The television industry is likely to suffer a negative impact from the escalating tensions in the ongoing trade war between the US and China, according to a report from analyst firm IHS Markit.
Amid US President Donald Trump’s decision to impose new tariffs on Chinese goods and blacklist companies such as Huawei, Chinese and Korean TV makers are said to have reduced panel orders, ostensibly to cut inventory carried over from previous quarters.
But IHS Markit say the decision is also linked to the US-China trade tensions, as the ongoing uncertainty makes it more difficult to come up with firm demand forecasts. As a result, TV makers are being more cautious, it said.
“There’s an increasing risk of a demand correction in the second quarter in light of several negative indicators from TV brands, including rising inventories, order cuts and increasing tariffs,” Deborah Yang, director of display supply chain at IHS Markit, said in a statement. “These signs imply a slowdown in the market and a possible downward trend for panel prices.”
China is expected to see the biggest decline in panel orders during the second quarter. IHS Markit’s data shows that Chinese manufacturers bought greater numbers of panels than expected during the fourth quarter of 2018 in exchange for agreeing to volume deals with suppliers. However, with their inventories now full up, and fears mounting over the US/China trade war, Chinese firms are cutting back on their panel purchases considerably. In the second quarter, IHS Markit predicts they’ll buy just 20.6 million units, down 17% from the previous period and 8% from a year ago.
Things are a little better in South Korea, where TV brands are forecast to buy 17.3 million panels in the second quarter, down 3% from the fourth quarter of 2018.
“This is indicative of weakness in panel purchasing following a decline of 2 percent in the first quarter on a quarter-to-quarter basis and no change on a year-on-year basis,” IHS Markit said.
With any luck however, the decline in panel shipments will only be temporary, as TV makers are expected to ramp up their purchases in the third quarter ahead of the holiday season, IHS Markit said. TV makers may also step up purchases of higher-end TV panels as the world’s second Gen 10.5 fab is expected to ramp up operations in the summer. In addition, Korean panels makers are also set to restructure their own fabs to manufacture more premium products such as OLED displays, IHS Markit said.
“TV makers will start to refill their panel inventories starting in the latter part of June or early July,” Yang said.
She added that TV makers’ promotional deals for the holiday period will likely have a big influence on their purchasing negotiations with panel suppliers.
“These companies are taking all possible measures to enhance their competitiveness and win more business,” she said.
