Two interesting pieces of information appeared today, one is the announcement that Corning is raising the price of its glass by 20%, and the other is an analysis o the global supply chain. Additionally, it should be noted that Display Daily has covered fab utilization as a result of a stagnant TV market, recently discussed at Display Week 2023, and the general slump in the consumer IT product market.
In theory, the best possible strategy to expedite the growth of the display supply chain and stabilize the market involves adopting next-generation technologies and investing in the future supply chain. However, due to the current market conditions and rising material costs, it is difficult to envision this scenario in the immediate future.
Yet, it seems that now could be an opportune time to make a challenging move: invest in the supply chain we aspire to have, rather than maintaining the one we currently possess.
Let’s consider a critical factor: the display supply chain is morphing into a closed-loop network, a departure from its previous quasi-closed network status. This shift is influenced by factors like green manufacturing requirements and increasing integration between panel manufacturers and consumer product channels, as seen with companies like Samsung, LG, and TCL. Decision-making in a closed-loop supply chain network involves strategic and tactical decisions. Strategic decisions entail bigger, long-term choices like selecting raw material suppliers, deciding on production center locations, and choosing suitable production technologies. Tactical decisions, on the other hand, involve shorter-term logistics such as distribution, storage, transport fleet selection, and pricing.
Pricing is a crucial tactical decision. In the forward supply chain, higher prices lead to an increase in manufactured products and the cost of returned products. In contrast, the reverse supply chain sees higher buying prices for returned products reducing the need for producing new ones, thus leading to environmental benefits.
For instance, tactically, Apple doesn’t have much to worry about since it controls logistics from the factory to the consumer’s shopping bag. Strategically, Apple has indicated that it is targeting a certain supply of materials, has begun relocating production centers, and intends to own its production technologies. The closed-loop supply chain for Apple is beneficial because it can minimize waste, manage product costs, maintain sales margins to consumers, while reducing any queueing in its supply chain due to its total end-to-end control.
Now, let’s address material costs. It is likely that material costs will rise, but this will likely only benefit materials suppliers through good margins and should not significantly impact consumer pricing. Despite a market slump or downturn, consumer pricing remains relatively stable. Strategically, panel makers, like the Chinese manufacturers, have been proactive, relocating resources to countries like Vietnam and India, with significant local government support in the Asia Pacific region.
The crucial piece that is missing, however, is securing material supplies. Each region – Europe, the US, and Asia – has its innovative suppliers competing for contracts. Next-generation materials will be the keystone of any strategy in a future closed-loop supply chain, either for manufacturing products or for facilitating easy recycling to meet green technology needs.
Therefore, this should be an exciting period for display material suppliers. They can increase their prices, secure strategic contracts, and find themselves well-positioned for the future. Based on the current market climate, this is what should happen. It also reassures me, somewhat selfishly, about my holiday TV purchases. I had concerns that higher panel prices and material costs would impact the price of my purchases, but other factors can mitigate these worries. I mean, even shipping prices are decreasing.
So, I guess my point is that being in the materials game is a pretty good place to be right now. The omens are good. It may be the only part of the supply chain where prices are going to be stable and predictable.
