Market Insight

Saturation and Slowdowns Impact October Smartphone Panel Pricing

October 22, 2014

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In October, panel pricing for HD (1280x720) & Full HD (1920x1080) smartphone displays is expected to decline by about 1.1% month-over-month (MoM). October’s price declines are more evident with annual decline, which exhibited a 17% year-over-year (YoY) decline, and even steeper declines for panels in the 5.x-inch segment. The reduction in pricing year-over-year is due to a number of factors, most prominent being the growth in available supply and weakened China market demand. 

The smartphone market was once led by the high-end segment (≥$400 device MSRP) where HD & Full HD were exclusively used. However, now these resolution have become commonplace in the midrange ($150 <$400 device MSRP) tier as OEMs use them for midrange devices, with HD penetrating the low-end segment (≤$150 device MSRP). This diversification has led the display market to continue to thrive, and for TFT-LCD to maintain dominance as its pricing and performance efficiently meet the needs of OEMs.

Regionally, China has become the largest smartphone markets of 2014, expected to reach over 400 million device unit shipments, accounting for over 30% of the total smartphone market. China’s stronghold on the market is due its fast adoption of smartphones, fueled by the fervent efforts of domestic Chinese OEMs. OEMs like Xiaomi, Huawei, Lenovo, ZTE, and many others have ramped up their product lines to compete against global players like Apple and Samsung.  However, many Chinese OEMs are flooding the market, with new devices announced every quarter, further attributing the current saturated state of the smartphone market where consumers have more options than ever before. This market saturation is further diminishing much of the control held by leaders like Apple, Samsung, and others.  

Recent government intervention has forced Chinese Telecom operators to adjust marketing expenses and reduce subsidies offered to consumers in the smartphone market. The lack of subsidies has prevented Chinese OEMs and Telecom operators from selling larger volumes of 4G devices, which are dominated by ≥HD resolution displays, as China’s market still exhibits price inelasticity. Further, 3G device devices, which feature ≤HD displays, have also begun to stockpile in inventories during October. This has weakened panel demand for those panel suppliers supplying ≥HD smartphone panels to the region.

Taiwan suppliers like AU Optronics, Chunghwa Picture Tubes, Innolux, and HannStar are all heavily invested into the Chinese smartphone market, supplying a number of varying panels and especially HD and Full HD panels. Chinese panel makers Tianma and BOE are also offering the same panels to their home region, often at a much more competitive price. However, as demand is weakened in the region panel suppliers from Taiwan and China are expected to lower smartphone panel prices to encourage and sustain sales volumes, resulting in an average price erosion of nearly 30% YoY this month from October 2013.

Further inhibiting price, is the swell of production of HD and Full HD smartphone panels. As these panels are still in high demand, creating a heavy supply base. Supply base has further been strengthened by the added supply from China’s BOE & Tianma, as collectively increase area input capacity for the small and medium display market by about 30% YoY in 2014, to reach an average monthly area input of over 430,000 square meters/month for 2014. The added capacity increased the competitive nature of the market, as it added to both the a-Si & LTPS supplies and granted Chinese panel suppliers access to the midrange & high-end smartphone space; dominated by HD (1280x720) and Full HD (1920x1080) & the 5.x-inch as the main size category. As a result, the average price of 5.x-inch HD (1280x720) smartphone panel is expected to drop around 32% YoY in October 2014, while the price for Full HD (1920x1080) in the same size segment is poised to decline by nearly 20% YoY during the same period.

As panel market moves into a state of strong supply, and competition will heat up further, smartphone panel pricing will likely further its quick descent through the rest 2014 and into 2015. Panel suppliers should seek to develop innovative panels with advanced features, like higher resolution and integrated touch like Quad HD (2560x1440) and On-Cell and In-Cell Touch, which will add value to their panels and help to hedge price declines.  Further panel suppliers should also diversify their efforts, with production dedicated to smartphone market segments, carving out clear distinct production for each. Lastly developing and securing a strong customer base, where long term commitments are guaranteed will likely offer panel suppliers with added success in the smartphone market.

Research by Market
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