(Yicai Global) May 11 – TV panel makers that were still in full swing from the end of last year to the start of this year are now facing severe challenges.

The price of their products has plunged or closed to the historical lowest point of the last wave of price decline in 2016. Prices are set to keep dropping in June to nearly their production cost, Beijing-based All View Consulting Ltd. (AVC) told Yicai Global.

Historic Lows

The accelerated decline in TV panel prices is mainly a byproduct of the start of mass production of new liquid crystal display (LCD) new-generation panel plants worldwide since the start of last year. Global demand for TV sets -- including China's -- has not greatly risen in the short-term to keep pace, AVC analyst Bian Zheng told reporter.

With TV makers preparing their inventories for the peak demand of the World Cup upcoming in June, the panel oversupply situation has become more severe and has accelerated the price decline.

The price for a 32-inch high-definition (HD) panel will fall to USD52 in the first quarter -- a nadir unseen since 2016 -- with the possibility of a further decline in June. The price of a 55-inch ultra-high-definition (UHD) panel fell to USD166 in April this year, dipping below the previous record low of USD170 in May 2016, AVC noted.

The price of TV panels decreased by 25 percent to 30 percent this month over the year before, Li Yaqin, general manager of the Beijing-based display panel market research firm Sigmaintell Consulting Co. told Yicai Global.

Expanding capacity

The greater-than-expected price decline was mainly attributable to supply outpacing demand, Li told Yicai Global.

Global color TV shipments grew by 7 percent in the first quarter, but the panel supply rose 8 percent to 9 percent. It is estimated that global demand will increase by 6 percent this year, but that supply will increase by 8 percent to 9 percent, Li noted.

Prices of panels of all sizes are under downward pressure, with even 65-inchers no exception.

"Capacity of 10.5-generation LCD production lines in mainland China has gradually climbed, and panel makers are increasing their output of 65-inch panels. However, the demand for 65-inch TVs in the market is lower than expected, so the pressure on ex-factory prices for 65-inch panels is rising. They are forecast to drop another USD10," Bian said.

The active expansion of production capacity has propelled Beijing BOE Optoelectronics Technology Co.'s LCD shipments to the top position in the world in the first quarter by volume.

"The panel industry has a scale effect. The bigger the scale, the more market influence [a player] has and the better it can survive. Businesses' own development needs, together with the capital support of local governments, has caused the supply to increase too quickly in the short term," Bian noted.

As more new projects come into production in the next two years, the global industry will continue to feel the heat from overcapacity in the next two to three years, Li predicted.

Profitability challenges

"As the wave of panel price cuts this time is as fierce as previous price increases, the profitability of the major panel makers has taken a downward trajectory since the second half of last year,"Cui Jilong, a panel industry analyst told Yicai Global, adding that he is not optimistic about the profits in the coming months.

The case of BOE serves to illustrate. The company's revenue in the first quarter of this year dropped 1.32 percent annually to CNY21.60 billion, while its net profit fell 16.3 percent to CNY2 billion.

BOE and Shenzhen China Star Optoelectronics Technology Co. are actively adjusting their product mix against this backdrop, cutting production of 32-inch panels and raising the supply of relatively profitable 43-inch, 49-inch and 55-inch ones.

BOE's shipments of 55-inch panels rose nearly 1/3 annually in the first quarter, shipments of 65-inch panels surged  nearly one and 1/2 times, and shipments of 4K TV panels grew by about 1/3, show Sigmaintell Consulting data.

The LCD TV panel industry is pessimistic about profits this year, but the LCD TV panel industry is set to have a long lifecycle, Stacy Wu, a senior analyst at technology market intelligence firm IHS Technology believes.

It is expected that the advent of more 10.5G production lines will eliminate capacity of older LCD TV panels is expected to be eliminated. For example, Samsung Electronics Co. closed a 7G line last year, Wu said.

Editor: Ben Armour