Entering the slow season, the aggregate production of LCD TV brands surveyed for our MarketWise – LCD Industry Dynamics report declined 14% M/M in December 2012, and is expected to fall in January and February before recovering somewhat in March and April, for a drop of 24% Q/Q in Q1’13.
TV makers are taking advantage of loose supply in Q1 to negotiate lower panel prices. At the same time, they are concerned about availability of TV panels in early Q2, when they launch most new models. They are also concerned about the supply of different sizes (32”, 40”/42”, and 39”/50”) and specifications, such as LED, during the 2H’13 busy season. The fact that a mature market like TV is moving toward size proliferation has confused TV makers.
Source: MarketWise – LCD Industry Dynamics – January 2013
Samsung, LGE and most Chinese TV brands have bullish LCD TV shipment targets, and corresponding panel procurement plans, despite the rather modest TV market growth this year forecast in our Quarterly LCD TV Value Chain report. Samsung and LGE plan to achieve this goal by taking share from Japanese TV brands.
Industry-wide production of 32” panels is forecast to drop sharply in 2013, and TV makers are very concerned about the mismatch in TV panel supply/demand. TV makers, including Chinese brands, can’t make a profit on 32” ‘fighter’ models, yet in order to secure panel allocation they are facing higher prices. In 2013, the supply of 32″ will clearly fall short of demand unless TV makers can shift some demand from 32”, which has been the main size for years, to larger sizes. Panel makers will strongly push for such a migration.
Samsung and LGE are adjusting their TV size portfolio to better match the drastic changes in panel supply this year; the share of 32” in their 2013 shipments will fall by 5% and 7%, respectively, with the volume moving to larger sizes. It is worth watching to see whether other TV brands will do the same thing. This may drive the upgrade cycle to larger sizes, though the lower prices required might make it at the expense of profitability for players along the supply chain.
Meanwhile, there will be a clear transition to LED models this year. The fast adoption of low-cost direct LED-backlit LCD TVs is worth noting. Samsung and LGE are significantly upsizing their plans for direct LED-backlit LCD TVs in 2013. In Samsung’s 2013 plan, 95%+ is LED, of which 80% is direct LED, segmented by bezel thickness. LGE is also increasing its plans for direct LED-backlit LCD TVs, at 50% of its total LCD TVs for 2013. While penetration of direct LED backlit LCD TVs has been low in Japan, it is increasing due to adoption from brands like Sony and Toshiba, with more coming in 2013. The adoption in China increased remarkably, with a growing number of makers participating in the low-cost direct LED TV market.