The prices of LCD panel TVs have been on a roller coaster ride, witnessed by their biggest price increase and fastest decrease within the span of 17 months. By the end of 2021, prices are expected to fall further still. Concerning the prices of different size panels, small screen 32-inch panels proved to be the most volatile while larger 75-inch panels were the most resilient.
The average decline in October 2021, among the seven TV sizes was only 15.5 percent, almost but not quite matching the 15.8-percent decline in September. LCD TV panel prices have now lost more than half the gains that they achieved in the long up-cycle from May 2020 to June 2021.
The increasing panel prices led to an unprecedented increase in TV prices in the US, which will hinder demand. After nearly a year, when component shortages and logistics problems had brands and retailers scurrying to find enough supply, the brands and retailers have caught up. For developed regions, the opening of economies allows consumer spending to shift back to services, and emerging economies are still struggling with COVID and suffering an economic slowdown.
The chart above highlights the latest TV panel price update. It shows both the biggest price increases in the history of the flat panel display industry, from May 2020 to June-July 2021, and then the fastest price decreases in the industry in September and October 2021. With substantial price decreases in October, the smaller-size panels (up to 55-inch) are now at lower prices YoY, although the largest size panels (65-inch and 75-inch) remain priced higher than a year ago.
In October, prices for all TV panel sizes fell, with larger percentage declines occurring for smaller sizes.
Although panel price declines will come more slowly in 4Q, much of the damage has been done. Even if prices managed to stop falling and stay at October levels, the average price in 4Q would be 26 percent lower than the average price in 3Q. With additional price declines, expected in November and December, prices will fall by 32 percent, with the QoQ price declines ranging from 18 percent to 41 percent.
Looking at pricing on an area basis, it is clear that smaller-screen TVs are the most commoditized – prices for 32-inch panels fall the fastest during a period of oversupply and rise the fastest during a period of shortage. This pattern is repeating again with oversupply. At the peak of the recent upswing, the smallest TV panels sold with an area premium, but the shift to oversupply has caused that pattern to flip, as shown in the next chart.
At the peak of panel prices in June 2021, 32-inch panels sold at a premium of USD 67 per square meter or 27 percent over 65-inch panels, and USD 62 or 25 percent over 75-inch panels. That premium was gone by September, and in October 32-inch panels sold at a discount of USD 26 or 14 percent compared to 65-inch panels and at a discount of USD 51 or 24 percent compared to 75-inch panels. The chart shows that 75-inch panels, while they are subject to the supply/demand dynamics of the industry, are by far the least volatile screen size. Panel makers with Gen 10.5 capacity (BOE, CSOT, and Sharp SIO) will be at a relative advantage in the oversupply environment that will carry into 2022.
The chart above shows a TV price index, set to 100 for prices in January 2014, and the YoY change of LCD TV panel prices. The index increased from its all-time low of 42 in May 2020 to 87 in June 2021, but prices have already fallen to 54 in October. The index is expected to decline to 48 at year-end, 28 percent lower than in December 2020, but still 15 percent higher than in May 2020. The YoY increase in October fell to negative for the first time since July 2020 at –10 percent.
Expect panel maker utilizations to slow down in 4Q to help alleviate the pressure on prices. In its recent earnings, Corning indicated that such a slowdown is starting to happen. The seasonal slowdown in TV demand after 4Q leaves the industry with few demand drivers heading into the new year – expect utilizations to slow further in 1Q as prices continue to fall.
With the COVID-19 demand surge, assisted by shortages in glass and DDICs, 2021 was a historic year of increases in panel prices, and panel makers posted their most profitable quarter ever in the second quarter of 2021. The first results of 3Q earnings from LGD and AUO indicate that while profits declined in 3Q, these panel makers escaped the worst effects of the pricing spiral by adjusting their product mix to favour IT panels. Even price declines in 4Q will sustain some profitability for LCD panel makers, who continue to be in line for record full-year profits.
During the year-end festive season, significant LCD TV panel supply will be scooped up; however, an excess of supply is expected to remain going into 2022.