Hello! I'm your financial analysis assistant. This article about the color TV and panel industry is quite informative, but the logic behind it is actually quite clear. It reveals a seemingly contradictory phenomenon: TV sales are declining, yet panel manufacturers are daring to raise prices.
To help you easily understand the reasons behind this, I'll first summarize the key points and then break them down into five easy-to-understand sections.
📝 Summary of Key Points
In the first half of this year, TV sales in China declined, and the global TV market has entered a “stockage era” (almost everyone already has a TV and isn't interested in buying a new one). Logically, if products aren't selling, manufacturers should reduce prices to promote sales. However, oddly, from July to September, the prices of TV panels (the core components of TVs) stopped falling and even stabilized, with leading manufacturers like TCL CSOT sending out price increase notices.
Why the Price Hikes?
1. Larger Screens: Although the number of TVs sold hasn't increased, people are buying larger screens, 75 inches and above. Larger TVs require much more panel area than smaller ones, so the total demand for panel area hasn't decreased; in fact, it's even increasing.
2. Rising Costs: The cost of memory chips has skyrocketed, making the profit margin on smaller TVs very thin. Brands are therefore preferring to produce larger TVs, which in turn drives up the demand for larger panels.
3. Manufacturers Have Learned to Be More Disciplined: In the past, panel manufacturers produced excessively to spread costs, leading to oversupply. After the lessons of 2022, they have started to produce according to demand, avoiding unnecessary expansion, making the supply side more controlled.
Conclusion: This price hike might just be a test; it may not lead to a widespread increase in prices, but it indicates that the panel industry is shifting from a focus on production capacity and price competition to a focus on panel area and management efficiency.
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🔍 In-Depth Analysis: Five Key Points to Understand the Changes in the TV Panel Market
1. The Paradox of Declining TV Sales and Surging Panel Demand
It might seem contradictory to the average person: TV sales are down by 9.2%, yet panel manufacturers are raising prices. It's like a restaurant with fewer customers still raising menu prices—doesn't that make no sense?
But it doesn't. The number of TVs sold doesn't equal the total panel area used. For example:
- Past Logic: Most TVs were 55 inches. Selling 100 TVs meant a demand for 100 panels.
- Current Logic: People are either not buying TVs or, if they do, they're buying larger ones. Data shows that 75-inch TVs are the most popular, with the average screen size increasing from 54 inches five years ago to 64.3 inches.
- Mathematical Example: The area of a 75-inch screen is roughly equivalent to 5.5 times that of a 32-inch screen. If last year 100 32-inch TVs were sold and this year only 50 75-inch TVs were sold, the total panel area required is still higher.
So, although the volume of TVs sold is decreasing, the area of panels needed is increasing. This is why panel manufacturers are confident: They're not worried about fewer sales; they're more concerned about the demand for smaller screens.
2. The Impact of Memory Chips on Panel Prices
Many people don't realize that smart TVs, like computers, also require memory (DRAM and NAND). The surge in demand for AI servers has pushed up the cost of memory chips, affecting the TV industry:
- Smaller TVs Are More Affected: The cost of memory now accounts for about 15% of the total cost of smaller TVs, which means the profit margin is very low.
- Larger TVs Are More Resilient: Larger TVs have a higher overall price, so the impact of memory costs is less significant for them.
- Brand Strategy: Brands like Sony, Samsung, and Hisense are reducing the production of smaller TVs and shifting resources to more profitable larger TVs.
This chain reaction means that the increase in memory prices indirectly drives up the demand for larger panels.
3. The Panel Manufacturers' “Prisoner’s Dilemma” and New Discipline
To understand the price hikes, we need to look at the painful lessons of 2022:
- Past Problems (Prisoner’s Dilemma): Panel manufacturing is a capital-intensive industry. Building a production line costs billions. Once built, costs (depreciation, electricity, labor) continue regardless of sales. Manufacturers thought, “The more I produce, the more I can spread the costs, even if I have to sell at a loss.”
- Current Changes (Supply Discipline): After years of losses, leading manufacturers (BOE, TCL CSOT, HKC) have learned that excessive production doesn't necessarily lead to higher profits. This year, they have reduced production to control costs.
- Example: In the first quarter, major manufacturers lowered their production rates, limiting supply.
This “production according to demand” strategy has made the supply more manageable. When supply isn't expanding indefinitely while demand is increasing, prices can stabilize.
4. The Timing of the Price Hikes: Why September?
TCL CSOT's price increase notice in September wasn't random; it took into account several key factors:
- Peak Season for Purchases: September is the prelude to the holiday shopping season (Double Eleven and end-of-year promotions). Brands need to stock up in advance, and buyers have budgets and are more willing to pay.
- Rising Costs: Other raw materials for panels (PCB boards, chemicals, driver ICs) are also increasing in price. If panel manufacturers don't raise prices, their profits will be eroded by these increases.
- Holiday Cycles: October has a national holiday, and manufacturers often schedule maintenance or reduce production. This means less supply in October.
5. Is It a Real Price Hike or Just a Test?
Although panel manufacturers have announced price hikes, we can't be overly optimistic. The current situation is as follows:
- Positive Factors: The supply-demand relationship is better than in the first half of the year, and the trend towards larger screens is irreversible. Leading manufacturers are controlling production.
- Cautionary Factors:
- Weak End-User Demand: TVs aren't a necessity, so brands may delay purchases if consumers are tight on money.
- Divergent Market Views: TrendForce predicts price stability, while CINNO Research sees downward pressure, indicating no consensus on a widespread price increase.
- Limited Price Increases: Even if prices rise, they might only increase by a few dollars per panel, which isn't much for TVs that cost thousands of dollars, but it could be crucial for panel manufacturers to recover their profits.
Implications for Consumers:
If you're thinking about buying a new TV, now might not be the cheapest time, but it's also not the most expensive time. Manufacturers are testing the market, and brands are waiting to see sales trends. If sales are poor in the fourth quarter, prices might fall; if the trend towards larger screens continues, smaller TVs might become more expensive, while larger TVs might remain stable.
In summary: The TV industry is undergoing a quiet transformation. The focus has shifted from who produces the most to who sells the largest volume and manages their operations best. This price hike is more of a signal of the industry maturing and becoming more rational than a full-blown price war.