Q3 Panel Capacity Utilization to Fall to 10-Year Low: Omdia

Display panel makers’ capacity utilization is expected to decline to 73% in Q3, the lowest level for the sector in a decade, reported Omdia Tuesday. LCD TV panel prices plunged to new lows in June, as TV makers felt the pressure to continue slashing their panel demand for Q2 and “further downsizing panel purchasing plans” for Q3, it said. Samsung decided in mid-June to halt procurements to avoid “high inventory in the pipeline,” and that decision “will likely ripple across the display industry,” it said. In response to Samsung’s strong change in its displays and components sourcing strategy and amid growing financial losses in the TV panel business, panel makers had “no better choice than to cut their fab utilization rates significantly from June,” it said. The drop in fab utilization “directly leads to higher fixed costs and ultimately results in elevated production costs and profit deterioration, which is why manufacturers try to avoid it at all costs,” said Omdia analyst Alex Kang. “That panel makers have chosen to reduce utilization despite a drop in production and profitability implies that the current price plunge is excessively steep and that panel makers are attempting to stop profitability from further deteriorating.”