Imbalanced panel supply-demand continues under gloomy European and US economies

TAIWAN: According to the survey announced by the research institute WitsView under TrendForce on latest shipment of large-sized panels in June, the total shipment of large-sized panels in June 2011 are 59.53 million units with MoM regression of 2.8 percent and YoY growth of 8 percent.

Surprising YoY -1.2 percent and -3.3 percent of shipments of large-sized panels in May and June
However, as indicated by the WitsView analyst Jien-Ann Chen, if we exclude the shipment of red hot Tablet PC panels this year and only compare shipments of LCD TV/LCD monitor/large-sized NB/Netbook panels in the first half of this year with the number during the same timeframe in 2010, we will see the YoY -1.2 percent and -3.3 percent of panel shipments in May and June, respectively.

According to WitsView’s observation on the panel shipment trend from 2006~2010, there have been positive growths among YoYs of every May and June. This year the market scales of LCD TV, LCD monitor, and large-sized NB have also been predicted to have positive growths. Therefore, the YoY regressions in May and June this year is an indication of the lack of consumer confidence in European and US markets in the first half of 2011 due to the debt crisis in Europe and high unemployment rate and pending debt ceiling issue in US, while worsening global inflation issue has also led to weak buying power of end market.

In this gloomy atmosphere, downstream customers have been much more conservative than usual with their stock preparation attitudes under the pressures of quarterly and semi-annual financial reports.

Sufficient endurance of tablet PC demand led by i-Pad
From the perspectives of applications, even with promotion slogans of 3D features and LED stylish design, the sales performances of all TV brands have been mediocre under the effect slow economic recoveries in Europe and US. The TV panel shipment in June is around 16.76 million units, which is almost identical with the shipment in May.

The latest prediction of global LCD TV demand by WitsView has been modified downward to 203~205 million (unit) from 211 million (unit); IT market has also been weak with monitor panel shipment at 16.13 million units in June with MoM regression of 7.2 percent; the shipment of NB panels is 15.71 million units with MoM regression of 4.3 percent. The only application product with contrarian growth is tablet PC panel with shipment at 7.23 million units and MoM growth of 8 percent. The shipment of Netbook is 3.68 million units with MoM regression of 8.9 percent.Source: WitsView, Taiwan.

Key for operations of panel makers in Q3: performance of utilization rate, and steady outlet
WitsView analyst Jien-Ann Chen has pointed out that downstream brand customers have been taking conservative procurement strategies with respect to large-sized panels (excluding Tablet PC panel) in Q2 this year.

There are four major reasons for the YoY shipment regressions in May and June this year:
1) the ensuing production capacity expansions were too large to be digested by growing panel demand, leading to imbalance between supply and demand;
2) the introduction of Tablet PC has been attracting both the attentions and buying powers of global consumers such that the growths of demands for other LCD application products have been directly or indirectly squeezed;
3) buying powers among end consumers have been suppressed because recovery of the global economy has been impeded by various natural and man-made calamities such as debt crisis in Europe, global inflation, and the earthquake in Japan;
4) asymmetric variation of regional demand where the growth of demand for LCD devices in the emerging market has not been enough to fill the blank created by slowed down demands for LCD products in European and US markets. All these factors have led to low panel prices with no signs of recovery in recent months.

For panel makers, to modify their operating strategies for facing the hot seasons in the second half of the year, steady panel outlet and reasonable utilization have been the most crucial factors in Q3. Korean panel makers have their own brands for support; on the contrary, panel makers in Taiwan and China will face great challenges in their wisdom and determination in order to blaze new trails in terms of price, utilization rate, and operating profit.