Coronavirus quashes panel price rally
Now the virus has led to severe concerns about demand, with everyone in the industry revising their forecasts down. With supply only lightly affected by the pandemic, and with the massive economic impact now expected in major developed economies, a slowdown in demand has become the defining feature of the industry, taking away all the upward pricing pressure.
The timing of the pandemic’s spread has given a particularly sharp twist to the downturn because of its impact on sporting events. In a non-event year (odd calendar years, without World Cup or Olympics), the spring quarter is typically the low point for TV demand. In an event year such as 2020 was scheduled to be, the major sporting events pull demand into Q2. However, now with the Tokyo Olympics postponed until 2021 and the European Cup effectively cancelled, there are no such demand drivers heading into the summer this year. The reduced Q2 demand leads directly to a reduction in upward pressure on panel prices.
The first chart shows our latest TV panel price update. Whereas a month ago we were expecting as much as 20% trough-to-peak price increases for commodity panels from November 2019 to March 2020, we now see more muted increases, mostly in the single digits with 32” the exception with a 13% increase, and we see prices starting to decline again in April.
Consistent with the last update, we expect 75” panel prices to continue to decline, since they still sell at a substantial area premium to their smaller counterparts, as shown in the next chart. The gap in price per square meter between 75” and 65” is narrowing, but still very wide: by the end of Q1 2020 that gap is expected to narrow to $49, or 25%.
With the more muted price increases in this update, 32” remains the lowest priced panel on an area basis. This bellwether panel shows the fastest drops to the lowest area prices in times of oversupply, and the fastest increases when panel prices rebound.
As the charts indicate, we now believe that February and March will represent the peak panel price of this mini-cycle, and prices will resume a downward track in April. For Q1, we now expect an average TV panel price increase of 4.2% Q/Q (this based on a simple average of the seven sizes we track; an average weighted by volume might be a little better). While this increase was a welcome relief for panel makers, it still leaves Q1 prices significantly lower than Q3 2019, when panel maker losses were severe, and panel makers will face much lower shipments in the Q1 slow season. With prices falling again in Q2 and no surge in volume expected, the coming months look bleak for companies that rely on LCD TV panel revenues.
The last two months have seen unprecedented volatility in stock markets, and the most severe market swings in many commodities, such as oil, precious metals and other goods. The pandemic looks to have claimed another casualty in killing the TV panel price rally. In this volatile market, it’s conceivable that things could turn back up as quickly as they turned down. DSCC will keep providing monthly updates.
About the author:
Bob O’Brien is co-Founder and President of Display Supply Chain Consultants (DSCC) – www.displaysupplychain.com