- Chinese TV makers might decrease panel purchases by 4% quarter-over-quarter (QoQ) but increase by 2% year-over-year (YoY) in the second quarter of 2020 (2Q20).
- Chinese TV makers might significantly increase panel purchases by 36% QoQ and 57% YoY in the third quarter of 2020 (3Q20)
Chinese TV makers might decrease panel purchases by 4% QoQ but increase by 2% YoY in 2Q20
Chinese TV makers wanted to support the overseas market first; thus, they have built up their inventories. After two or three months, their inventories may be consumed as they continue to adjust their forecast and TV makers might build up inventories for OEMs and brands again. Therefore, they might buy more panels in 2Q20, and possibly even in 3Q20 if the COVID-19 pandemic can be contained.
There is still a risk of a further demand correction, particularly for some Chinese TV makers. South Korea’s leading maker, LG Electronics, has no plan to strategically maintain inventories in 2Q20; thus, it is highly likely that the company will adjust its panel purchasing volumes. The end market performed better than forecast, in particular, the North American market was better than previously forecast. Meanwhile, some TV makers are maintaining their business plans, and as such, TV makers are starting to buy more panels. Several panel sizes have been maintaining their prices since May 2020, which means that panel prices have reached their lowest; with TV makers increasing the panel demand, the panel prices could rebound soon. However, as the panel makers continued to have high utilization in 2Q20 and since they must ship many panels to make sure their inventory levels are balanced, the TV makers need to pull in panels from 3Q20 to 2Q20 instead.
Chinese TV makers have had to decrease panel demand and they were struggling to cut orders until April 2020 as there were uncertainties over whether panels would be easily available after June 2020. Thus, some TV makers received support from panel makers, which included panel price reduction, panel price protection, and panel price discounts. However, from June 2020 onward, since some panel makers have cleared their inventories until May 2020, they will no longer provide further support.
While China is gradually recovering from the COVID-19 outbreak that began two and half months ago, the unexpected rapid spread of the coronavirus—especially in European countries—is now attracting the attention of TV makers, in particular South Korean TV brands that have a major presence in the region. Omdia predicts that these companies will have to cut panel demand in 2Q20 to reduce the risk of rising inventory as more and more cities and countries go into lockdown. The TV production in some countries in Asia and Europe either have already stopped or are going to stop for the next couple of weeks. However, what worries TV brands is that consumers’ purchases of TV products will decline during this difficult situation. The recent decision to postpone the 2020 UEFA European Football Championship (UEFA Euro 2020) and Tokyo Olympics 2020 is the other critical trigger for TV makers to reduce panel demand for 2Q20.
TV panel prices started to remain flat in May 2020, but negotiations will be very tough for panel makers because they will have their lowest inventory levels during this very challenging time. Most TV makers have built up strategic panel inventories as there is strong demand from the overseas market and some TV makers are concerned that there will be supply issues in the second half of the year (2H20).
Without support from the Chinese government (incentives and subsidy programs) or contributions from other channels, upcoming promotional events like the 618 (June 18) sale in China will face difficulties.
Panel makers that wanted to increase prices will be under pressure to lower them instead (or provide price protections) in June 2020 to soften the effects from the reduced demand, particularly in June–July 2020.
The question now for Chinese TV makers is will the market recover quickly, or will it face a persistent downturn? TV display supply chain participants must prepare countermeasures for potential worst-case scenarios now. COVID-19 has become the most important swing factor influencing everything from demand to supply and the evolving TV competitive landscape.
Chinese TV makers might significantly increase panel purchases by 36% QoQ and 57% YoY in 3Q20
Chinese TV makers still have not adjusted their 2020 business plans. Owing to the COVID-19 impact worldwide, they must recover their losses in 2H20.
Therefore, Chinese TV makers have a high forecast in 3Q20 for both the domestic and overseas markets, with especially strong demand from the North American market. The market will slowly recover thanks to the emerging and European markets in future.
However, there are still some risks as follows:
- COVID-19 is not contained yet and could take more time to come under control. A second wave of COVID-19 might occur again in 2H20 as there is no vaccine now.
- There might not be a strong market recovery in 2H20. If so, TV makers will have to deal with high inventory levels, which will affect panel makers’ strategy, such as panel pricing.