Omdia: Display fab utilisation set to decrease
According to Omdia's latest Display Production and Inventory Tracker, overall utilisation of display fabs is expected to fall below 70% in the fourth quarter of 2023 (4Q23), as demand slows and efforts by panel makers to protect LCD panel prices decrease.
Monthly fab utilisation forecast
Alex Kang, Principal Analyst in Omdia’s Display practice, commented: “Panel makers continued to increase LCD TV display price in 3Q23, which brought strong panel price pressure from TV brands/OEMs. As LCD TV display buyers started to cut panel purchasing from 3Q23, panel makers began reducing their fab utilisation and the so-called production-to-order policy.”
Price pressure and purchasing plans
Kang added: “Following the LCD TV display price pressure from TV brands/OEMs, panel buyers are realising they will need to modify their purchasing plans over the coming months, including in 1Q24 if meaningful reductions in LCD TV panel prices are not applied. Compared to a couple of months ago, panel makers have cut their fab utilisation more aggressively in the latest forecast, which implies panel makers are struggling to sustain LCD TV panel prices.”
Supply/demand trend impact
This trend in LCD TV display supply and demand is likely to pose challenges for panel makers during 4Q23 – 1Q24. Several TV brands are experiencing increased TV inventories from 3Q23 due to slower demand, while others are facing reduced profits due to the hike in LCD TV display prices from 3Q23. These factors are leading panel makers to significantly lower panel prices.
Significant utilisation drop in 1Q24
Particularly, Chinese panel makers are contemplating a substantial drop in fab utilisation in the first quarter of 2024 (1Q24), potentially below 60%. This decrease is anticipated around the Chinese New Year holiday in February 2024, with the aim of minimising panel price erosion in 1Q23.
Broader trend in IT LCDs The trend of cutting fab utilisation is not limited to LCD TV displays but also extends to IT LCDs such as notebooks, PCs, and monitors. PC brands and OEMs are cautious about purchasing IT LCDs to avoid excess inventory. IT LCD buyers are waiting to see the results of the 2023 year-end shopping season before making further purchasing decisions.
Global recession and IT LCD demand Despite expectations of commercial demand from the B2B market in 2024, hopes are diminishing due to the forecasted global recession. Omdia concludes that the anticipated slower IT LCD demand until early 2024 may lead to a deeper cut in utilisation in 1Q24.