TrendForce Reports Glut Ratio of Large-Size Panels to Drop in Q2 as Market Demand is Expected to Rise

WitsView, a division of TrendForce, has published its latest report on the global production capacity of large-size LCD panels. According to the report, large-size LCD panels by supply area for the first quarter of this year fell by 1.3% compared with the previous quarter. This is a 3.5% difference from the earlier projected quarterly increase of 2.2%. Samsung Display (SDC) was responsible for 2.1% of the 3.5% downward correction because the panel maker has issues with 0.4mm glass production, and in turn caused delays to the certification of new panel products. The remaining 1.4% difference was attributed to the early February earthquake that damaged Innolux’s fabs in Taiwan. While the industry has no plan to significantly cut back the production of large-size panels, the problems encountered by Innolux and SDC actually reduced some of the oversupply pressure over the entire year.

The capacity that was lost due to the earthquake is expected to be gradually restored in the second quarter, again raising the worry of oversupply. However, the overall demand for large-size panels will be stronger in the second quarter than in the first. The IT product market in this period will be preparing for new product releases, while the TV market will be readying for the Chinese Labor Day sales. These sources of demand will help consume the large-size capacity to alleviate some oversupply pressure. WitsView expects some improvements to the excess capacity situation in the industry during the second quarter. Large-size panel’s glut ratio (an index used by WitsView to measure market oversupply) will also drop to 5.6% in the same forecast period, down from 6.5% in the first quarter.

The outlook of the large-size panel market for the second half of 2016 has become brighter as panel prices in different application segments are expected to reach the bottom by the middle of the year. Branded vendors in the end markets will also strive harder to expand their product shipments during the second half of the year as to compensate for low shipments in the first half. Efforts to reach the annual targets will spur panel demand at the same time.

Brand promotional activities this year will be greatly assisted by panel prices, which have been on a downtrend for a year. Sales of the large TV sets, for instance, are expected to be robust due to favorable pricing. This in turn will stimulate the demand for 55- and 65-inch panels and accelerate the consumption of the industry’s capacity. Based on WitsView’s analysis, the glut ratio for large-panel market in the second half of 2016 may fall to 0% on account of the limited overall capacity increase and the peak season demand. The large-size panel market will likely reach supply-demand balance and may even experience tight supply.