LCD TV Panel Price Update – Up, Up and Up
As demand for LCD products remains strong with concerns deepening about shortages in glass substrates and driver ICs, LCD TV panel prices continue to increase in Q1, and we expect that to continue in Q2. Announcements by the Korean panel makers that they will maintain production of LCDs and delay their planned shutdown of LCD lines has not prevented prices from continuing to rise.
Panel prices increased more than 20% for selected TV sizes in Q3 2020 compared to Q2, and by 27% in Q4 2020 compared to Q3, we now expect that average LCD TV panel prices in Q1 2021 will increase by another 12%.
The first chart shows our latest TV panel price update, with prices increasing across the board from a low in May 2020 to an expected peak in May/June of this year. Last month’s update predicted a peak in February/March. However, our forecast for the peak has been increased and pushed out after AGC reported a major accident at a glass plant in Korea and amid continuing problems with driver IC shortages. The inflection point for this cycle, the month of the most significant M/M price increases, was passed in September 2020, and the price increases have been slowing down each month since then, but the January increase averaged 4.1%. Prices in February 2021 have reached levels last seen exactly three years ago in February 2018.
Prices increased in Q4 for all sizes of TV panels, with massive percentage increases in sizes from 32” to 55” ranging from 28% to 38%. Prices for 65” and 75” increased at a slower rate, by 19% and 8% respectively, as capacity has continued to increase on those sizes with Gen 10.5 expansions.
Prices for every size of TV panel will increase in Q1 at a slower rate, ranging from 5% for 75” to 16% for 43”, and we now expect that prices will continue to increase in Q2, with the increases ranging from 3% to 6% on a Q/Q basis. We now expect that prices will peak in Q2 and will start to decline in Q3, but the situation remains fluid.
LCD TV Panel Prices January 2020 – June 2021
In this cycle, we have now seen trough-to-peak increases in TV panel prices that exceed any price increases in prior turns of the LCD crystal cycle. Comparing our forecast for May 2021 panel prices, when we expect prices to peak, with the prices in May 2020, we see trough-to-peak increases from 16% for 75” to 128% for 32”, with an average of 76%. In comparison, the average trough-to-peak increase of the 2016-2017 cycle was 48%. Taking a longer view with data back to 2006, the current price increase far exceeds any prior cycle in the industry.
Crystal Cycle Prices for 32” LCD TV Panels
Whereas in May 2020, 75” panels sold at an area premium of $77 per square meter higher than the 32” panel price, now in February 2021, they sell at a $28 discount on an area basis. This means that those Gen 10.5 fabs could earn higher revenues from making 32” panels than from 75” panels. The pattern for 65” also deviates from the smaller sizes, and 65” now is the lowest-priced size on an area basis, selling at a $41 per square meter discount compared to 32”.
Monthly Area Prices per Square Meter for TV Panels, October 2016 – June 2021
The improved pricing for mid-range (32-55”) TV will boost the profitability of panel makers, especially the two large Taiwanese players and LG Display, who have Gen 7.5 and Gen 8.5 fabs but no Gen 10.5 fabs. Chinese panel makers HKC and CEC Panda have a similar industrial profile and stand to benefit, while the leading companies with Gen 10.5 fabs (BOE, CSOT, and Foxconn/Sharp) stand to benefit less, because of the price increases on the largest sizes are more modest.
The last chart here shows our TV price index, set to 100 for prices in January 2014, and the Y/Y change of LCD TV panel prices. Our index has increased from its all-time low of 42.0 in May 2020 to 72 in February, and we expect it to peak at 75.6 in June before declining in the second half of 2021. The Y/Y increase is peaking in May 2021 at 80% and will remain at elevated levels throughout 2021.
TV Panel Price Index and Y/Y Change, January 2015 – June 2021
In addition to being an exceptionally large up cycle, the current upswing matches some of the most extended stretches of increasing prices ever seen, a full year from trough to peak. The length of the upswing can be attributed to several factors: glass and driver IC shortages, the Korean fab downsizing or the pandemic-driven demand.
As we reported last week, TV makers continued to make strong profits in Q4 2020 despite increasing panel prices. A shift in the retail environment caused by the pandemic may have helped: in-store sales have declined sharply during the pandemic, while online sales have increased. The shift online may have helped TV brands reduce promotional expenses, allowing for greater profitability despite the panel price increases.
The bellwether 32” TV panel typically shows the fastest drops to the lowest area prices in times of oversupply and the sharpest price increases in times of supply constraint, and we show that pattern repeating itself in this up-cycle. In May 2020, 32” panel prices matched their all-time lows at $32, but these panels will peak at more than twice that, at $71. The price of 75” panels has not followed the same pattern, with much smaller increases.
For three years, from 2017 to 2020, LCD panel makers suffered through a continuous pattern of price declines interrupted only with brief respites. With the COVID-19 demand surge assisted by a glass shortage, panel prices are spiking. We have seen Korean and Taiwanese panel makers reporting robust margins in Q4 2020 and we expect the good news to continue, and to get even better, through the first half of 2021.