September 24, according to South Korean media Businesskorea reported that Chinese LCD panel makers are collectively reducing factory capacity utilization, a move that is expected to have a significant impact on the global LCD panel and LCD TV supply chain.
Production cuts by major manufacturers
The report quoted industry sources as saying that major manufacturers such as BOE, Huaxing Optoelectronics and Rainbow Optoelectronics (CHOT) have decided to reduce average capacity utilization to 60-70% by October. Previously, driven by rising LCD panel prices, these manufacturers had maintained 80-90% capacity utilization until May. The shift not only reflects fluctuations in market demand, but also reveals the complexity of the global economic environment.
Against this backdrop, changes in global market demand for LCD panels are being influenced by a variety of factors. With the rapid iteration of consumer electronics products, the market demand for high-quality display technology gradually shifted to emerging technologies such as OLED. The introduction of new technologies has changed consumers’ purchasing preferences, causing LCD panel manufacturers to rethink their market strategies. In addition, economic uncertainty and changes in the international situation have made consumers cautious in their spending, which has further dampened demand for LCD TVs.
In January this year, the most sought-after 55-inch LCD TV panel price of $122, by May has risen to $132. However, since July, LCD panel prices have continued to fall, prompting China’s LCD panel makers to adjust their production strategies, with the decline in capacity utilization particularly concentrated in TV panels over 55 inches. This price volatility is also closely linked to the fragility of the global supply chain, with manufacturers facing pressure from a variety of sources, including raw materials, transportation and labor costs.
Rising logistics costs, raw material shortages and international trade tensions have had a profound impact on manufacturers’ operations. The global supply chain has suffered major shocks in recent years, especially after the New Crown epidemic, and many firms have had to contend with transportation delays and shortages of raw material supplies. Under these circumstances, manufacturers not only have to control costs, but also ensure timely delivery of their products in order to remain competitive in the marketplace.
Rising costs impacting profitability
The report said that since the second quarter of this year, logistics costs, labor costs, and raw material prices have risen, making manufacturers’ profitability further reduced. A display industry source said, “Logistics costs, labor costs, and raw material prices have been rising since the second quarter of this year, and profitability will deteriorate further if LCD panel prices also rise.” This is particularly prominent in the highly competitive market environment, manufacturers have to find a balance between profitability and market share.
Against this backdrop, Samsung Electronics, which spends 5 trillion to 6 trillion won a year on LCD panels, saw its share of the high-end TV market fall below 40 percent for the first time in the second quarter of this year. The decline is partly attributed to rising costs and competitive pressure from Chinese manufacturers, which account for more than half of the TV LCD panel supply chain. Of the 36.03 million LCD TVs shipped each year, more than 20 million are equipped with Chinese-made LCD panels.
Shifts towards OLED technology
Industry sources said, “Chinese manufacturers are expected to reduce factory operations for 2-3 weeks around the National Day. While the share of OLED panels in cell phones and tablet devices remains high, the share of LCD panels in televisions has not decreased, giving Chinese companies de facto pricing power.” This suggests that despite the challenges in the market, Chinese manufacturers are still maintaining some control in the LCD panel space.
As China’s LCD panel makers gradually adjust their strategies, the market will usher in new changes. Despite the current challenges, some industry analysts believe that this adjustment may be able to promote the transformation of the entire industry to a more efficient production model, thereby enhancing overall competitiveness. In addition, the industry is actively exploring the application of new technologies to increase the added value of products. For example, manufacturers may increase investment in smart TV technology to meet consumer demand for smart homes.
Both Samsung Display and LG Display have phased out of the LCD panel business to focus more on OLED technology. This strategic shift highlights the market strategy of these two Korean giants, although there are differences between the two: Samsung focuses on LCD TVs as well as its high-end QLED series, while LG focuses on OLED technology. As OLED technology continues to mature, the market’s acceptance of it is also rising, which may further change the LCD panel market pattern.
In short, the current LCD panel market is undergoing profound changes. Manufacturers not only have to face the pressure of price volatility and rising costs, but also have to adapt to technological changes and changes in market demand. In the coming months, the LCD panel industry is likely to see a new reshuffle as Chinese manufacturers adjust their production capacity and the market environment evolves further. Meanwhile, new technology trends and changing consumer preferences will continue to shape this challenging industry.
