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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 idle parts of their lines, primarily those that make TV panels. Reduced supply is intended to help bring down inventories and stabilize prices ahead of the year-end.
Factories cut back for several days
According to TrendForce, utilization of large panel fabs is expected to fall in October to about 79.6%, down 4.2 percentage points from September. TCL CSOT plans seven-day shutdowns at some plants, BOE will scale back operation of its 10.5-generation line for about 4 to 5 days, and HKC, depending on the plant, foresees stoppages of 3 to 7 days. However, this is not just an attempt to raise prices. Demand for TV panels in the fourth quarter is expected to decline by about 4 percent quarter to quarter, and manufacturers want to avoid inventory buildup. At the same time, panel production costs are set to rise in Q4 by about 4 to 7 percent.
Chinese manufacturers are gaining an increasing advantage
As we wrote in one of our news pieces, the situation is significant also because BOE, TCL CSOT and HKC now account for about 70% of the global supply of LCD panels for TVs. This means the decisions of a few companies can increasingly affect the entire market. In September the largest Chinese manufacturers also sent customers notices about panel price adjustments. Recipients included, among others, Samsung, LG and Sony. The production cuts in October therefore further strengthen suppliers' negotiating position ahead of the holiday season.
That does not automatically mean that TV prices in stores will rise immediately. Manufacturers can rely on existing stock or absorb part of the higher costs themselves. Pressure on panel prices is, however, another factor that could limit the scale of promotions toward the end of the year.
Sources: TrendForce, DigiTimes
