IHS pointed in the report that total mobile phone display shipments are estimated to reach a new record high of 2 billion units in 2014. Average smartphone display prices declined nearly 14% Y/Y from $22 per module in 2013 to $19 in 2014.

“While smartphone display resolution and sizes reach new milestones, panel makers are still being challenged to reduce display module prices,” said Terry Yu, analyst for small and medium displays and display technologies for IHS Technology, formerly with DisplaySearch.

“Shipment and manufacturing of panels using various display technologies like a-Si, Oxide, LTPS, and AMOLED continues to rise, while pricing continues to decline. The sharpest smartphone average panel price declines occurred in 2014, and this trend of double-digit declines is expected to continue in 2015.”

Panel makers (like Tianma, BOE, InfoVision, and Japan Display Inc. (JDI) via their subsidiary TDI) are all promoting their products to Chinese smartphone makers with aggressive pricing strategies. Chinese smartphone makers are agile enough to use economies of scale and their strong market position to better negotiate display prices.

On the supply side, LTPS LCD manufacturing capacity is increasing in all regions. Taiwanese panel suppliers are aggressively shifting production of smartphone panels to Gen 5 fabs, as well. These factors are adding pressure to reduce prices.

5" LTPS TFT LCD FHD (1920×1080) smartphone panels with IPS/FFS LCD technology experienced a decline of 30% Y/Y, from $30 in December 2013 to $21 in December 2014.

“Smartphone ASPs will continue to drop substantially in the first quarter of 2015, which is a traditionally slow season for smartphone display panel purchasing,” Yu said.

The 5" 720 HD (1280×720 pixels) module is the most popular smartphone display size in China, helping the format to gain more than 40% of the global market for 5.x" displays during 2014.

“Most brands are promoting low-priced, high-specification models with these displays, especially on e-commerce platforms,” Yu said. “China is the major battlefield for 5" smartphone displays. Demand for these displays is very strong, but they face strong competitive price pressure in the set market.”

In China’s open market, prices for 5" 720 HD panels declined significantly to just under $12 in December 2014. Business agreements aside, market pricing for low-specification 5.x" panels is expected to decline to about $11 by March 2015. Prices of some low-grade specifications panels (lower brightness requirement) could decline to below $10 by the same period.

Due to the booming demand for LTPS LCD in China, panel makers are expected to continue expanding their LTPS manufacturing capacities and shipments.

“By the end of 2016, new fab investments by AUO, BOE, China Star, Tianma, and Foxconn will result in at least five Gen 6 LTPS fabs running in China and Taiwan, which may put more pressure on smartphone ASPs in the future,” Yu said.

Another price-reduction pressure in the smartphone display market comes from aggressive smartphone end-market pricing by Chinese smartphone brands.

After the introduction of the iPhone 6 Plus with its 5.5" FHD display, more Android-based premium models are expected to come equipped with wide-quad high-definition (WQHD) (2560×1440) displays, driving FHD models down into the mid-range segment with lower pricing.

On December 23, 2014, Meizu, a rising brand in China, introduced its new “No Blue Note” smartphone equipped with a 5.5" FHD display from Taiwan, which sells for just CNY 999 ($161). This model and pricing has been cited by many in the industry as a warning for upcoming price competition in 2015.

“Facing ASP pressures, display cost reduction will be the top priority for the panel makers, especially through more effective production yield rate management and improvements in component performance,” Yu said.