LCD Panel Costs Rise As China Dominance Grows
With Samsung Electronics and LG Electronics relying heavily on Chinese companies for a significant portion of their liquid crystal display (LCD) panels for TVs, panel manufacturing costs are forecast to rise until next year. As Chinese companies push for panel price increases citing cost burdens, th
As Samsung Electronics and LG Electronics increasingly depend on Chinese firms for their liquid crystal display (LCD) panels, panel manufacturing costs are set to rise until next year. Market research firm Omdia predicts that the cash cost of open cells for 65-inch LCD TVs will hike from $112 last year to $116.8 this year, and further to $124.55 next year.
This represents a 4% increase this year and an additional 6.6% rise next year, resulting in a cumulative growth rate of about 11.2% over two years. Open cells constitute the core part of LCD panels, excluding components like backlights. The cash cost, which excludes depreciation, is on the rise owing to increased prices of raw materials and parts.
The main factors behind the cost increase are attributed to the competition in the electronic component supply driven by the expansion of the artificial intelligence (AI) industry and the upsurge in international oil prices. Additionally, the prices of petrochemical raw materials used in polarizers and optical films are also contributing to the cost burden.
With domestic TV manufacturers directly impacted by the price hikes of Chinese panel companies, the global LCD supply chain is now predominantly dominated by Chinese companies, accounting for 70~85% of the 65-to-85-inch LCD TV panel market. Samsung Electronics, for example, is projected to purchase about 4.4 million panels from Chinese firm BOE this year, double the quantity from last year.
Chinese panel companies such as BOE, TCL CSOT, and HKC have already informed their clients about their price increase plans, citing rising costs. These companies are also curbing oversupply by adjusting their production line operations, indicating that the price hike of LCD TV open cells will materialize in actual transactions starting December.
For Samsung Electronics and LG Electronics, maintaining profitability might become more challenging if panel prices surge amidst slow global TV demand. Although they are countering by boosting sales of premium TVs and broadening supply chains, industry experts opine that it is not straightforward to incorporate the cost increases into product sales prices.
An industry official commented, "Given the heightened dependence of domestic TV manufacturers on Chinese LCD panels, the price hikes by Chinese companies will inevitably result in a cost burden." They further added, "As the recovery in TV market demand is sluggish, reflecting the panel price increases in product prices is not easy, making profitability management even more critical."
Written by urgent.news from BusinessKorea's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
