LCD TV Panel Fab Utilization Falling in 2H’19
The display market turned in Q3’19 from healthy to oversupply as utilization dropped from 89% to 85% and is expected to keep falling in Q4’19 to 80%. What happened? The drop can be attributed to:
- Channel inventory. 1H panel output was strong, but sell-through did not keep up.
- Weakening global economy, tariffs and fear of tariffs choking off demand – brands are reducing their 2H outlook on the expectation that higher prices from tariffs will slow demand and do not want to get stuck with higher priced inventory from the tariffs. This is result- ing a sudden drop in utilization at most manufacturers.
- Rising G10.5 capacity which is expected to jump 18% in Q3'19 and 13% in Q4'19, putting pressure on other fabs.
The decline is across the board in terms of glass size, although the fabs shown below are some of the ones most affected. We are seeing:
- BOE B9 utilization falling to 75%, putting more pressure on 65” prices. Sharp’s China G10.5 fab is coming on at the worst possible time with prices low and still falling and demand below expectations resulting in low utilization which is not expected to improve. CSOT T6 is also ramping more capacity and BOE B17 is about to start ramping.
- CEC G8.5 falling below 70% and CEC G8.6 falling to 75%.
- LGD’s G8.5 fab in Korea is expected to fall from the high 70s to under 50% and is expected to go below 40% and is not expected to come back as they look to downsize this fab.
- LGD's G7.5 utilization has fallen from the low 90s to 60% and this fab may also be downsized.
- SDC’s G8.5 fab in Korea has dropped from 90% in August to less than 50% in September and is expected to remain below 60% from October – December. Its G7.5 fab also dropped sharply from August to September and is expected to remain under 50% in Q4’19.
Based on this outlook, we have dropped our 2019 display revenue forecast growth to -6%. We now show revenues at $111B, down from $118B. The drop in prices and utilization will result in more losses in Q3’19 and Q4’19 for panel suppliers and we are seeing a number of panel suppliers hit with more downgrades such as Hanwha lowering LGD’s price target by 15%. We show LCD revenues falling from $92B to $83B while OLED revenues grow slightly from $27B to $28B.
Monthly Fab Utilization Results and Forecast
Source: DSCC’s Quarterly Display Fab Utilization Report