Display fab utilization to drop to 68% in 1Q24, says Omdia

Jessie Shen, DIGITIMES Asia, Taipei 0


As per the most recent report from Omdia, the overall utilization of display fabs is projected to fall to 68% in the first quarter of 2024. This decline is attributed to sluggish demand early in the year and panel manufacturers' efforts to preserve the price of LCD panels.

"North America TV sales on Black Friday and the Chinese Double 11 promotions in 2023 were slower than expected resulting in numerous TV inventories being carried over into the first quarter of 2024. TV display price pressures from TV brands and retailers have also been stronger," said Alex Kang, principal analyst of Omdia. "However, panel makers, especially Chinese panel makers who took 67.5% of LCD TV display shipments in 2023, are responding to these conditions with further utilization cuts in 1Q24 highlighting their ambition to sustain LCD TV display prices by controlling LCD TV display supply."

"China's big three panel makers, BOE, China Star, and HKC Display lead in the fab utilization cuts scheduled for 1Q24 especially in February during the Chinese New Year holidays," Kang continued. "These three makers decided to extend their Chinese New Year holidays from one to two weeks. As a result, their average fab utilization in February 2024 is 51% whereas other makers will be at 72%."

Reduced demand early in the year, combined with many carried-over inventories, has caused LCD TV display buyers to predict display prices will continue to fall until inventory is cleared and 2024 new model demand can help recovery, at least until the end of the first quarter. However, Chinese panel makers, who dominate the LCD TV display supply market, believe they can halt price erosion considerably quicker than the industry anticipates, according to Omdia.

Omdia cited three reasons for this confidence. First, Chinese panel makers have experience in managing LCD TV display prices through a production-to-order policy (which means fab utilization control) despite the slow demand of early 2023. Second, panel makers believe TV display demands will increase in the second quarter because of large sporting events such as Euro 2024, the Paris 2024 Olympics, and 2024 Copa América. Third, the recent rising shipping issues because of an increased threat of attack by Iran-backed Houthi rebels in Yemen targeting ships traveling to Israel led to more global shipping companies making the decision to stop their Red Sea routes from the middle of December 2023. As a result, transportation time and costs from Asia to Europe have increased significantly.

"Developments over the next few months will set the stage for panel makers, particularly Chinese panel makers who believe they can impact a faster LCD TV display price recovery," Kang noted.