- Korean panel makers’ exit from LCD TV production, as per Omdia, is expected to create a supply bottleneck
- The coronavirus crisis is now impacting FPD demand and creating considerable business uncertainty
From 2013 through 2020 worldwide flat panel display (FPD) capacity grew almost 50 per cent, expanding to 335 million square meters per year, up from 225 million. The continuous build-out of new factories in China, including multiple enormous Gen 10.5 lines, as per Omdia, drove the FPD industry to an unusually high average capacity glut of 13.6 per cent in 2019. This in turn caused liquid crystal display (LCD) TV panel prices to decline throughout the year to record lows.
“In the first quarter of 2020, the FPD supply chain was significantly restricted as COVID-19 hindered logistics, caused material and component shortages, and prevented factory workers from assembling modules in China,” said Charles Annis, senior director at Omdia.
He added, “This helped to balance the large-panel market and caused prices to rise through much of the quarter. By early April, Chinese FPD factories had mainly returned to near-normal capacity. Now as the coronavirus spreads globally, the bottom is falling out of TV demand. The glut level is again surging to high levels and second-quarter TV panel prices are now expected to plunge back below cash costs.”
Accelerated plans to exit LCD TV panel production in Korea in 2020
The coronavirus crisis, as per the report, is now impacting FPD demand and creating considerable business uncertainty. Challenged to maintain profitability in this environment, South Korean suppliers have accelerated plans to completely exit LCD TV panel production in Korea in 2020.
These factory closures will remove 57 million square meters of capacity between 2019 and 2021. With 17 percent of total capacity now expected to be shuttered by next year, the glut level is modeled to shift from being excessively loose in 2019 to an extremely tight 6.5 per cent average in 2021.
Surge in IT demand will be short-lived
On a unit basis, demand in 2020 is currently estimated to decline by about 10 per cent compared to 2019 as a result of COVID-19. The IT market—particularly notebooks and tablets—is the one segment of the display industry now enjoying healthy demand as much of the world has rapidly had to pivot to working, playing and teaching children at home.
Even so, Omdia currently assumes this surge in IT will be short-lived and will mainly pull in demand from the second half of the year. The rise in IT spending will not be sustainable as corporate IT and education systems’ budgets are likely to be curtailed as the economic impacts of the pandemic increase. At this time, Omdia forecasts unit demand will start to recover from 2021 but will take two to three years to approach 2019 levels. However, on an area basis, 2021 large-panel demand is expected to exceed 2019’s level by 11 percent due to projected growth in LCD TV weighted average panel size from 45.4-inch to 49.2-inch.
Over the same 2019 to 2021 timeframe, capacity is forecast to grow by only two per cent. From a total industry supply perspective, the Korean LCD TV factory shutdowns negate much of the capacity expansions and new factories now being built in China.
“The year 2020 was previously expected to be a time of substantial change for the FPD industry. However, now with COVID-19 and Korean panel makers withdrawing from LCD TV panel production faster and more abruptly than even the most aggressive scenarios, it now looks like this year will suffer from more disruption than anyone imagined only a few months ago,” Annis said.
