Panel price negotiations remain tough, urging TV makers to further cut 4Q23 buying plans

Tension between panel makers and TV makers has increased in recent months; panel makers are unwilling to offer price concessions as TV makers requested following a recent turnaround of their TV display business in late 2Q23 and 3Q23. However, they are still facing challenges to break even for 2023. Meanwhile, TV makers are now desperate to ask for panel price reductions because of the  recent skyrocketing panel prices and the weak market demand in the past several months which has placed them in deficit. At the same time, they face further pressure from retailers to cut TV set prices as market demand remains sluggish.

Panel price negotiations continue to be tough in 4Q23, and with panel makers forecasted to lower panel prices in the immediate future,  the risk of a panel price collapse in 1Q24 cannot be overlooked. Supply-driven price hikes can barely be sustained, and in Omdia’s view, the eventual demand-driven influence will be the most vital swing factor.

The weak market demand and the panel price negotiation results have upset TV makers and will urge them to further cut their panel purchasing plans for 4Q23, making the demand outlook in 1Q24 unclear. In addition, TV makers will lose their confidence to refill more panels when they sense the TV panel price trend is/will soon be reversed from upward to downward.

As a result, it is foreseen that TV makers will be turning more conservative in purchasing panels in 4Q23 and 1Q24 unless they sense the panel prices will be falling to lower levels that will in turn pressure all panel makers to cut their fab utilization close to or back to the low level as seen in last September or early 2023. Omdia forecast see Chinese TV makers to be more willing to refill their panels after 1Q24 if they can stay competitive and expand their global market share.

Chinese buying plans in 3Q23 and 4Q23 are weaker, lower than previously forecast

Chinese TV makers made stronger purchases in 1Q23–2Q23 but are now reducing their buying plans in 3Q23 and 4Q23. Their panel purchasing volume shares in 1H23 and 2H23 are now forecast to be 51% and 49%, respectively. This is rare because the buying volume share in the year’s second half is normally greater than in the first half of the year. Compared with the previous forecast of 50% for both, this implies that Chinese TV makers reset their panel purchasing plans for 2H23 or will have lower demand for LCD TV panels from August through December.

• Chinese TV makers are growing concerned that increasing panel prices will erode their profit margins in 3Q23. This concern started to pressure them into decreasing shipments in 2H23. On the flip side, Chinese TV brands might benefit from the depreciation of the Chinese yuan against the US dollar for the export business.
• Top-tier Chinese TV makers were forecast to keep their panel purchasing volumes firm in 3Q23. However, several TV makers began to take action in August and downsized their panel purchasing plans to urge panel makers to stop increasing prices and give them price concessions through rebates or incentives. This caused the Chinese TV makers’ panel purchasing volumes for 3Q23 to be weaker than in 2Q23.
• The negotiations between TV makers and their panel suppliers regarding panel prices in August and September will be crucial in determining how TV makers will adjust their purchasing plans for 3Q23 and 4Q23. In September, Chinese TV makers were upset about the results of the panel price negotiations with panel suppliers. Thus, they further cut their panel purchasing volumes for 3Q23 and 4Q23, causing them to be about 2% and 8% lower than previously forecast, respectively.
• Chinese TV makers’ buying volumes in 4Q23 are forecast to be weaker than those in 3Q23, as shown in Figure 1, which is rare. However, Omdia observes that Chinese TV makers will be more willing to refill panels in 1H24 if they can stay competitive and expand their shares.
• With panel prices expected to fall more pronouncedly in 1Q24, top-tier Chinese TV makers that have built up high panel volumes are now more aggressive about pushing out their TV shipments equipped with higher-priced panels. At the same time, TV makers plan to manage their inventories at healthy levels toward the end of 2023 until they sense panel prices stabilizing in 2Q24.

1. Figure 1: Top-tier Chinese makers’ TV panel purchases, 2020–23 (F), September 2023 update

South Korean purchases rose slightly in 3Q23 and will fall in 4Q23

Samsung’s and LG Electronics’ purchase volumes are forecast to pick up in 3Q23 but only modestly and lower than previously forecast. This is mainly because they slashed their panel demand from panel makers, particularly BOE and HKC Display, in 3Q23 and 4Q23.

• In September 2023, South Korean TV makers will still carry higher-than-normal inventories in the regional markets. Both hope to realize shipment targets for this year, which are expected to be weak compared with their shipment records in past years. However, the sell-through results in the markets remained slow.
• Samsung and LG Electronics are also concerned about weakening profit margins in 2H23 owing to rising panel prices and the price competitiveness of Chinese TV makers in the market. As a result, they further cut their panel purchasing plans for 3Q23 and 4Q23.
• Overall, Samsung and LG Electronics’ buying plans for 3Q23 will increase from 2Q23 but be weaker than the previous forecast and remain much weaker than their purchasing patterns in previous years. The forecast for their panel purchasing plans for 4Q23 is also conservative, as shown in Figure 2, or lower than the previous forecast because of the much lower demand for BOE.
• In August and September 2023, the panel price negotiations between TV makers and panel suppliers were very tough, as expected. Samsung prefers to wait and monitor the results or look for clear signs of the supply chain dynamics before refilling its panels.
• For 2024, Omdia estimates that Samsung may remain conservative with its LCD TV shipments or maintain units at levels similar to that seen in 2023 (36 million units). Meanwhile, Samsung’s business plan for OLED TVs will be about 2 million units, double the 2023 shipment forecast.
• Both Samsung and LG Electronics plan to reshape their supply base in 2024. For example, Samsung may significantly reduce its purchases from BOE in 2024. Samsung and LG Electronics plan to shift their panel demand from Chinese makers to Taiwanese (AUO and Innolux), Japanese (Sharp), and South Korean (LG Display) panel vendors in 2024. LG Display will become a critical supplier or leverage for both Samsung and LG Electronics for LCD and WOLED TV panels in 2024.

2. Figure 2: Samsung’s and LG Electronics’ TV panel purchases, 2020–23 (F), September 2023 update

Source: Omdia

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