Shipments of LCD TV sets worldwide are projected to reach 219 million units in 2016, representing a year-on-year growth of about 1.5%, according to the latest report from WitsView, a division of TrendForce. Combined shipments from South Korean brands will be around the same level as last year’s at 77 million units, while the combined shipments from the top six Chinese brands will register a year-on-year growth rate of 6.2%. Chinese brands are starting to benefit from their oversea expansion. Japanese brands on the other hand have seen their shipments drop recently as their TV sets are not as competitive compared with products from South Korean and Chinese brands. For 2016, the combined shipments from Japanese brands are projected suffer a year-on-year decline of over 20%.
Ricky Lin, WitsView research manager, said branded TV makers have made significant changes to their LCD panel purchasing strategies this year due to cost considerations. With panel prices expected to rise, brands are actively adjusting their supply sources as they prepare for the peak shipment season of the third quarter.
South Korean TV brands this year have shifted a significant portion of their orders away from domestic panel suppliers to the Taiwanese and Chinese. Besides making the upstream supply chain more flexible, this move intends to obtain panels at lower costs as to further improve the margins of promoted TV sets during the peak season. Samsung Electronics’ Visual Display (VD) division, which has cut orders going to the Samsung Display (SDC), is mainly responsible for the decreased share of domestic products in the combined panel purchases of South Korean TV brands. Based on WitsView’s projection, 43.7% of the panel purchases made by South Korean brands in 2016 will come from compatriot suppliers, down from 50.5% in 2015. The percentage of Japanese panels in South Korean brands’ purchases is projected to remain at just 3.4%. Furthermore, SDC will close one of its fabs, L7-1, at the end of this year. Hence, South Korean TV brands will likely allocate a greater share of their orders to Taiwanese and Chinese panel suppliers in the future.
Chinese TV brands are projected to purchase around 25 million pieces of panels from domestic suppliers in 2016, with the most of the products being small- and mid-size TV panels (those sized under 50 inches). Compared with 2015, the share of domestic products in Chinese TV brands’ panel purchases will increase marginally by 0.5%. Chinese orders for large-size TV panels, such as the 55-inch and 65-inch, will still go to Taiwanese and South Korean suppliers that offer better product quality and maintain higher yield rates.
“Chinese panel supplier have built additional Gen-8.5 fabs in recent years,” said Lin. “However, they also use the same economical glass-cutting method, so their product mixes overlap quite a lot. Moreover, South Korean and Taiwanese suppliers have yield and quality advantage in large-size TV panels, especially in the 55- and the 65-inch segments.”
Japanese TV brands have also departed significantly from their prior purchasing strategies, and their purchases of domestic panels are projected to be 14.1% percentage points lower compared with last year . A major influence behind the changes made by Japanese TV brands is Foxconn’s acquisition of Sharp this March. Another factor is that Panasonic’s panel division, Panasonic Liquid Crystal Display (PLD), plans to leave the business altogether in the fourth quarter as its panel fab in Himeji, Japan, continues to incur losses. To maintain their market dominance in product quality and specs, Japanese TV brands have therefore increased their purchases with Taiwanese and South Korean suppliers. However, SDC’s shipments are currently being impacted by challenges related to the integration of Black Column Spacer (BCS) into the manufacturing process. Taiwan-based AU Optronics (AUO) also has limited TV panel capacity. Consequently, most of the orders from Japanese TV brands have been directed to LGD. On the whole, LGD’s share of TV panel orders from Japanese brands for 2016 is projected to expand to 26.4%.