The landscape of the LCD panel industry is undergoing a significant transformation as production expansion starts to reach its zenithOverseas manufacturers are gradually exiting the market, leading to a notable increase in industry concentrationAmid this backdrop, leading companies continue to adopt a "just-in-time" production strategy, which has positively affected the supply dynamics and contributed to price stability in the panel marketAs a result, many firms have reported remarkable growth in their performance during the first three quarters of 2024, advancing their products towards a more premium positioning.

Chinese manufacturers command a significant share of global LCD production capacity, allowing them to adjust operating rates of production lines flexibly according to market demands

The balance of supply and demand has improved, resulting in a gradual uptick in television panel prices back into a profitable rangeThe government’s "trade-in" policy has invigorated the procurement demands from domestic brands, coinciding with the traditional promotional inventory season in the third quarterThis, combined with a normalization in the procurement rhythm across channels, has led many companies to see a rebound in revenues, suggesting that large-size panel prices may exhibit modest upward movement in the fourth quarter.

At present, the fixed asset scale of panel manufacturers is at an all-time high, while construction projects for new facilities remain relatively lowShort-term depreciation and amortization expenses are substantial, thus impacting current profitabilityConsolidations and acquisitions within the industry continue, and as terminal products innovate and high-specification display technologies advance, new growth factors in the mature market provide fertile ground for product restructuring and business innovations.

Domestic manufacturers are bifurcating their focus: some are exerting efforts on high-end IT products and flagship mobile phone displays, while others are enhancing comprehensive solutions for vehicle displays and advanced automotive display products, with preliminary success already apparent.

Stabilizing Prices and High-End Growth

In the first three quarters of 2024, television panel prices experienced a slight dip, with the price of 65-inch panels falling to approximately $175 in September, a decrease of 2.78% from July

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The global shipment of flat panels reached 199 million units, reflecting a year-on-year increase of 6%. Remarkably, the shipment volume in the third quarter surged nearly 26% compared to the same period last year, signaling a robust rebound in the flat panel market.

Starting from mid-August, incentives under the "trade-in" subsidy policy began to be implemented across various regions in China, driving rapid growth in domestic television sales, especially for ultra-large products sized 75 inches and aboveThe interplay between rising demand and larger average screen sizes has significantly bolstered the demand area for television panels in the domestic marketBy October, panel prices stabilized; however, mid-to-high-end panel prices experienced slight declines due to intense technological competitionResearchers anticipate that television panel prices will remain steady through the fourth quarter.

TCL Huaxing, benefiting from a rise in major product prices compared to the previous year, reported substantial improvement in operational performance

In the first three quarters, semiconductor display segment revenue reached 76.956 billion yuan, marking a 25.74% year-on-year increase, while net profit improved significantly to 4.443 billion yuan.

According to TCL Technology, the fluctuations in television panel prices in October have started to narrow around a reasonable equilibriumIn the long term, as the supply side continues to optimize alongside stable growth in demand area, the industry’s supply-demand relationship is projected to improve annually, suggesting that large-size panel prices may exhibit a gentle upward trend.

Trends Toward Premium Products

With 5G and IoT technology gaining traction, and generative AI permeating various terminal applications, there are structural opportunities within the global display market

The penetration rate for high-specification display technologies is on the rise, particularly fueled by emerging applications such as new energy vehicles.

BOE Technology Group has noted that as some IT products transition to higher-end markets, the overall development in the IT sector remains relatively strong, and product prices are stabilizingEspecially with the robust demand for gaming products, it is anticipated that this will stimulate growth in the IT segment and consequently elevate related product prices.

In the revenue composition of BOE's display device business during the first three quarters of 2024, contributions from TV, IT, OLED, LCD mobile phone, and other products stood at 25%, 33%, 24%, and 17% respectivelyThe commencement of production on the 8.6-generation oxide semiconductor display device production line heralded solid growth in the mid-size business segment, with BOE's panel shipments securing the second position globally and steadily increasing market shares in laptop, tablet, and automotive sectors

With phase two capacities of the T9 line underway, revenue from the mid-size panel business is expected to continue surging, projected to reach around 30% of total revenue in the forthcoming years.

In the same timeframe, BOE's flexible AMOLED sector demonstrated marked improvementShipment volumes for flexible AMOLED reached nearly 100 million units, a 20% year-on-year increase; however, market conditions and short-term depreciation pressures have kept profitability from fully improvingNotably, BOE's flexible AMOLED products remain front-runners in the industry, particularly within foldable and LTPO-enabled flagship mobile phones.

On the other hand, deep-substrate technology firm Tianma has recorded revenues of 24.014 billion yuan during the first three quarters of 2024, although this represents a 2.78% year-on-year decline

Adjusted net profit for the same period was negative 1.311 billion yuan, showing an increase of 56.05%. The third quarter's individual revenue figures indicated improvements, with a quarterly adjusted net profit of negative 273 million yuan, which is a year-on-year increase of 71.52% and a quarter-on-quarter increase of 42.67%.

In the automotive display segment, Tianma has shown over 40% growth in revenues year-on-yearThe company has commenced bulk deliveries to international automotive manufacturers, with expansion observed among leading new energy vehicle clientsFurthermore, LTPS technology is penetrating rapidly within the automotive display sector; the introduction of new eighth-generation lines TM19 and TM20 has further amplified revenue, achieving over 250% year-on-year growth in automotive displays.

In the third quarter, Tianma achieved a profit turnaround, marking a significant recovery of approximately 200 million yuan

During the first three quarters, revenues from automotive displays comprised about 35% of the total, with a growth rate exceeding 40%. The optimization of the mobile display segment continues, with the TM17 flexible AMOLED product now representing over 20% of revenue, growing by more than 25% year-on-year.

The OLED mobile phone business at Tianma maintained rapid expansion during the first three quarters, significantly enhancing product specificationsShipment volumes for mobile panels across two flexible OLED production lines rose approximately 76% year-on-yearThe TM17 flexible AMOLED segment turned a profit in the latest quarter, and the increasing profitability of automotive displays is steadily improving the overall gross margin of the companyAs the high-end production capacities, including HTD and foldable displays, come online, the company is expected to increase coverage of flagship projects with leading customers and elevate the proportion of high-end products.

TCL Technology’s T4 production line operated at elevated capacity levels, with substantial increases in OLED revenue and shipment volumes compared to the previous year

Innovations in flexible OLED technology, including folding, LTPO, and ultra-narrow borders, have positioned their products at the forefront of the industry, leading to a steady rise in the proportion of high-end product shipments.

Facing the Peak of Depreciation and Amortization

As of the end of the third quarter of 2024, BOE and Tianma's fixed assets had reached 209.816 billion yuan and 45.862 billion yuan respectivelyThe semiconductor display industry has begun transitioning from a phase of rapid large-scale expansion towards maturityThe current fixed asset levels for companies are at historical highs, while new construction projects remain relatively lowShort-term depreciation and amortization costs have escalated, negatively impacting profit levelsHowever, as new project capacities become operational and revenues improve, the continuing adjustments during production and technological enhancements are expected to gradually boost yield rates, resulting in better cost control

This paves the way for constricted capital expenditures and alleviating depreciation burdens as older projects conclude their amortization, allowing profits to be released.

The depreciation cycle for BOE's main equipment spans seven years, after which the company will opt for technical upgrades on production lines as necessary to improve efficiencyFuture capital investments will focus on innovative projects in IoT, sensors, MLED, and smart medical technology, which encompasses new projects and completion payments for already established projects along with maintenance of existing production lines.

Anticipating a modest increase in overall depreciation in the second half of the year compared to the first, BOE expects minimal fluctuations in depreciation owing to the progressive completion of new projects and the scheduled conclusion of LCD high-generation line depreciation throughout 2024 and 2025.

For 2024, BOE has set an ambitious AMOLED product shipment goal of 160 million units

The OLED shipment volume exceeded 65 million in the first half of the year, achieving a year-on-year rise of over 25%, primarily concentrated on flagship and high-end foldable devicesThe flexible AMOLED business predominantly focuses on smartphones, while the company is also actively exploring mid-size applications in automotive and IT sectorsThey possess three production lines for OLED displays, and the objective for the first half of 2024 is to achieve operational stability across all linesProfitability hinges on enhancing customer product layouts and elevating standardization efforts.

Tianma's new production lines, TM19 and TM20, are progressing systematically, with both entering the trial production phaseThey are advancing product development and client onboarding concurrentlyThe first IT product from TM19 has commenced mass production, while car display modules from TM20 have been successfully delivered to customers

With IT module products also entering mass production, Tianma is poised for steady capacity expansions.

TCL Technology is directing 2024’s capital expenditures primarily towards the phase two construction of the T9 production line, having no immediate plans for new line investmentsWith most eighth-generation lines having reached completion on their depreciation, the current production landscape suggests that as old project capacities stabilize and new ones climb in operational readiness, there is an expectation of a slight increase in depreciation from 2024 to 2025, culminating in a peak in 2025, before beginning a gradual decline in depreciation expenses from 2026 onwards.

By the end of the third quarter, TCL Technology is poised to acquire an 80% stake of LG Display (China) Co., Ltd

(LGDCA) along with a 100% stake of LG Display (Guangzhou) Co., Ltd(LGDGZ), with a total purchase price of 10.8 billion yuanSpecifically, the acquisition of 59.5% equity in LGDCA amounts to 7.37 billion, while LGDGZ’s total acquisition costs are pegged at 3.43 billion.

LGDCA focuses on producing large-size LCD panels for televisions and commercial displays, with a monthly production capacity target of 180,000 unitsTheir projected revenue and net profit for the first half of 2024 were 3.879 billion yuan and 268 million yuan respectivelyMeanwhile, LGDGZ specializes in LCD display modules with a designed monthly capacity of 2.3 million units, with first-half revenues and net profits of 6.477 billion yuan and 465 million yuan respectivelyCombined, these two companies surpassed the 10 billion yuan revenue mark in the first half, accounting for approximately 25% of TCL Huaxing’s revenue during this period