Recently, the display panel industry leaders, like BOE, TCL, Tianma, Caihong Display, have released their annual report for 2023. In general, the context of the panel industry as a whole is under pressure, and the performance of the panel manufacturers is poor.

From the second half of 2021, the panel industry has entered the industry downward cycle. In the two-year-long industry down cycle test, panel manufacturers are not good days. However, from February 2023 especially since the second half of the year, all types of panel prices are relatively stable, large-size LCD panel prices began to climb from the bottom of the valley, and the panel industry has recently improved the degree of prosperity.

In the published earnings forecast, due to the differentiated performance of panels in various fields, the performance of various panel manufacturers began to show some differentiation. However, there is a clear sign that, with the price of large-size panels rebound, in the second half of 2023, especially since the fourth quarter, the performance of each panel leader has stabilized signs of recovery. With cell phones, computers, and other terminal demand rebound, as well as the stabilization of the panel prices, institutions are now generally optimistic that the panel industry will usher in a recovery in 2024.

Profit performance differs from segment

The panel industry is a typically strong cyclical industry, 2020-2021 panel industry up to 13 months of “super upcycle” in the expansion of production has become the main theme of the panel manufacturers, and various types of panel supply increased significantly. In 2021, the second half of the panel appeared seriously oversupplied, under the influence of the panel price’s continuous decline, even close to the cost price, the performance of the panel manufacturers continues to be under pressure.

In the forecast, BOE is expected to 2023 net profit of 2.3 billion-2.5 billion yuan, down 67%-70% year-on-year, but non-deductible net profit rose 66%-75% year-on-year; Tianma’s net profit is expected to be a loss of 2.07 billion-2.13 billion yuan, from profit to loss; and Everdisplay net profit of 3.245 billion yuan, down more than 50% compared to the same period last year.

For the reasons for the market decline, Tianma and Everdisplay expected “consumer electronics terminal demand pressure, cell phone display price decline” and other statements; while BOE is forecasted that “the company’s LCD business profitability than in 2022 significantly improved! “, it is presumed that the company’s net profit decline by AMOLED business has a greater impact.

To seize the market, AMOLED manufacturers are expanding against the trend

However, under the background of weak terminal demand, domestic AMOLED manufacturers to expand against the trend, in 2023 to seize the market share, breaking the monopoly of South Korean panel makers. Research organization data show that Chinese manufacturers’ flexible AMOLED market share from 33.8% in 2022 to 48.2% in 2023; while South Korean manufacturers share from 66.2% in 2022 to 51.8% in 2023.

Market share is rapidly increasing, but net profit declined, industry insiders believe that the main reason is that the current “low price to grab the order” is still the market strategy of the domestic manufacturers. Magillo consulting research director Sima Qiu said, in 2023 domestic flexible AMOLED is still at a low price to seize the market share stage, so the selling price is still in the BOM (bill of materials) level, and failed to bring profits.

“If you count equipment amortization, labor costs, etc., domestic flexible AMOLED panel manufacturers are still in the loss-making stage.” Sima Qiu said.

However, due to the differentiated performance of each panel segment, the performance of each panel supplier has also diverged, and some of them have begun to recover.

Performance preview shows that TCL expects the company to realize a net profit of 2.1 billion yuan – 2.5 billion yuan in 2023, an increase of 704% – 857% year-on-year. Among them, the company’s display business in the first half of loss of 3.45 billion yuan, and the second half of the year is expected to achieve a net profit of 3.1 billion-3.45 billion yuan, which means that in 2023 the annual display business is expected to achieve a net profit of -350 million-0 billion yuan. 

Another survivor is Caihong, it is expected to realize the company’s net profit attributable to owners of the parent company in 2023 is 560 million-680 million yuan, compared with the same period of the previous year -2.66 billion yuan to turn a profit.

The rebounding of the Large-size panel contributes to the profit turning positive 

TCL science and technology announcement said that during the reporting period, the semiconductor display business field, large size industry pattern further optimization, the main manufacturer’s profitability gradually repair, medium-and-small size new display technology and product application ushered in growth opportunities. Caihong reported, that the company actively responded to market changes, LCD panel production lines continue to maintain stable operations and take various cost reduction and efficiency initiatives to enhance cost competitiveness and profitability.

Some supply chain sources told reporters that large-size panels around May 2023 began to profit. In 2023 large-size TV panel prices rose favorably, which contributed to the net profit growth of TCL and Caihon.

Recovery driven by internal and external forces from 3rd quarter

Since the third quarter of 2023, consumer electronics terminal brands have released new machines, driving the growth of OLED screen shipments, and the shipments and share of domestic panel makers continue to improve. The performance of panel manufacturers began to stabilize and recover.

Among them, BOE fourth-quarter net profit of 1.008 billion-1.028 billion yuan, close to the sum of the first three quarters; Visionox said in the performance forecast, that the company’s fourth-quarter product sales revenue to achieve a substantial increase in ringgit, and the gross profit of product sales is steadily improving; Tianma fourth-quarter net profit loss of 280 million-340 million yuan, is the smallest quarter of loss in 2023.

The demand for AMOLED is increasing but the profit contribution is in doubt

According to statistics, the global market AMOLED smartphone panel shipments of about 690 million pieces in 2023, an increase of 16.1% year-on-year. Among them, shipments in the fourth quarter increased by 30.9% year-on-year and 35.1% sequentially; flexible AMOLED smartphone panels accounted for 77.8%, up 9.2 percentage points year-on-year.

News that Apple has decided to start using OLEDs in tablets in 2024 and in MacBooks from 2025 further strengthens expectations that the OLED market will expand from smartphones to laptops and displays.

Omdia forecast that smartphone OLED panels will rise from 570 million pieces in 2022 to 730 million pieces in 2025; in the future, as the macroeconomic environment continues to recover and the consumer electronics industry further picks up, the OLED market penetration rate will also increase.

However, there are reminders from industry insiders, that with the industry’s rapid expansion of production capacity, OLED display panel prices may step into the history of the LCD, a risk of price reductions. Because the rapid expansion of industry capacity will also lead to overcapacity, to capture the market the panel manufacturers need to sacrifice some of the profits to lower prices for sales of products, increased competition in the market ultimately affects the profit performance of manufacturers.

For the large-size LCD panel, given the pricing power increasing, the balance of supply on demand becomes the norm. 

At the same time, with the LCD panel production capacity increasing concentration in China, the pricing power of Chinese factories on the large-sized panels has been formed in 2023. To stabilize the price by adjusting the production utilization rate on-demand will become the normalization of the initiative to them.

According to the latest research, due to the terminal sales weakness being further transmitted to the machine manufacturers, coupled with the impact of increased channel inventory, brand panel procurement tends to be a more cautious and conservative strategy. It is reported that some factories of panel leaders BOE, TCL Huaxing, and HKC will take a two-week vacation in February 2024 for the Chinese New Year. According to Omdia data, it is expected that the overall production utilization rate of display panel makers in the first quarter of 2024 will decline to below 68%, and it may be as low as 60% in February.

Expected 2024 is the year of recovery in demand and price

Industry insiders believe that with the continuous recovery of the demand side as well as the implementation of the display panel manufacturers’ strategy of controlling production and maintaining prices, the industry will usher in a recovery in 2024.

The analysis shows that the recent panel prices show signs of stopping the decline and warming up, and the industry boom degree upward momentum is beginning to show. According to the institute, it is expected that in January 2024, the panel price decline gradually narrow, and individual small-sized panel prices are expected to stop falling back to warm up. Panel industry growth attributes gradually appeared, and with the recovery of the demand side, the panel industry chain is expected to show an overall boom upward trend.

In addition to the recovery of cell phones, AI PCs, and other terminal industries, the panel industry will also benefit from the big events in 2024, it is estimated that the global demand for TVs will warm up in the second quarter of 2024. The industry believes that the performance of panel makers is expected to turn better quarter by quarter.