Following the weaker-than-expected seasonality in the traditional strong third quarter, the large-sized panel shipments regained their upward momentum in 4Q10, as panel prices bottomed up during the quarter. In contrast to 3Q10, shipments were up by 7.9% QoQ to 168 million units. On an annual basis, they increased by 14.1% YoY, surpassing the previous high point of 164 million units that was recorded in 2Q10. The quarterly shipment growth in 4Q10 was attributed to the large-scale utilization rate reductions and lower demand from clients, which helped clear away the overly high inventory problems that occurred throughout the supply chain in 3Q10. Meanwhile, sharp panel price falls were seen in 3Q10 caused by the sluggish market demand. IT panels further fell past the cash cost level in early 4Q10. The limited room for further declines and the anticipation from clients that prices have reached a low point helped stimulate the panel demand.

 

 

Among the three main applications, following the downstream clients’ preparations for China’s National Day holidays and year-end Christmas sales, the TV panel demand in 4Q10 was underpinned by the inventory pull-in for the Chinese Lunar New Year holidays and planned launch of new models during spring. But as the Christmas sales period in Europe and the US were not too strong, it still weakened the overall TV panel demand, resulting in its panel shipments to fall by 3.1% over the previous quarter. By contrast, as monitor panel prices bottomed up in 4Q10, panel makers started to sharply raise their utilization rates. The increased output led to monitor and notebook panel shipments going up respectively by 12.4% and 6.7% QoQ. Amid market expectations that the tablet PC will see robust growth in 2011, brand vendors were busy preparing the launch of relevant products. Thus, the 12.1” netbook and tablet PC panels experienced explosive growth in 4Q10, which was most notable in the netbook segment. As several Tier 2 and 3 white brand makers launched relevant tablet PC products, it spurred the originally sluggish netbook demand to jump by 28.1% QoQ in 4Q10. Finally for tablet PCs, the hot sales of Apple’s iPad around the globe and panel makers’ development of various panel sizes with wide-angle viewing technology that are used in other branded tablet PCs, resulted in its shipments to soar by 58.8% QoQ.

 

By observing the 4Q10 panel shipments, the demand was driven by preparations for the Chinese Lunar New Year and planned launch of new models in 1Q11. The possible labor shortage that may occur during the Chinese New Year also supported the shipment momentum. But as the market enters into 1Q11, the inventory preparations for the above mentioned factors are expected to come to an end. The panel demand is expected to slow down, resulting in an oversupply to possibly occur again. But from another perspective, the industry is also talking about a slight tight panel supply that may occur in 2Q11. This concern together with the equipment upgrades that some panel makers are currently performing on their production lines, could impact the panel supply in the short-term. Thus, 1Q11 may be a stronger than expected season. Yet, in WitsView’s opinion, once this supply issue is solved, a glut could appear again. If this happens, manufacturers will need to deal with the associated panel price and inventory pressure. Consequently, if suitable adjustments are made by the panel makers in 1Q11, it should help better maintain the forthcoming market equilibrium.