LCD products in the mobile phone screen market; at present, the OLED panel line has begun to focus on the IT market and achieved a 200% increase in the shipment volume of OLED TV market from 2020 to 2022 - these changes are also the pressure on LCD production capacity. For example, in recent years, LCD capacity has expanded very strongly: mainly because manufacturers have accelerated production capacity preparations to cope with the incremental demand for panels with large-scale display demand, incremental demand for emerging markets such as vehicles, and incremental demand for commercial display markets. However, in 2022, the demand market in these aspects also showed an increase in consumption pressure. For example, in domestic demand for LCD interactive products, both education and commercial use fell by more than 20% year-on-year in the first quarter (Luotu Technology data).
On the other hand, the core demand market of large-size LCD panels and the largest independent market in the display industry are facing a long-term "demand decline" trend. The main reasons are: 1. The diversity of audio-visual consumption and equipment, and consumers turn their audio-visual consumption time to mobile phones, PCs, VR, projection and other diverse devices; 2. LCD display product technology is highly mature, the new replacement is not attractive, and the product life is relatively long.
Especially in the first half of 2022, it shows that the above changes in the industry are superimposed on uncertainty of the global macroeconomic situation: such as the impact of the Russian-Ukrainian war, the anxiety of the food crisis, the suppression of consumption by high inflation in Europe and the United States, the spillover pressure of the US dollar interest rate hike cycle on the global consumer market... and so on.
"There are many unfavorable factors, and the only favorable factors are 'large sizes are cheaper'!" Industry insiders lamented that the "decline" of the industry in 2022 is a bit "exceeding imagination", and it integrates comprehensive suppression from multiple dimensions such as demand market, supply market, macro market, technological development and reform laws, and is entering a real painful moment in the industry.
adjusting the structure: it may become a long-term choice other than stressor
"Production restrictions are not the fundamental way!" Faced with this round of market pressure in the display panel industry, reducing production capacity can certainly temporarily alleviate inventory pressure, but it is only a stressor. The industry generally believes that "adjusting the supply structure" is the "long-term transformation" that the industry needs to strive for now.
First, the development of emerging display technologies is an inevitable trend. In this regard, Samsung and others plan to build an 8.5 OLED line to cope with the changes in OLED in IT demand, and start mass production of QD-OLED panels in 2022; BOE is also preparing to mass produce OLED panels for TVs to expand the market for differentiated and high-end color TV demand. At the same time, AUO, Huaxing Optoelectronics, BOE, Shenzhen Tianma and others are also trying to develop TFT-micro LED display products to expand the market for new product categories.
Second, the development of emerging display categories is an inevitable trend. Not only is the structural upgrade on the supply side, but the structural upgrade on the demand side is also continuing. For example, in the long run, the demand scale of mature markets such as Europe, the United States, China and Japan will not increase, and there may be more reductions. The commercial display market is a long-term upward new application scenario. Increasing the development of demand-side products such as in-vehicle and smart commercial displays is an inevitable choice for panel companies. Such as Huaxing Optoelectronics' layout in the electronic paper market, BOE's development of product demands such as digital price tags, etc.
Third, elastic supply adjustment for demand diversity is an inevitable trend. Unlike the core theme of color TV products, which is "larger screen", not all demand scenarios in the display industry are beautiful. For example, the NB market focuses more on performance elasticity, lightness and eye protection than on display size growing. For example, automotive and industrial displays are often "customized sizes"; the commercial display market also needs more "non-16:9 standard size" products. That is, the development of emerging demand means that the panel industry needs to "provide differentiated products more resiliently", which tests the flexible production organization and R&D capabilities of panel companies.
Fourth, build a closer and innovative upstream and downstream relationship. The rise of the consumer market in industries such as in-vehicle and smart commercial display has expanded the scope of downstream terminal markets. This is a long-term change for display panel companies. Panel companies need to break through the three major components of traditional large OEM factories, mobile phones, IT, and TV in the downward direction of the industrial chain, and find better cooperation and innovation relationships that are suitable for new scenarios and new applications. At the same time, the third world market is still a potential stock that shows the global increase in demand. This market requires products and channels that are suitable for the market and meet consumer demand.
To sum up, in mid-2022, the display panel industry is ushering in a difficult moment that exceeds expectations. Among them, TV, as the first to launch a price reduction in mid-2021, is struggling with the cost price position; while other major applications represented by IT and emerging applications represented by interactive tablets in commercial graphics have entered the price reduction stage at the end of 2021 or the beginning of this year, and it still takes longer to observe the price stabilization. Against this background, it has become an inevitable task for industry enterprises to "take care of upstream and downstream" and "use short, medium and long measures and means together" to achieve "flexible winter" as much as possible.
However, as the "inevitable first interactive window in the era of informatization and intelligence", its strategic significance and long-term upward demand trend will not change due to short-term price fluctuations and supply and demand adjustments. Industry companies adhere to long-term scientific and technological innovation as the center and highlight emerging demand market development will inevitably usher in "spring" in the near future: the ubiquitous "screen universe" is still the brilliant future of the display panel industry.
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