LCD shipments accelerate, outstrip production
Michelle Clancy | 30-05-2013
Shipments of large-sized liquid crystal displays (LCD) in March exceeded total production when measured in terms of area, the result of a deliberate move by panel manufacturers to digest accumulated inventory, according to an LCD Fab and Inventory Management Tracker from information and analytics provider IHS.
In the month, large-sized LCD displays reached a total shipment area of 11.3 million square metres, a metric showing the expanse of shipped panels during the period and distributed among the panels' four major applications for TVs, notebooks, monitors and tablets. In comparison, production area measuring the spread and breadth of manufactured panels equated to 11 million square metres — approximately 340,000 square metres less than the total shipment area.
"March represented the first time in four months that shipments outpaced production for large-sized LCD panels," said Ricky Park, senior manager for large-area displays at IHS. "The last time the same phenomenon took place — when shipment was higher than production — occurred in November 2012, an understandable occurrence as manufacturers raced to pump out more displays in time for the December holiday season and Lunar New Year holiday season in China. In March, panel suppliers applied the same tactic to chip away at creeping inventory, the upshot of shipments falling below production levels from December 2012 to February 2013."
After March, however, the dynamic took a different turn. Pending final figures, forecasts show that production would catch up to shipments starting in April as both indices reach 11 million square metres, with production then exceeding shipments beginning in May. The new movement starts as the industry ramps up for the higher demand anticipated in the second half of this year.
"For all the vicissitudes of the market, panel manufacturers need to continually negotiate a delicate balancing act — between making sure there is enough inventory, and preventing the inventory at hand from ballooning and crossing into dangerous oversupply," explained HIS. "A potent weapon in their arsenal is to turn the screws on production, intentionally limiting manufacturing capacity in fabs, while continually shipping out panels taken from both current assembly and leftover inventory in their possession. Constant vigilance is required in an industry where oversupply is usually the norm, with panel manufacturers always striving to perfect their game."
Utilisation rates are also adjusted to achieve targets. In March, utilisation rose to 80% from 72% in February, but the pace of fabrication remained lower than was originally intended, estimated at 82% and consistent with the plan to keep production lower than shipments. Fab utilisation rates were expected to remain unchanged in April and then jump to 83% in May — again in keeping with plans for production to start growing and overtake shipments.
"Even so, panel manufacturers are not expected to exceed 85% utilisation and risk producing more than the channel can swallow. Inventory has been particularly problematic because of slow demand, but manufacturers are also careful that pricing doesn't drop further even with anaemic demand plaguing the system," the firm noted.