Inflection Points Again…

We have a combined issue of Large and Mobile Display Monitor as each was going to a bit thin this week. Much of Europe disappears to the beach for this month and news slows right down. Famously this period is known as the “Silly Season” by British national newspapers, as the relative lack of government activity can make it hard to fill a paper.

I have mentioned before that in the early days of broadcasting, in the 1930s, the BBC once said “there is no news today” and played music for the time reserved for the news bulletin. I thought this was just an urban myth, but the BBC has confirmed that the story is true! It’s hard to imagine in these days of 24 hour news channels.

In fact, there is probably enough entertainment and Premiership news to fill the papers! This year, the tension between the US and North Korea is providing plenty to discuss. Part of me wants to believe the view I saw today that said that those in South Korea with close connections to and long experience of North Korea are not especially concerned about the current situation.

However, I remember that the First World War started just six weeks or so after the assassination of Archduke Franz Ferdinand in June 1914. And the world moves much, much faster these days. The effect of a serious war between North Korea and the South or the US would have devastating effects on the rest of the world.

Anyway, the big story that we haven’t reported on this week, but will look at next week, is LCD pricing. As we went to press, it was clear that there are real shocks reverberating around the industry. The TV industry is stalling in volume, with set makers looking to make less than 200 million TV sets this year. Foxconn, which has the largest capacity for LCD is starting to build up inventory in China and most TV makers seem to have too much inventory.

Panel makers want to drive more demand, but if they drop prices, will that drive enough demand to absorb the capacity that is coming with the new G10.5 fabs in China? Of course, the production of the new G10.5s will depend on the ramp and the speed of those ramp ups is an unknown. Nobody has built one of these plants in China before.

As we report in the news about JDI, LTPS suppliers are also seeing too much capacity and that will mean that there will be even more pressure on small panel prices, especially those for smartphones.

I’ve been writing articles about LCD pricing for a long time and at the moment, it seems to me that we’re at one of those inflection points that means that prices are going to fall quite sharply. If I go back ten or fifteen years, I did well forecasting panel prices, as the panel makers rarely adjusted their output to control utilisation. They tried to use price to drive the utilisation. Eventually, the panel makers realised that they were better using utilisation to control prices, rather than the other way around. However, there are a lot of new participants and its not clear that they will follow this approach.

Of course, we’re around the peak time for LCD demand, as panel makers make the panels to go into the sets that will be sold in the critical three months from Black Friday. It seems inevitable that panel prices will fall significantly once we’re past that peak. The question is, by how much? We’ll try to look at that topic over the next few days to get a view.