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With the conclusion of the semi-annual reports from major television manufacturers, it has come to light that due to rising panel costs, the performance of several TV companies took a hit during the first half of the year. Analysts within the color TV industry have noted to reporters that even though TV panel prices have started to decline, this reduction doesn’t immediately translate into lower prices for finished TVs. It usually takes at least a quarter before we see these changes reflected in the final product prices. All manufacturers should focus on adjusting their product mix and moving toward a higher-end, higher-margin strategy.
The first half of 2017 saw a decline in color TV output. Despite the ongoing issues of capacity saturation and sluggish performance in the color TV market, the situation in 2017 proved especially challenging. According to the Ministry of Industry and Information Technology's "2017 First-Half Operations Report on the Electronic Information Manufacturing Industry," the cumulative production of color TVs during the first half of the year was 74.23 million units, marking a 6.4% year-on-year drop. The production of LCD TVs reached 69.62 million units, down 8.5% compared to the same period last year.
By late August, major color TV companies were reporting on their first-half performance in 2017. Looking at the numbers, some leading players experienced setbacks in their first-half results. Hisense Electric reported first-half revenue of 13.567 billion yuan, up 2.09% year-on-year, but a net profit of 396 million yuan, down 46.55% year-on-year. Sichuan Changhong saw revenue of 34.76 billion yuan, growing 6.07% year-on-year, but a net profit of only 150 million yuan, down 66.55% year-on-year. Shenzhen Konka A had revenue of 14.068 billion yuan for the first half, up 32.49% year-on-year, with a net profit of 30.871 million yuan, up 140.53%. However, the core operating profit was negative 44.4562 million yuan, down 54.70% year-on-year.
In their financial reports, manufacturers cited rising raw material prices as the main reason for shrinking profit margins. Shenzhen Konka A stated in its semi-annual report that intense market competition and rising raw material prices led to a decline in profit margins across key businesses like color TVs and white goods.
It is worth noting that starting in April 2016, LCD panel prices began a steady climb that lasted until May 2017, spanning 14 months—the longest price hike in panel history. By June 2017, the average panel price had risen by about 40% compared to the same period the previous year, while the price of finished TVs increased by less than 20%, doubling the cost pressure on the entire TV industry.
Conversely, panel companies like Samsung, BOE, and Huaxing Optoelectronics benefited from this round of price hikes. BOE’s first-half net profit surged ninefold year-on-year due to the price increase; TCL also capitalized on its own panel business, and Huaxing Optoelectronics saw a net profit increase of 110.8%.
Li Yaqin, deputy general manager of Quzhi Consulting, told the "Daily Economic News" reporter, “The performance of color TV companies has been impacted by two main factors: rising costs and falling sales volumes. This dual impact has significantly affected them over the past year. Prices for most TV raw materials have risen.â€
According to the "2017 China TV Market Semi-Annual Summary Report" jointly released by the China Electronics Video Industry Association and AVC, domestic color TV retail sales totaled 21.81 million units in the first half of 2017, a year-on-year decrease of 7.3%.
Panel prices have begun to fall. Major panel manufacturers have ramped up production, leading to a domestic investment boom in 10.5-generation facilities. Companies like BOE, China Star Optoelectronics, and Hon Hai Group have all invested in constructing 10.5/11-generation LCD production lines. Additionally, LG Display (LGD) plans to invest in 10.5-generation AMOLED or LCD production lines to produce oversized OLED or LCD panels.
Against this backdrop of increased production capacity, large-size panel prices began to decline in June 2017. According to the latest panel price quotes from the WitsView Optoelectronics Research Center, after TV panel prices loosened in June, they saw even sharper declines in August.
The latest panel quotes in late August showed that the 55-inch TV panel ranged from $200 to $209 per piece, with an average price of $206, a $4 drop from the previous period. The average price for the 43-inch panel was $135, a $4 drop from the previous period. For the 32-inch panel, the average price was $70, a $1 drop from the previous period.
Jibang Consulting analyst Qiu Yubin told the "Daily Economic News" reporter, “Although TV panel prices have started to decline, it will take at least 2 to 3 months for these reductions to be fully reflected in overall pricing. TV shipment estimates are being adjusted downward, with a potential decrease of 5 to 6 million units compared to the same period last year.â€