What Display Daily thinks: The data suggests that China’s OLED suppliers are going to hit some bumps in the road over the coming 12 months which may work out pretty nicely for Samsung and LG, and other foreign competitors. That means a tightening up of supplies of vital components for China’s OLED.
However, the underlying suggestion is also that pricing will start to see a downward trends, which should reverberate across the supply chain. However, as it looks right now, terminal products like TVs and monitors will probably continue to be priced high as OEMs look to profitability in a sluggish demand scenario.
You have to wonder if we won’t actually see a break in that strategy very early in 2024. At some point, it makes more sense to go for market share by cutting prices to the bone, and building a customer moat for TVs, definitely, and to some extent, monitors. The smartphone market may also see some of the same downward price pressures but that may come as a result of expansions into regional markets by Chinese phone makers, particularly into Southeast Asia, India, the Middle East, and Africa, where economy products should dominate. The squeeze is going to be put on all mid-range products because premium products don’t seem to be losing that much steam, if all the speculation about Apple’s iPhone 15 sales pan out before the end of the year.
Financial constraints may demand a conservative response and profits, but 2024 should be all about market share, and rising unit sales which will mean lower consumer prices for the majority of SKUs. It’s an ideal opportunity to lock up customer bases and the payoff will come in the next upgrade cycle.
Display Driver Prices Hit Rock Bottom
China’s Sigmaintell is reporting that the display driver chip market shows regional differences, with mainland China’s OLED capacity growing slowly compared to global supply. With soft demand, IC vendors expanded wafer output cautiously through 2023. But growth should resume in 2024 per the research, with shipments rising 5.7% to 7.97 billion units.
On the supply side, while utilization remains high, the supply/demand ratio is easing globally. Yet mainland Chinese fabs will see tighter OLED supply/demand at 7.1% in 2024 versus 18.9% worldwide. Why? New 28/40nm capacity benefits overseas brands, leaving less for China device makers.
Amid inventory corrections, IC vendors sacrificed margins for market share. Major supplier profitability dropped from 30%+ to 15%, where it should hover through 2024. Novatek grew Q2 revenue 19.5% QoQ, aided by its SoC business as driver ICs declined. To grab share, Novatek cut HD TDDI and RAMless OLED pricing despite diversified profit streams.
LX Semicon Q2 revenue fell 16% sequentially with lower mobile demand. Smartphone ICs dropped 35% quarter-over-quarter but should recover with the iPhone 15. Himax profits also declined on low-yield contract adjustments, but fundamentals remain strong in auto TDDI and tablet drivers. While inventories are high, automotive refreshing slowly mitigates risk.
With demand uncertain, large display drivers will see modest price erosion into 2024, according to Sigmaintell. But elsewhere, diminishing returns on price cuts could spark stability from Q4’23 onward. HD TDDI prices are near costs, while OLED driver quotes in China are aggressive at $1.9, heading below $2.3.
