Channel cautious over LCD price recovery talk

Middle East resellers trading in LCD displays remain doubtful of seeing a stabilisation in prices over the coming months despite indications that the panel market will stage a recovery during September.

The global panel sector has been suffering declining profitability and sharp price drops following a period of over-supply since June and higher inventory levels in the supply chain due to lower demand.

Conditions are expected to dramatically pick up on the supply side, but channel players in the Middle East remain unperturbed. “Typically over the last six or seven years I have seen that if worldwide panel prices go up as manufacturers claim, this region somehow doesn’t follow the trend,” lamented a source at one volume distributor. “Either there is not enough inventory or the local offices have taken it before prices go up.”

Analyst firm iSuppli says pricing in the LCD panel market slumped at a faster rate than ever before last month. However, panel production cuts, coupled with the clearance of inventory and an uptick in demand from TVs, desktop PC monitors and notebooks, should shift the supply-demand equation back to balance during September, culminating in a recovery in pricing.

Aaron Fright, regional director for the Middle East and Africa at monitor vendor ViewSonic, said it was important to note that the anticipated price improvement relates to the panel price and not the finished product.With a leadtime from factory to market place of at least six weeks, Fright suggests that increases in panel prices during September are unlikely to be felt in the Middle East channel until October or November, and even then it is subject to the panel makers’ inventory management.

“From the supply base, if panel costs erode, then sooner or later we will see this cost downturn effect in our local market pricing, and the same applies in reverse,” said Fright. “However, across the Middle East we do have some local seasonality trading periods coming into play in the next 60 days which will kick-off promotional activities across the channel driven by display vendors. This may not be a direct result from the LCD panel prices themselves, but simply margin and dollar investment from the display vendors to stimulate end-user buying decisions during this seasonality period.”

Middle East resellers, meanwhile, say they are not bracing themselves for a stabilisation in market prices given recent trends. “Two months back a 17-inch screen was US$157, today it is US$134,” said Tarun Nandi, managing director at Samsung monitor reseller Bluebell Computers “Panel prices have gone down drastically. If you continue selling you can make a margin, but if you keep stocks then making a profit becomes impossible.”

Mohamed Giado, managing director at Samsung and ViewSonic trader New Computer Trading, also exercises doubts over how much impact the prospect of rising panel prices will have on the Middle East. He raises the possibility of stock build-up in certain brands over the coming weeks, but believes market pricing will ultimately be determined by vendors’ appetite for market share.

“Wholesale prices have come down, especially in the 17-inch segment as prices for 19-inch screens have come down to US$155,” he said. “The competition has become much more fierce because many of the brands are fighting it out for top spot and there is immense rivalry on the price side.”

According to iSuppli, LCD panel prices have been declining since June when the market plummeted 10% month-on-month. Prices for mainstream notebook, monitor and TV panels fell between 3% and 15% during July, and initial estimates suggest a 4% to 20% drop occurred August.

The research house claims large-sized panel prices are now approaching the manufacturing cost level, especially in some TV and monitor lines, although panel suppliers have reacted to weak sales and declining profitability by slashing their utilisation rates. LCD TV and desktop PC monitor makers are also starting to cut their prices in order to reduce inventories and boost demand.

“These developments, along with recovering demand from the notebook segment, will bring stabilisation to large-sized LCD panel pricing in September,” stated Sweta Dash, director of LCD and projection research at iSuppli. “Some panel prices may even increase by 1% to 3%, especially those which are reaching at or below the cost levels.”