Major TV brands are reducing their sales targets for 2011, forcing LCD screen makers to sustain the prices they sell to manufacturers despite already selling below costs for most screen models.While demand in the TV market is slowing, “the supply side is making adjustments to prevent drastic panel price fluctuations,” stated a research paper by DisplaySearch on Thursday.
“As TFT LCD panel makers became aware of weakness in the market, they changed their Q3’11 fab utilization plans in an effort to maintain light inventory and control production, in the hopes of stabilizing panel prices, especially now that global TV brands have encountered sales challenges in some regions,” said Deborah Yang, Research Director for DisplaySearch.
“Reducing capacity rates reflects the trade-offs panel makers must make between over-supply and falling prices on the one hand, and increased depreciation costs at low utilization rates on the other.”
DisplaySearch’s VP of its Greater China Market division, David Hsieh, found that the TV manufacturers and sellers who bought panels have not seen strong enough sell-through to support panel price increases.
“Panel makers had hoped that prices would continue to increase, improving their profitability, but the upside seems very short-lived and panel prices are still below costs for a majority of the panel models,” said Hsieh in his blog.
“Panel makers now intend to sustain panel prices at current levels (there is no room for prices to fall further as they are below costs in many cases), and then wait for the market to tighten in late Q3’11 when downstream customers will need to build inventories for the holidays.”
