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Supply Chain Contraction Leads to Declining Global LCD TV Panel Demand, IHS Says

10/21/2015

Panel inventory adjustments will continue in 2016, with larger sizes prevailing over smaller sizes

SANTA CLARA, Calif. (October 21, 2015) - Since the third quarter (Q3) of 2014, the LCD TV panel industry has been going through a difficult time, with TV set makers adjusting panel inventories as well as their 2015 business plans downward. LCD TV panel demand is now expected to drop 3 percent in 2016 over the year to reach just 257 million units. The decline is a result of TV brands' continual panel inventory control, as well as global economic uncertainty, according to a new report from IHS Inc. (NYSE: IHS), the leading global source of critical information and insight.

"TV panel inventory adjustments will continue into the first half of 2016, because more manufacturing capacity will be coming online, especially in China," said David Hsieh, senior display director for IHS. "Global consumption is stagnant and the replacement cycle is slow, which will not support strong growth in the coming year."

According to the latest Display Long-Term Demand Forecast Tracker, 134 million LCD TV panels were shipped in the first half of this year; however, although prices declined in the second half of the year, panel makers have maintained capacity utilization to produce even more panels. At the same time, they have been quickly reducing panel prices to encourage TV brands to keep buying for their short-term needs and for the upcoming global holiday shopping seasons. "All of these factors will have a negative impact on LCD TV panel demand in 2016," Hsieh said.

"Panel shipments have surpassed LCD TV set shipments by double digits for three consecutive years," Hsieh said. "TV brands are revising their business plans downward this year and continuing slow economic growth is creating more uncertainty in 2016, so TV makers are expected to be conservative in their 2016 planning."

While LCD TV panel unit shipments are forecast to decline in 2016, area demand will reach 125.9 million square meters, a 3 percent increase from 2015. When OLED TV panel area is included, year-over-year area growth reaches 4 percent.

Panel supply is growing in the 40-inch to 43-inch panel segment, and panel price decreases are helping larger sizes grab market shares from the traditional mainstream 32-inch segment. Unit shipments of 32-inch panels will fall from 90 million in 2014 and 2015 to less than 80 million in 2016. The 32-inch panel size is now being threatened by 40-inch to 43-inch sizes; meanwhile, panel shipments of 50-inch to 55-inch sizes will grow from 37 million in 2015 to 41 million in 2016.

"The collapse of panel prices in the second half of 2015 is encouraging panel makers to shift their product mix, because smaller panel sizes will experience deep losses," Hsieh said. "Panel makers will be spurred to produce larger panels, which are more profitable, rather than stick with smaller panels with deeply eroded profitability."

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