South Korean TV makers Samsung Electronics Co. and LG Electronics Inc. are facing higher costs ahead of the year-end peak season after Chinese liquid-crystal display (LCD) panel makers notified customers of price increases. Concerns that China’s dominance of the LCD supply chain would translate into greater control over panel prices are becoming a reality.
BOE, TCL China Star Optoelectronics Technology Co. (TCL CSOT) and HKC Display Technology Co. have recently sent notices to customers regarding LCD price adjustments, according to industry sources on Sept. 18. Major TV makers including Samsung Electronics, LG Electronics and Sony Group Corp. received the notices. BOE will apply new prices from the fourth quarter, while TCL CSOT and HKC will raise prices for some products starting in September.
The timing of the increases coincides with the period when TV makers secure inventory for the year-end season. Samsung Electronics, LG Electronics and other TV manufacturers begin preparing production volumes for sales around Black Friday and Christmas from August and September. That makes it difficult for them to significantly reduce LCD purchases.
Demand is not substantially outpacing supply, either. Some Chinese LCD production lines are operating at utilization rates as low as about 70%, according to industry estimates. Rather than increasing utilization and flooding the market with panels, Chinese manufacturers are reducing production to contain oversupply and defend prices.
The strategy is possible because China has secured control over LCD supply. Market researcher Omdia has said BOE, TCL CSOT and HKC have formed an oligopoly in the large-size LCD TV panel market. The major Chinese manufacturers account for 70% to 85% of the 65-, 75- and 85-inch panel market, while Chinese makers account for nearly all of the ultra-large-size market.
Chinese manufacturers expanded their market share through large-scale capacity additions and low-priced supply. As LCD prices fell amid oversupply, South Korean and Japanese manufacturers reduced their less-profitable LCD businesses. Samsung Display ended LCD production in 2022, and LG Display also halted domestic production of TV LCD panels while selling its Guangzhou plant.
