TV panel shortage puts strain on supplier plans
A global shortage in TV panels, in particular 40” panels, has reportedly sparked a buying frenzy among major suppliers.
Further, the supply of larger sizes, in particular 55” and 65” UHD models are falling short of demand for TV makers, as outputs are somewhat constrained by tight capacity and lower yield rate.
According to market analyst IHS predicts the shortage will continue well into Q3 2016, which is traditionally the period in which suppliers prepare stock for the forthcoming holiday period.
As a result, display prices are increasing and panel makers are becoming more aggressive in securing the stock they need moving forward.
“Not all the panel suppliers are able to fill the rising demand from their TV customers, considering constraints on supply and capacity utilisation,” IHS Markit Display Supply Chain Research and Analysis director Deborah Yang says.
“Basically, panel supply will be allocated based on price negotiations, TV makers’ business outlook and the state of the supply-chain supply relationship. Display manufacturers have limited supply and a strategy to hold supply-chain bargains, to optimise panel prices, to improve revenue flow.”
Given the shrinking supply base of 40” panels, an increasing number of panel makers are considering deleting lines that are either idle or no longer competitive.
According to the IHS Markit TV Display Intelligence Service, strategic panel supplier negotiations for 40”, 43”, 45” and 49” panels as well as the product positioning and cost competiveness of 49”, 50”, 55”, 60”, 65” and 70” and larger displays are critical for late 2016 and 2017.
In the second half of 2016, leading global TV brands Samsung Electronics and LG Electronics are planning to purchase 46.6 million units of TV panels in total, up 12% year on year.
The six leading Chinese TV makers plan to increase their panel purchasing capacity by 27% year over year in Q3 to reach 19.7 million units. Hisense, TCL, Konka, Changhong and Haier, which are actively expanding their global stances, are especially big purchasers; in comparison to Skyworth, which is carrying a relatively larger panel stock.
Chinese panel makers are expanding their supply of 32” to 49” displays and 55” displays although with some, product quality and reliability concerns still remain.
“Chinese TV manufacturers are carrying some inventory, and overall they are not pressured to hunt for panels with any urgency. But, what keeps them buying are strategic reasons to mitigate the risk of future panel supply constraints and to achieve their aggressive domestic Chinese and overseas shipment targets for the second half of this year,” Deborah says.
Because Hisense, TCL, Skyworth and other Chinese TV makers have set aggressive shipment targets to grow market share this year, and plan to grow their businesses outside the domestic Chinese market, they still need to buy more panels in the second half of this year. Even if they have more panels in stock now, ongoing panel-supply issues mean their major competitor, South Korean TV brands, will increase panel demand in Q3 of this year. China’s top six TV makers will have to refill panels aggressively, though inventory adjustments might be necessary sometime in Q4.