Earlier Than Expected Monitor Panel Price Rebound in Q1’10?

By David Hsieh – Vice President, Greater China Market, and Deborah Yang – Research Director, Monitor & TV

DisplaySearch has forecasted oversupply in Q4′09 to Q1′10 due to seasonal weakness and inventory adjustments. Panel prices started to decline at the end of September, as we forecasted in the Monthly Large-Area LCD and PDP Pricing Report, and we expected declines until Q2′10, especially in notebook and monitor panels. However, the following signals indicate that monitor panel prices might rebound as soon as January/February, regardless of price pressure on TV panels:

• The LCD TV market may approach 140 million units in 2009, compared to the 130 million we originally forecasted. In our most recent Quarterly Global TV Shipment and Forecast Report, we reported that LCD TV shipments were 37.5 million in Q3′09, due to strong results in China, as well as improvements in North America and Europe. These results are better than the 32.7 million we forecasted, and will help to digest panel inventory.
• Many leading TV brands are increasing their shipment plans for 2010 and are looking for more panel allocation.
• After strong sell-through in the October shopping season, Chinese brands are starting to buy large numbers of panels, including monitor panels for small-size TVs, to prepare for the February Chinese New Year shopping season.
• Most PC brands and OEMs have been cautiously managing their inventories; inventories in China seem to have reached acceptable levels. Demand in Europe and North America is improving, and most monitor brands are moving their shipments forward to secure market share. Most monitor brands and OEMs are building panel inventories in expectation of stronger demand in 2010. Some top-tier monitor brands have agreed to flat panel prices for December.
• Even at current panel prices, brands are launching aggressive high-season promotions. This means panel prices are not unreasonable for downstream customers. This gives panel makers confidence that they do not have to reduce prices.
• In 2010, capacity growth will be small, but demand will be strong due to economic recovery and China. This will encourage many panel buyers to follow a strategy of pre-buying to establish panel inventory from Q1′10.
• Some panel makers had plans to reduce capacity utilization in November and December but they have decided to run at full capacity due to increased orders.
• Notebook and mini-note OEMs are increasing their shipments and continue to receive more orders from brands for 2010.

All of these signals tell us that this down cycle might be the shortest in history (just one quarter-Q4′09), and that our prediction of good prospects for panel makers in 2010 will be realized. However, if panel prices rebound earlier than expected, and end-market prices continue to fall, then the margin distribution issue will be highlighted again.