2Q12 panel price likely to increase, off-season inventory stocking expected

TAIWAN: According to the Worldwide Large-sized Panel Sufficiency Analysis from WitsView, TrendForce’s display research division, the global economy recovered slowly after being hit by 2008 financial crisis, followed by severe economic problems including inflation, European debt crisis, Japan 311 earthquake, and China’s economic growth slowdown, causing a weak end-market demand to put panel industry in a long-term oversupply condition.

Display industry’s continuous inventory adjustment in the past two years has enabled the overall inventory to return to a healthy level when entering 1Q12, while downstream clients start their new-model launches and inventory restocking.

WitsView indicated that the panel makers who intend to leave the loss behind have been aggressively targeting cost optimization by adopting new manufacturing process and fresh products since 2012. As for manufacturing process, new adoptions including 0.4 mm/0.5mm thin glass substrate, CF on Array, and Gate on Array, while new product development including direct type LED TV models, 29”, 36.5”, 39” and 50” new-sized products, and 3 mm Ultra Slim NB Module, both of which were developed to create actual benefit by increasing added values and lowering cost simultaneously.

Boyce Fan, WitsView research manager, indicates that due to panel makers’ aggressive efforts on production conversion, some capacity has been transferred to pre-production models, coupled with lower-than-expected yield rate at the early stage of adopting new manufacturing process, leading to a profound gap between glass input and output volumes. As a result, as demand rebounded in February to March, tight supplies might more or less enhance the panel price uptrend.

WitsView believes that with optimized component cost, panel makers are projected to continuously increase the utilization rate and further strengthen cost optimization in response to rebounded demand and prone-to-increase panel price, causing the global large-sized panel capacity utilization rate to climb to 81 percent in 2Q12 from 73 percent in the earlier quarter. However, once the downstream vendors notice the changes occurring in terms of both supply volume and prices, pushing them to stock their inventory in advance in 2Q12, it is likely that 3Q12 would become yet another peak season with weak demand due to higher inventory levels.Source: WitsView, Taiwan.