Panel prices becoming biggest swing factor for TV makers’ profitability

DetailsEditor | 07 February 2015




With all sorts of rival candidate display technologies — such as OLED and Quantum Dot — battling it out, 2015 is likely to be the year that panels define the TV industry says a new analyst note from Display Search.


displayserchpanlels15The analyst calculates that the LCD module is 70-80% of the cost of an LCD TV set, and most of the value-added features are in the LCD panel rather than the chassis. Moreover the company observed that TV makers’ procurement has been heavily dependent on panel prices when the market is in oversupply, but when the market is in shortage, panel availability affects market share.

Therefore, Display Search suggested, panel procurement departments are always facing a tough situation in balancing allocations to maintain share against higher prices that erode margins. Indeed it pointed to recent events at LG Electronics and Samsung Electronics who announced their Q4’14 financial results, neither of which showed good financial performance.

“Soaring TV panel prices are clearly a factor in the erosion of profit margins, and TV revenues are the biggest component in the multimedia and home entertainment departments of both companies,” remarked David Hsieh vice president, Greater China Market for DisplaySearch, examining the market’s likely profitability factors.

“Both panel and TV makers continue to introduce new features, new sizes, and distinctive models to increase their added value and profitability. However, this relies on the LCD module. The only solution is for panel makers to step into the TV manufacturing industry directly or for TV makers to build their own fabs to offset the profitability challenges.”

Hsieh added that another key factor in TV brand profitability would the currency exchange rate. He noted that TV makers sell TVs around the world using local currencies, but panels are always traded in US dollars as a standard. In 2015, the strong US dollar may likely erode the profit margins of TV makers. That said he regarded panel makers as comparatively secure against these kinds of currency rate fluctuations because panels are all traded in US dollars and many panel component prices are also quoted and traded in US dollars.