The outlook for TV sales throughout the second half of 2022 continues to grow more difficult, with word that the glass input utilization rates at the world’s leading display panel factories continues to fall, according to forecasts from analyst TrendForce.
Faced with decreased demand for TVs this year resulting from the explosive sales levels earlier in the pandemic, sputtering supply logistics and a bleak economic outlook brought on by inflation and the Ukraine situation, panel makers are being forced to adjust their planned factory panel output levels to avoid inventory build up that could spell major price/profit declines going into 2023.
The adjustments come as several Chinese factories have been expanding factory capacity to respond to earlier growth predictions and a decrease in LCD panel production by the two Korean display panel makers, Samsung and LG.
The rate of glass input utilization at the world’s leading display panel factories is expected to fall to 70% in the third quarter, with the trend likely to continue for the rest of the year, TrendForce revealed Monday.
According to TrendForce’s “Monthly Panel Supplier Utilization Report,” utilization rate is calculated as volume of glass input, and is applied to multiple mother glass fabs from Gen 5 to larger fabs used for TVs and LCD monitors.
TrendForce said its Q3 utilization forecast represents “a substantial decrease of nearly 7.3 percentage points from the second quarter of 2022.”
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TrendForce indicates that the utilization rate of Gen5 to Gen 7.5 is expected to decrease by 7.7% percentage points to 63.7% and the utilization rate of TV-sized Gen 8 to Gen 10.5 will decrease by 7 percentage points to 75% in the third quarter.
The fab Gen numbers reflect the size of the mother glass it produces.
“More than 90% of the Gen 10.5 utilization rate used to produce TVs is expected to drop by 17.8 percentage points QoQ, which also highlights the continuing pessimistic demand for TV panels in 3Q22,” the report said.
TrendForce said that depreciation and amortization pressure on Chinese panel makers is more severe than that of other panel makers due to the construction of new factories. In addition, total shipments of TV-sized applications from Chinese panel makers account for more than half the market, so when the bottom drops out of TV demand, the impact on these companies will be greater than on competitors, TrendForce said.
How these factories respond to mounting inventory panel levels in coming months will be key to determining the future market conditions entering 2023, TrendForce said.
The top three Chinese panel manufacturers (BOE, CSoT and HKC) will likely have to both re-adjust production from their older factories in Q3 and, where applicable, moderate the level at which new factories ramp up.
“It cannot be ruled out that the utilization rate of LCD Gen5 (including) and above large generational fabs will maintain the same level of operation as in 3Q22. In the past, production cuts were the main response whenever the market was oversupplied. However, with future production capacity still growing, the speed at which brands deplete their inventories and global political and economic trends will be key factors affecting the future display market,” the report states. “If market conditions continue to deteriorate, it cannot be ruled out that the industry will face another reshuffle, setting off a further wave of mergers and acquisitions.”
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By Greg Tarr
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