Possibility of Further Decline Due to Decreased Demand
[Asia Economy Reporter Minji Lee] Although the decline in LCD panel prices has shown signs of stabilizing this month, analysis suggests that investor sentiment in the display industry is unlikely to improve.
According to the display industry on the 11th, the prices of TV LCD panels for the first half of this month (1st to 15th) remained at similar levels to the latter half of last month, with 32-inch, 43-inch, and 55-inch panels priced at $29, $65, and $104 respectively. Despite concerns over decreased demand causing a sharp drop in panel prices, the price decline has temporarily paused this month.
The stabilization in price decline is due to Chinese companies reducing supply volumes as panel prices fell below cash costs (cost excluding fixed expenses). Over the past year, the panel industry has caused price drops by not reducing supply despite accumulating inventory due to weakening demand in home appliances and IT sectors. Although the effect of supply reduction is reflected this month, considering the possibility of continued demand decline, the downward price trend is expected to persist.
Kim Rok-ho, a researcher at Hana Securities, stated, "While the decline in some panel prices has stabilized due to reduced factory operating rates, prices for panels over 60 inches are still higher than cash costs. With continued weakening demand for monitors, laptops, and other PCs, the price decline for monitor and laptop panels is also expected to continue."
Concerns over sluggish demand are impacting earnings forecasts for display companies. In the securities industry, LG Display's annual operating profit forecast has been revised downward to a deficit (22.31 billion KRW loss last year), with Ebest Investment & Securities predicting a maximum loss of 419 billion KRW. Along with lowered earnings forecasts, the stock price has also shown a weak trend; as of 9:40 AM on the day, LG Display's stock price had fallen more than 38% since the beginning of the year, standing at 15,200 KRW. Securities experts unanimously agree that although the business direction is shifting towards OLED, the impact of price declines in key IT products cannot be avoided.
Domestic display material and equipment companies with significant sales exposure to China, such as Dongjin Semichem and Soulbrain, are also expected to face impacts on their LCD business divisions. Kim Yang-jae, a researcher at Daol Investment & Securities, explained, "Chinese panel companies (such as BOE) receive government support for factory investments and have guaranteed operating rates, so significant production cuts are expected only after July. Due to reduced new investments by Chinese companies, the scale of new orders for equipment companies, including Dongjin Semichem, will also decrease."
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