WitsView: First quarter critical to 2012 TFT-LCD industry development

In 2011, the LCD panel industry was hit hard by the aftermath of the March 11 earthquake and tsunami in Japan, worsening credit crisis in Europe and the US, and China’s economic growth slowdown. Not only did this put panel makers’ businesses in the red, it also dealt a severe blow to the consumer market confidence. The sluggish market demand and downstream clients’ conservative inventory stock-up resulted in the panel industry to stagnant, deep slump since the second half of 2011. Back in 2009, spurred by the Chinese government’s relevant polices and measures in expanding its domestic demand, panel makers aggressively raced against each other to seek China’s approval in setting up production lines there. But as the market evolved, the worsening oversupply conditions in 2011 led to panel makers posting severe losses, forcing them to continuously delay their plant building plans. On the other hand, backed by China’s strong support, the Chinese panel makers have now built a strong manufacturing base. Undoubtedly, this development will further complicate the panel demand and supply dynamics in 2012.
   
In terms of 2011, the annual large-sized panel demand grew by 7% YoY, fueled primarily by the huge growth in the tablet PC segment. Meanwhile, the 2011 LCD TV, Monitor and Netbook panel demand declined by 1%, 5% and 15% YoY respectively. As for the regular-sized NBs, although it enjoyed a 5% annual growth rate, which still significantly fell short of original projections. These figures evidently indicate how the weak macroeconomic conditions have seriously affected the overall market demand.

For this December, due to preparations for the upcoming Chinese Lunar New Year holidays and the shorter working days in January and February 2012, brand vendors have been conducting earlier-than-usual inventory preparations. The increased panel orders have helped stabilize panel prices. In response, panel makers have raised their utilization rates in hoping to improve their financial performance in the fourth quarter of 2011. Yet, it should be noted that as the inventory pull-in schedule has been moved up, it will also affect the demand during January and February 2012. For next year, if panel makers maintain their average 75% utilization rate as seen in the current fourth quarter, the inevitable rise in the inventory may render panel prices and market confidence to spiral downwards again. But if panel makers timely reduce their overall production output, it will provide support to the panel price trend. By March 2012, downstream clients will begin to replenish their inventory, as they make preparations for the market release of new models and upcoming sales campaign for China’s Labor Day holidays in May 2012. By then panel prices may finally experience a rebound, thereby providing a strong stimulus to the market doldrums. 

Nevertheless, if prices begin to move upwards, it would be a double-edged sword to the market, especially during the second half of 2012. On the positive side, as long as panel makers keep stringent controls on their respective utilization rates, potential oversupply problems would be of less concern. By contrast, if panel makers aggressively raise their utilization rates in order to enhance their cost competitiveness, the industry could plunge into another vicious cycle of oversupply during the traditional strong seasonality. The upward panel price trend would then be a mere short-term occurrence. In short, how panel makers adjust their future utilization rates will play a pivotal role in shaping the TFT-LCD industry landscape in 2012.
In 2012, both Europe and the US will continue to devote significant resources in combating the still existing credit crisis. Combined by China’s economic slowdown, this will all hamper any rapid recovery in demand. To stimulate sales, panel makers are striving to develop more advanced specs and further optimize the panel cost structure. In addition, they are also developing new panel sizes that can be even more efficiently produced. For 2012, WitsView, TrendForce's panel research division, believes that the key highlights will be on low cost direct type LED TVs, 3D TVs, super narrow bezel, LED monitors, ultra slim modules, high resolution, new TV sizes, high transmittance panels and Microsoft’s Windows 8. Driven by these new features and operating system, WitsView cautiously holds an upbeat outlook toward the large-sized panel demand in 2012. Aggregated demand is expected to reach 178 million units, up by 12~14% YoY. Tablet PC and color E-reader panels are projected to grow by more than 60% over 2011, reaching 115 million units. As the average selling price of each panel continues to slide, the larger the display size, the more appealing the price will be. Thus, area-wise, the panel area demand in 2012 is expected to reach 135~137 million m2, amounting to an annual growth rate of 17~19%.