Affected by the Russia-Ukraine conflict and inflation, terminal demand continues to be weak. The LCD panel industry originally thought that the second quarter should be able to end the inventory adjustment, now it seems that the market supply and demand imbalance will continue to the third quarter, into the “peak season is not prosperous” situation. Even in the first half of next year there are inventory pressure, brands have revised the list, so that the panel factory had to find new growth momentum.
The panel market began to freeze in the second quarter of this year. Production and shipment were affected by the COVID-19 lockdown, consumer demand was weak, and the inventory level of channels was high, which led to the depression of brand goods pulling strength. AUO and Innolux operating pressures were higher than expected in the second quarter. They posted a combined net loss of more than T $10.3 billion and took a conservative view of the floor space and price trend in the third quarter.
The traditional third quarter is the peak season for brand sales and stocking up, but this year the economic outlook is uncertain, said AUO Chairman Pang Shuanglang. Previously, the electronics industry was cancelled, the inventory increased, and the terminal demand decreased. The brand customers revised orders, reduced the drawing of goods, and prioritized inventory adjustment. It may take some time to digest the channel inventory, and the inventory is still higher than the normal level.
Peng Shuanglang pointed out that the overall economy is disturbed by uncertainties, rising global inflation pressure, squeezing out the consumer market, including the weak demand for TVS, computers, mobile phones and other application channels, high inventory, slow speed of elimination, we can also observe the high inventory in the mainland panel industry. Only car out of the lack of material haze, will be optimistic about the medium – and long-term growth of the car market.
AUO released three strategies to cope with the situation. Firstly, strengthen inventory management, increase inventory turnover days, but reduce the absolute amount of inventory, and dynamically adjust the capacity utilization rate in the future. Secondly, manage cash flow carefully and reduce capital spending this year. Thirdly, accelerate the promotion of “dual-axis transformation”, including the layout of the next generation LED display technology, establish a complete upstream and downstream ecological chain. Under the strategic goal of smart field, accelerate investment or put in more resources.
In the face of headwinds in the panel industry, Innolux has also accelerated product development in “non-display application areas” to increase the proportion of revenue from high-value added products to protect against economic fluctuations. It is known that Innolux is actively transforming the layout of non-display application technology, investing in the application of advanced semiconductor packaging at the panel level, and integrating the upstream and downstream material and equipment supply chain of the front wire layer.
Among them, the panel fan-out packaging technology based on TFT technology is the key solution of Innolux. Innolux showed that several years ago, it was thinking about how to make the old production line regenerate and transform. It will integrate internal and external resources, join hands with IC design, packaging and testing foundry, wafer foundry and system factory, and carry out cross-field technological innovation.
In the first half of this year, BOE shipped more than 30 million pieces, and China Star Optoelectronics and Huike Optoelectronics shipped more than 20 million pieces. Both saw “annual growth in shipments” and maintained a high market share. However, the shipments of panel factories outside the mainland all declined, with Taiwan’s share of the market totaling 18 percent, Japan and South Korea’s share of the market also falling to a low of 15 percent. The outlook for the second half of the year even started large-scale production reduction allocation, and slow down the progress of new plants.
Research firm TrendForce said production cuts are the main response when the market is in a glut situation, and panel manufacturers should maintain low activity in the fourth quarter of this year to reduce existing panel inventories if they do not want to face the risk of high inventories in 2023. In the fourth quarter of this year, activity should remain low to reduce existing panel stocks; If market conditions continue to deteriorate, the industry could face another shakeout and another wave of mergers and acquisitions.
Post time: Aug-18-2022