- As panel makers hesitate to lower prices, TV manufacturers find themselves in a tough spot, with retailers pressing for cheaper TVs due to slow market demand.
- The negotiations are intense, and the outcome could affect the future of panel prices.
In business, tensions between panel makers and TV manufacturers have reached new heights in recent months. The root of the conflict lies in the reluctance of panel makers to grant the price concessions that TV manufacturers have been fervently requesting. This demand for price reductions followed a significant turnaround in the TV display business during late 2Q23 and 3Q23. However, despite these improvements, TV makers are still struggling to break even in 2023.
The problem got worse because the prices of panels went way up, and not many people are buying TVs right now, so the TV companies are losing money. On top of that, stores are telling TV companies to make their TVs cheaper because people aren’t buying many. Also, it’s been tough for the TV companies to agree on prices for the panels they use in their TVs. They think that soon, the panel makers will have to lower their prices, but if they do it too much, it could cause significant problems with the prices of panels. The prices are rising because there’s insufficient supply, but it might soon be because of insufficient demand. This means the prices could go down again in the future.
Weak Demand and Panel Prices Cast Shadows on 1Q24 Prospects
The adverse effects of weak market demand and the outcome of panel price negotiations have left TV makers in a precarious position, leading them to reduce their panel procurement plans for 4Q23 further, making the demand outlook for 1Q24 uncertain. Furthermore, their confidence in replenishing panels is waning as they fear a reversal in the upward trend of panel prices. Consequently, TV makers are expected to adopt a more conservative approach to panel procurement in 4Q23 and 1Q24 unless they perceive a significant price drop. Such a move would pressure panel makers, potentially forcing them to reduce fab utilization to levels last seen in September or early 2023. Omdia’s forecasts suggest that Chinese TV makers may become more willing to replenish panels after 1Q24, provided they can maintain competitiveness and expand their global market share.
Chinese TV makers have revised their buying plans for 3Q23 and 4Q23 downward, citing concerns about eroding profit margins due to increasing panel prices. They are also keeping a close eye on the depreciation of the Chinese yuan against the US dollar for their export business. In 3Q23, several top-tier Chinese TV makers downsized their panel procurement plans to pressure panel makers into offering price concessions, resulting in weaker purchasing volumes compared to 2Q23. The negotiations between TV makers and panel suppliers in August and September were critical in shaping purchasing plans for 3Q23 and 4Q23. Displeased with the outcomes, Chinese TV makers further reduced their panel procurement volumes for both quarters. Notably, 4Q23 is expected to see weaker buying volumes, a rarity in the industry. However, a more positive outlook emerges for 1H24 if Chinese TV makers remain competitive and expand their market share.
Samsung and LG Electronics Navigate Challenges
Turning to South Korean purchases, Samsung and LG Electronics are expected to slightly increase in buying volumes in 3Q23, albeit lower than previously anticipated. They have reduced their demand for BOE and HKC Display panels in 3Q23 and 4Q23. Both companies are grappling with higher-than-normal inventories in regional markets and sluggish sell-through results. Weakening profit margins in 2H23, driven by rising panel prices and the competitiveness of Chinese TV makers, prompted Samsung and LG Electronics to cut their panel procurement plans for 3Q23 and 4Q23. While their buying plans for 3Q23 will increase from 2Q23, they remain weaker than previous years. Forecasts for 4Q23 also indicate conservatism, with a lower demand for BOE panels.
The tough negotiations between TV makers and panel suppliers in August and September 2023 have led Samsung to adopt a wait-and-see approach before replenishing its panels. Looking ahead to 2024, Samsung may maintain conservative LCD TV shipments, similar to 2023 levels, while increasing its business plan for OLED TVs to about 2 million units, double the 2023 forecast. Both Samsung and LG Electronics are planning to reshape their supply base in 2024, reducing purchases from Chinese makers and shifting their panel demand to Taiwanese (AUO and Innolux), Japanese (Sharp), and South Korean (LG Display) vendors. LG Display is poised to become a critical supplier for both companies in 2024, primarily for LCD and WOLED TV panels.
The tensions and negotiations between panel makers and TV manufacturers, particularly in the Chinese and South Korean markets, are expected to significantly impact the industry’s dynamics in the coming quarters, with pricing, demand, and supply chain shifts being critical factors to monitor.