Korean Factory Exits, Panel Supply And Demand Will Reverse Next Year

- May 19, 2020-

It is estimated that panel production capacity will decrease by 17% in 2021, and panel prices will rebound significantly, but demand will still take 2 to 3 years to return to 2019 levels.


The oversupply ratio of the panel industry reached a high of 13.6% in 2019, which caused the collapse of TV panel prices, leading to the accelerated withdrawal of Korean panel makers from the LCD panel market. Market research agency Omdia estimates that the capacity that will be shut down in 2021 will account for about 17%, which will also reverse the supply and demand of panels, reducing the supply-demand (surplus) ratio to 6.5%, and the supply will become tight.


From 2013 to 2020, the global flat panel display production capacity increased by nearly 50%, from 225 million square meters per year to 335 million square meters. Severe oversupply has caused TV panel prices to continue to fall, setting a record low.


Due to CoronaVirus, it is estimated that the number of panel demand in 2020 will decrease by about 10% compared with 2019. From an area perspective, as the average size of TV panels increases from 45.4 inches to 49.2 inches, demand for large-size panels in 2021 is expected to increase by 11%. Falling prices and falling demand have prompted South Korean panel makers to accelerate their withdrawal from the LCD panel market. It is estimated that panel production capacity will decrease by 17% in 2021, and the market will also turn to tight supply. Panel prices are expected to rebound significantly in 2021, and panel makers ’finances will also Improve accordingly.


In the first quarter of 2020, China's CoronaVirus epidemic caused material shortages and hindered logistics, which affected the output of the panel module supply chain and also led to a rebound in panel prices. In early April, the capacity of Chinese panel makers returned to normal levels. However, with the spread of the epidemic around the world, the decline in TV demand has led to an oversupply of panels and price reversal. It is expected that the price of TV panels will fall below the cash cost in the second quarter.


IT products such as laptops and tablet computers benefited from working at home and distance teaching, and demand was strong in the second quarter. Omdia believes that IT demand growth is a short-term effect, because the budget of corporate IT and education systems will shrink with the impact of the epidemic on the economy. This surge of IT panel demand cannot be the main driving force for demand in the second half of 2020 . Omdia predicts that although the number of shipments will resume from 2021, it will take 2 to 3 years to reach the 2019 level.


As for the supply side, from 2019 to 2021, the capacity growth rate is only 2%. In the first half of 2020, the mass production plans of many new 8.6 and 10.5 generation factories in China were postponed, mainly because the installation of related equipment required the assistance of engineers from the home country, and the current travel restrictions in various places have interrupted or delayed the installation of equipment Local engineers in China have managed to communicate and cooperate remotely, but the installation of new equipment will still be two to four months behind schedule, which will also limit the schedule and number of new capacity this year.