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The largest Chinese LCD panel manufacturers are cutting production in October. BOE, TCL CSOT and HKC are using the holiday period in China to temporarily halt parts of their production lines, primarily those responsible for TV panels. Reduced supply is intended to help reduce inventories and stabilise prices ahead of the year-end.
Panel fabs idle for several days
According to TrendForce, utilisation of large panel fabs is set to fall in October to around 79.6%, down 4.2 percentage points from September. TCL CSOT plans seven-day shutdowns at some plants, BOE will limit work on its 10.5-generation line to about 4 to 5 days, and HKC, depending on the factory, expects stoppages of 3 to 7 days. However, this is not solely an attempt to push up prices. Demand for TV panels in the fourth quarter is expected to fall by around 4% quarter on quarter, and manufacturers want to avoid inventory build-up. At the same time, panel production costs are forecast to rise in Q4 by about 4 to 7%.
Chinese manufacturers are pulling further ahead
As we wrote in one of our news articles, the situation matters also because BOE, TCL CSOT and HKC already account for about 70% of the global supply of LCD panels for TVs. That means decisions by a few companies can increasingly influence the whole market. In September the largest Chinese manufacturers also sent customers notices about panel price adjustments. Recipients include, among others, Samsung, LG and Sony. A production cut in October therefore further improves suppliers' negotiating position ahead of the holiday season.
That does not automatically mean TVs in stores will get more expensive immediately. Manufacturers can draw on existing inventories or partially absorb higher costs themselves. However, pressure on panel prices is another factor that may limit the scale of promotions at the end of the year.
Sources: TrendForce, DigiTimes
