What Display Daily thinks: There is a pattern arising, a second half of the year profit surge or whimper, and much back-slapping on cost and inventory controls being put in place. That’s the general order of what is happening in display manufacturing.
I am not sure why that is usually followed by a cloud of analysts talking up 2024 growth and recovery. First of all, I have never met anyone who can predict what is going to happen tomorrow, let alone months from now. Prognostications about market opportunity are like horoscopes: plenty of people read them, plenty of people believe in them, there’s plenty of truths that you can read into them, but you know they ain’t real. You just hope that Pisces in a rising Virgo moon really does end up with you taking a long trip to somewhere far away with someone special. When it ends up being driving your mother to get cataract surgery, you kind of go, “Spooky! Must be Pisces in a rising Virgo moon.”
In the meantime, there’s the ubiquitous expansion, or toe-tipping, in EV batteries or some other mishmash of ideas, and automotive, and lest we forget, MicroLED. All during a time of cost-cutting and inventory management. Seems a bit challenging to try and expand into weird and wonderful new product areas while navigating a transition to newer, higher-end display technologies.
It doesn’t make sense because demand and macroeconomic pressures are not going away before the end of this year, and how long that drags into next year remains unforeseeable by all expect those that track when the moon is in the Seventh House and Jupiter aligns with Mars.
So, if you are a Virgo, or a Leo, or an Aquarius, or any one of the other twelve signs, know this, you will continue to cut costs, feel some more pain, and you’ll struggle with demand until you don’t. When is that? Your guess is as good as anybody else’s so don’t fret it, manage your own inventory and think about taking market share away from a competitor. Which means pricing pressures and squeezes on profits.
Fasten your seatbelts; it’s going to be a bumpy ride.
It’s Earnings Season
BOE’s operating revenue increased 12.65% YoY in Q3 but decreased 4.69% YoY in the first three quarters. Reported net profit turned positive in Q3 at 286 million RMB ($39.1 millon), compared to a 1.3 billion RMB ($177.6 million) loss in Q3 2022. But net profit in the first three quarters is still down 80.68% YoY. Net profit before exceptional items is still negative in both Q3 and the first three quarters, but the losses have narrowed compared to 2022.
Samsung Display (SDC) reported strong third-quarter results, with consolidated revenue hitting KRW 8.22 trillion ($6.1 billion) and operating profit at KRW 1.94 trillion ($1.4 billion). The robust performance was driven by a focus on high-end mobile and large displays, despite macroeconomic headwinds.
LG Display reported continued losses in the third quarter of 2023, marking six straight quarters of deficits, but showed signs of improvement through cost-cutting initiatives. The last time we looked at Korean analysts’ expectations for the third quarter, the estimates were for about 433 billion won in losses.
Innolux delivered improved revenue and profitability in Q3’23 driven by panel price increases, despite lower shipments. The company expects this dynamic of lower volumes but steady pricing to continue into Q4’23. Innolux says it remains focused on cost management and optimizing product mix to maintain stable financial performance. Display components made up 78% of sales, while non-display components were 22% of sales.
Yet, we also saw contradictory indications of future opportunities for these companies. The supply-demand imbalance that has plagued the market for large LCD and OLED panels over the past few years is making a comeback. According to market research firm Omdia, after making significant progress in the first half of 2023 to reduce excess capacity, the industry is now poised to slide back into oversupply in the second half of the year and into early 2024.
The glut ratio, which compares production capacity to actual shipments, declined to 13.7% in the third quarter from 26.7% in the first quarter, thanks to a nearly 20% jump in demand against modest capacity growth. This long-awaited rebalancing enabled panel manufacturers to raise LCD TV panel prices by 31% on average and improve profitability.
However, demand is softening while production capacity remains abundant. As a result, the glut ratio will likely rise again starting in the fourth quarter, exacerbated by TV makers’ reluctance to build inventories amid weak end-market demand. In response, panel makers are once again restricting production by reducing glass input. Some Chinese manufacturers are even considering extending Lunar New Year shutdowns in February to curb output. But with panel prices still relatively high, TV brands are pushing back through tighter inventory controls of their own.
