After reaching a record high of 6.8M in December, our research indicates that shipments of LCD TV panels to Chinese TV makers fell to 5.0M in January, declining 26% M/M, about five points worse than we had forecast. LG Display and Chinese panel makers did worse than expected, but Innolux, Samsung, and AUO had shipments as planned. 

TV panel shipments typically trend downward significantly in the first two months of the year, but the decline this year is less severe than usual – the forecast for February is a decrease of just 3% M/M. Compared to the 33% and 23% declines of last January and February, these are modest drops. However, while shipment growth is expected in March, the recovery is forecast to be less strong than in past years, as some shipments may have been pulled ahead into Q4’13 and early Q1’14.

TV panel prices are likely to bottom out in Q1’14, and it is worth watching to see whether this will trigger Chinese TV makers to restock panels in volume in March 2014. While the demand forecast for TV panels in March and April is strong, largely for new product launches – in particular 4K TV lineups, and for the May Day Holidays, we not rule out the possibility of a correction for May. For now, we forecast just under 6M panels in March and April, falling to 5.6M in May. There are several factors influencing 1H’14 panel shipments to Chinese TV makers, including seasonal trends, panel maker strategies, and Chinese market dynamics.

The Chinese holiday fell early in the calendar this year, and TV makers wanted to pull in panels and build inventories for the holidays and to manage supply chain lead-time after the holidays. According to our supply chain check, major local brands have been increasing TV panel purchasing and TV set production over the last three months. The major local brands are still carrying 6-7 weeks of inventory after the recent holidays, about two weeks higher than normal. Thus, TV makers are cautiously refilling panels before the next wave in late March, which includes the May Day holiday.

LCD TVs sales in China were flat during the three weeks of the Chinese Lunar New Year holiday between January 20 and February 9, and our preliminary estimate is that sales volume was 3.8 million, while total TV sales declined 3% Y/Y due to decreases in CRT and PDP TV sales. The results were in line with TV makers’ expectations, since during the same period in 2013 the energy-saving subsidy program helped boost sales.

In January, Innolux retained its top place for panel shipments to Chinese TV makers, closely followed by China Star, while Samsung Display, which has been lagging in shipment rankings, is now third. AUO, BOE, and LG Display rounded out the rankings. LG Display’s shipments in January fell the furthest short of target, probably because of over-shipment in Q4’13 and increasing competition. While most panel makers forecast increased panel shipments in March and April, falling in May, Samsung Display is forecasting stable shipments through May, indicating plans to increase production at its Gen 8 fab in China.

Xiaomi is launching a 49” 4K LCD TV in May, and other Chinese TV brands are looking for 4K solutions to compete. Low-spec 4K panels like RGBW UHD and RGB 60Hz solutions are likely to fit the needs of some Chinese TV brands. Samsung Display is aggressively promoting its green 4K (RGBW UHD) to Chinese TV makers. The price premium of RGBW 4K TV panels over FHD is expected to be only 10%.