Because of seasonally very weak demand and the ramping of new capacity in China, flat-panel display (FPD) supply exceeded demand by 20 percent in the first quarter of 2016, the largest glut since early 2012. The market began to rapidly correct itself in the second quarter and is now trending toward surprising tightness in the second half of 2016. Supply is expected to tighten still further in 2017, according to IHS Markit (Nasdaq: INFO).
Rapidly falling panel prices late last year and early this year have encouraged consumers to buy larger TVs. At the same time, notebook and monitor demand has started to stabilize. Finally, capacity growth is restricted, as manufacturers adopt new and more complicated processes in some factories, and more importantly close less productive facilities.
“South Korean panel makers are being particularly aggressive in shutting down older LCD fabs, including Gen 5 and even Gen 7 facilities,” said Charles Annis, senior director at IHS Markit. “The South Korean Gen 7 facility expected to be taken off-line late this year accounts for approximately nearly 4 percent of capacity dedicated to large-area production. It would be the largest factory shutdown in the history of FPD manufacturing.”
Based on the latest IHS Markit Display Supply Demand & Equipment Tracker, demand for large-area FPD applications is expected to grow 5 percent to 6 percent per year from 2016 through 2018; however, capacity dedicated to large-area production is only expected to expand 1 percent in 2017 and 5 percent in 2018. By the second half of 2018, the market is again expected to start trending towards looseness, as even more Chinese capacity is brought on-line, including the world’s first Gen 10.5 factory.
“Historically, the FPD market has corrected itself by reducing factory utilization and delaying capacity expansion plans,” Annis said. “With the rise of Chinese FPD manufacturing, neither of these strategies seemed likely in 2016. This situation has pushed makers in other regions to rationalize their current production assets at unprecedented and unexpected rates ”