WitsView says prices of LCD TV panels steadily increased from the second quarter of 2014 to the start of this year, generating sizable profit for panel makers. However, the depreciation of foreign currencies since the end of this first quarter has slowed down the sales of branded LCD TV sets in Europe and the emerging markets. With profits turning to losses, branded TV vendors have scaled back their panel demand, leading to rising inventory level and falling prices.

Hence, the panel market is not showing signs of recovery despite the arrival of the traditional peak season. Since excess inventories need time to be cleared out and Chinese panel makers are still expanding their capacities, the current price downtrend is likely to persist and influence panel purchasers’ decisions. In sum, the panel market’s performance will become even more conservative in this fourth quarter.

TV panels have had a noticeable price decrease with the average decline between the start of this year and present being almost 15%. Among the products, the 32-inch HD OC (open-cell) and the 55-inch FHD OC panels have suffered the worst with their declines respectively at 25% and 16%.

The price of the 32-inch HD OC panels has dived from US$93 at the start of this year to US$69 in the first half of September. It is expected to keep falling during this quarter to around US$67, which is below the average total cost of US$70~71 and the average cash cost of US$59~60.

As for the 55-inch FHD OC panels, their average price has dropped to US$225 in the first half of September and is nearing their average total cost of US$216~217 (their average cash cost is around US$176~177).

WitsView expects the average price of this product segment to fall through its total cost level in October. Panels of other sizes from the 39.5- to the 50-inch still have US$20~45 differences between their prices and total costs. Panel makers therefore will depend mainly on them for profits.

Though the general price decline in the TV panel market is unlikely to ease, there is still some room for profitability. Cutting production is the quickest and most effective way of dealing with continuing oversupply and downward price pressure. Nonetheless, this practice can also impact the growth and profitability of the panel market.

Taiwanese and South Korean panel makers have a cost advantage over their Chinese competitors when it comes to Gen-8.5 production as their fabs are near the end of their amortization period. Looking ahead, WitsView expects overcapacity, diminishing demand, falling prices and weak profits to remain as serious issues for the panel market in the fourth quarter.