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In 2021, global TV market experienced huge fluctuations, and demand was strong in the first half of the year and weak in the second half of the year. With the weakening of demand in the second half of the year, panel prices have also changed from a sharp rise in the early stage to a stalled decline, and it is difficult to get rid of the impact of cyclical fluctuations in the end. Entering the post-epidemic era, the global political and economic environment continues to fluctuate, the conflict between Russia and Ukraine has worsened, the risk of inflation has increased, and the impact of demand overdrafts continues, bringing more uncertainty to the global TV market demand.

According to the "supply and demand model" of Sigmaintell, global LCD TV panel market  supply-demand ratio on area basis is 6.2% in 22Q1, the supply and demand situation show better than the second half of 2021, but still show loose supply. The price will maintain a downward trend, and the decline gradually narrow. In 22Q2, as panel prices gradually approach the cash cost, and domestic demand for stockpiling is expected to recover, can LCD TV panel prices stabilize and panel prices of some sizes usher in an inflection point? Sigmaintell believes that the factors affecting the supply, demand, and price trends in 22Q2 are mainly reflected in the following aspects:

1. Whether end market demand can be expected to recover.

In the second quarter, the demand in the Chinese market is expected to recover under the influence of increased promotions, but due to factors such as the unoptimistic economic environment and the loss of rigid demand, it is difficult to expect high growth.

In terms of overseas markets, the "Black Friday" promotion in the North American market continued until the end of the year, and the decline in retail sales in December narrowed YoY, but the overall sales volume was still lower than the same period in 2019. Demand from end market remains weak. As the price of LCD TV panels continues to decline, whether the demand in overseas market, especially the North American market, can expect an accelerated recovery in 22Q2 will have a significant impact on the brand's panel purchasing strategy. Overall speaking, Sigmaintell expects that the global TV sell-in shipments in 22Q2 will decrease by 2.5% YoY, with a slight growth QoQ. End market demand is expected to gradually recover, but it is difficult to expect high growth.

2. The impact of Russia and Ukraine conflict.

The outbreak of the war between Russia and Ukraine will have a profound impact on the global political and economic, and its impact on the global TV industry should not be underestimated. According to the calculation of Sigmaintell, as the situation in Russia and Ukraine are in a state of anxiety, it is expected that the global TV market demand will decrease by about 4.7 million units in 2022. The impact is expected to mainly come from the following aspects:

(1) Affected by the war, the demand of warring countries will be severely hit, especially Russia and its allies may be subject to continued economic sanctions from Western countries. Economic and financial development will face resistance, the ruble will depreciate sharply, and TV demand may be suppressed for a long time.

(2) Russia and Ukraine are important exporters of energy and agricultural products in the world. The outbreak of war will push up the prices of oil, natural gas, and agricultural products, further aggravating global inflation, especially the TV demand in Europe may face more uncertainty factors.

(3) Russia and Ukraine have an important geographical position on the Eurasian continent. The outbreak of the war may have an even worse impact on the current difficult global logistics situation. Land and air transportation between Asia and Europe will be blocked, and the logistics cost and L/T in Europe may further increase, thereby affecting the recovery of terminal demand.

We hope that the situation in Russia and Ukraine will improve to weaken the impact on global TV demand, otherwise, it may form a greater resistance to the recovery of demand in the second quarter.

3. Changes in TV makers' panel purchasing strategies.

In 22Q1, Samsung Electronics' panel purchasing demand remains positive, while other brands' TV panel purchasing demand is relatively conservative. As the price of LCD TV panels falls to a lower level, the brand's panel purchasing strategy may be adjusted at any time, mainly focusing on the changes in the following aspects.

(1) Samsung Electronics is operating with high inventory. Will it change to a conservative procurement strategy in 22Q2 to restrain panel prices from rising?

(2) As panel prices enter a low level, will TV makers actively buy stocks at the bottom?

(3) Can the purchasing demand for large-size panels usher in explosive growth in 22Q2?

In the increasingly fierce competition between top brands and panel makers, the confidence of TV makers is particularly important. Only by rebuilding confidence can TV makers change their strategies for panel purchsing, thereby stimulating the recovery of panel demand.

4. Whether the recovery of brand profits can drive the recovery of demand.

In the last cycle of panel price increases, the sharp rise in LCD TV panel prices has severely squeezed the profit margins of brands. Especially in the North American market, affected by factors such as the difficulty of rising set retail prices and high logistics costs, brands have fallen into a difficult profit dilemma. Considering the influence of the panel stocking cycle (4 months in the North American market), the proportion of mainstream panel prices to the average retail price is high, and brand profitability is facing severe challenges, which will gradually decline until 21Q4. Among them, 32" brand profits are expected to recover from January, while large sizes such as 55" and 65" will not recover profits until 22Q2. The decline in panel costs is expected to promote brands to increase promotions in the end market, and whether it can drive demand growth has also become an important factor affecting the supply and demand trends of LCD TV panels in 22Q2.

5. Changes in the trend of container logistics costs.

In the past year, the supply chain has faced many challenges, and the increase in logistics costs and the lengthening of logistics time have become the continuous influencing factors. For TV, on the one hand, the lengthening of logistics time has increased the risk of inventory in distribution channels; on the other hand, logistics and container costs have risen by 10 times compared with normal years, and the sharp rise in logistics costs has seriously affected TV demand. In particular, the demand for large-size TVs has been significantly suppressed due to the high cost of sharing the logistics cost of a single TV. According to Sigmaintell’s forecast, the logistics cost of the American route in the first half of 2022 may not be expected to improve greatly due to the repeated and continuous impact of the epidemic.

6. Whether the demand for large-size can usher in an outbreak.

The price of small size panels declined rapidly to a relatively reasonable level in the early stage, which greatly enhanced the willingness of brands and channels to stock up. The purchasing demand for small size panels continues to be strong. And as the price of large-size panels further declines to a relatively low level, can it stimulate the recovery of large-size purchasing demand? According to Sigmaintell’s forecast, the demand for large-size panels in the first half of 2022 may not be as expected due to multiple factors such as logistics and economics.

7. Capacity ramping up and production expansion progress of the new line.

Although panel makers have slowed down their investment in new LCD TV panel production lines, they are still actively expanding their capacity based on existing production lines. The capacity of BOE, TCL CSOT, and Sharp's G10.5 generation line continues to increase, while the capacity of HKC's G8.6 generation line continues to expand. The ramping up of the capacity of the new line and the release of the expanded production capacity have driven the continuous growth of the global LCD TV panel supply capacity area, which will have an important impact on the global LCD TV panel market supply and demand.

8. Whether panel makers adjust the UT.

After the panel price experienced this round of stalled downward adjustment, the mainstream size prices have fallen below the total cost and gradually approached the cash cost, and panel makers will face more severe operational challenges. Although Samsung Display has made it clear that it will withdraw from the supply of LCD TV panels in 2022, other mainstream LCD TV panel makers still have no clear plans to reduce production, which keeps the supply of LCD TV panels at a high level. In the second quarter, whether panel makers will consider reducing the UT to control the supply is worth watching.

9. Impacts from the other applications.

The destocking cycle of the IT panel market has just started, and the overall demand for panels will continue to decline. As the demand for IT panels falls, panel makers may face greater pressure to reduce capacity. Since the profitability of IT panels is much better than that of LCD TV panels, panel makers still hope to actively increase the capacity supply of IT panels, but with the decline in IT panel demand and price correction, capacity may be transferred to TV panels again.

10. Global LCD TV panel capacity area continued to grow in 1H of 2022, with an increase of 6.2% YoY in 22Q2.

In the first half of 2022, as the G10.5 and G8.6 new lines continue to ramp up, and at the same time, there is no clear production reduction plan for panel makers, for the time being, it is expected that the global LCD TV panel production area will show a significant recovery trend YoY. In 22Q1, it will increase by 4.1% YoY, and the supply area in 22Q2 will increase by 6.2% YoY. The capacity is maintained at a high level, which will put greater pressure on the supply and demand in 22Q2.

Affected by the above factors on the demand side and supply side, there is still great uncertainty as to whether the market can reverse the oversupply situation in 22Q2 and usher in a price inflection point.

On the whole, the panel preparation for "6.18" will start in this quarter. At the same time, as panel prices declined to a relatively low level, it is expected that TV makers will start strategic stocking in anticipation of demand recovery and further destocking of panel factories. However, maintaining the high capacity of panel makers still faces huge challenges. According to Sigmaintell's "supply and demand model", the supply-demand ratio will be 5.6% in 22Q2 when panel factories did not regulate the UT. The balance between supply and demand tends to be loose so that the price of LCD TV panels will stop the decline and return to stability in 22Q2.