Major telecom operators in China have been activating 4G services from year-end 2013 to the first quarter of 2014, leading to an increased number of consumers who are taking a wait-and-see attitude towards buying new phones. Since operators have changed their subsidy plans for smartphones, branded vendors have speeded up to clear existing inventories, leading to a weaker demand for new smartphones compared to previous years.

In regard to medium size TFT-LCD panels, branded vendors' low-cost tablets and large-screen smartphones have dampened the demand for Chinese white-box tablets and in turn dragged down panel shipments for portable DVD players and DPFs (Digital Photo Frame), which share the use of medium size panels with tablets. Consequently, TFT-LCD panels for portable DVD players and DPFs plunged 23.7% sequentially to around 22.6 million units in the fourth quarter, posting the steepest decline among all panel applications.

Demand for automotive TFT-LCD panels is anticipated to grow steadily in the long term. Strict certification processes and higher specifications required in this application market have erected a high entry barrier to newcomers, giving existing players better profits. Taiwanese vendors have deployed in this segment for long and seen continuous growth in shipments, with major customers spreading around Europe and the United States. In the fourth quarter of 2013, automotive TFT-LCD panels registered the strongest growth among all applications, up 26.4% sequentially to around 11.9 million units.

Despite a 4.4% sequential decline in shipment volume, the industry's shipment value managed to rise 1.1% sequentially to around US$2.2 billion in the fourth quarter of 2013. This is attributable the industry's improved product mix and ASP, which was resulted from the significant growth in shipment volume of 3-inch-and-above panels for mobile phones and an increase in the average size of tablet panels.

Figure I: Taiwanese Small and Medium Size TFT-LCD Panel Shipment Volume, 4Q 2011 - 2Q 2014 (source: MIC)