Lower Demand After Pandemic Buying Frenzy Is 'New Normal': Omdia

Smartphone shipments, which grew year on year in Q2 despite the spread of the COVID-19 delta variant and component shortages, will turn negative in Q3 due to continued supply shortages and reduced demand, said Omdia analyst Jusy Hong in a Monday report.

With consumers in many markets starting to emerge from quarantines, returning to out-of-home dining and entertainment, traveling, and going back to the office, the new demand normal is starting to look more like the “old normal” for the CE market, Hong said. But pandemic impacts “continue to reverberate” in the semiconductor and display markets, where shortages, supply-demand imbalance and price fluctuations are ongoing, he said.

Demand for large LCD displays, propped up during lockdown as consumers sought to improve their in-home entertainment experience with bigger screen TVs, led to a 6% increase in TV shipments for the four-quarter period ending in Q1. But TV demand is now reversing to “below normal” for the next four-five quarters, Hong said.

External factors contributing to lower TV demand are the end of U.S. stimulus payments and unemployment, plus lifting of lockdowns and travel restrictions, resulting in more spending for out-of-home activities. At the same time, higher costs for products are driving higher retail prices after replacement and upgrade purchases were pulled forward.

Hong referenced the “beginning of the price-down cycle” in Q4, where component supplies remain tight, but demand is falling, giving TV set makers purchasing components for 2022 “a stronger negotiating position.” Forecasting 2022 as an “over-supply period,” the analyst predicts “price elasticity” in the first half, asking, “how much do prices need to fall to drive up demand again?” The price per square meter of large-area flat-panel displays will need to drop “substantially” to trigger new demand, he said.

LCD TV open cell prices started to drop in August, with purchase order prices falling by more than $25 to $180 for a 50-inch 4K 60 Hz panel from July to August, then to $165 in September. Open cell prices for a 65-inch 4K 60 Hz panel dropped from $294 in July to $280 in August and $255 in September, he said.

In semiconductors, the first major segment to weaken was the PC market, said Hong, as work- and school-at-home trends gave way to more typical demand. Gaming consoles will also return to normal demand, he said. In the automotive chip segment, higher interest in electric vehicles, more semiconductor content per vehicle and advanced electronic control units are pushing revenue higher.

Through 2022, infotainment, body and convenience, advanced driver-assistance systems, powertrain and vehicle dynamics will be the primary drivers of the automotive chip business, Hong said: Omdia predicts revenue growth of 5% this year to over $50 billion, 6% in 2022 and 12% in 2023. Automotive semiconductor revenue fell 11% in 2020.