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As the release of semi-annual reports from major TV manufacturers wraps up, it has become clear that rising panel costs have had a significant impact on the performance of several TV companies in the first half of the year. Reporters gathered that many leading brands experienced a downturn in profitability due to these rising expenses.
A number of color TV industry analysts have noted that despite a downward trend in TV panel prices, this reduction doesn't immediately translate into lower retail prices. It typically takes at least a quarter for the savings to be reflected in the final product pricing. Analysts advise that all manufacturers should focus on adjusting their product mix and moving towards higher-end, higher-margin offerings.
The first half of 2017 has been marked by a noticeable dip in color TV production. Even as capacity saturation and weak demand have been ongoing issues in the color TV market for some time now, the situation in 2017 has been particularly challenging. According to the Ministry of Industry and Information Technology's "Operations of Electronic Information Manufacturing Industry in the First Half of 2017," total color TV production during the first six months of the year stood at 74.23 million units, representing a 6.4% year-on-year decline. LCD TV production reached 69.62 million units, marking an 8.5% year-on-year decrease.
In late August, major color TV companies reported their first-half performances for 2017. Data reveals that some key players faced challenges in their first-half results. Hisense Electric reported a revenue of 13.567 billion yuan, a 2.09% year-on-year increase, but a net profit of only 396 million yuan, a 46.55% drop from the previous year. Sichuan Changhong saw a revenue of 34.76 billion yuan, showing a 6.07% year-on-year growth, yet its net profit dropped to 150 million yuan, a 66.55% decrease. Despite Shenzhen Konka A's revenue of 14.068 billion yuan, a 32.49% increase, its net profit of 30.871 million yuan still represented a 140.53% improvement year-on-year. However, after accounting for non-operating income, Konka A’s underlying net profit was negative 44.4562 million yuan, a 54.70% year-on-year decline.
These companies cited rising raw material costs as a major factor in their reduced profit margins. Shenzhen Konka A stated in its semi-annual report that intense market competition and increasing raw material prices led to a drop in the gross margins of its core businesses, including color TVs and white goods, resulting in losses for certain segments.
It is worth noting that since April 2016, LCD panel prices started to rise consistently, continuing until May 2017—a period of 14 months, the longest price increase in panel history. By June 2017, the average panel price had surged by around 40% compared to the previous year, while TV set prices only increased by less than 20%, putting immense pressure on the entire TV manufacturing industry.
This upward movement in panel prices benefited major suppliers like Samsung, BOE, and Huaxing Optoelectronics. BOE's first-half net profit skyrocketed ninefold year-on-year due to the price hike, while TCL also enjoyed positive outcomes thanks to its own panel operations. Huaxing Optoelectronics reported an 110.8% year-on-year increase in net profit.
Li Yaqin, deputy general manager of Quzhi Consulting, explained to "Daily Economic News" reporters that the poor performance of color TV companies stems from two main factors: rising costs and declining sales volumes. Over the past year, the prices of most raw materials used in TVs have risen significantly.
According to the "2017 China TV Market Semi-annual Summary Report" released jointly 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 7.3% year-on-year decrease.
Panel prices have recently started to decline. Major panel manufacturers have ramped up production efforts, with a particular focus on 10.5-generation lines. Companies like BOE, China Star Optoelectronics, and Hon Hai Group have made substantial investments in building new production lines. Additionally, LG Display (LGD) plans to invest in 10.5-generation AMOLED or LCD lines for oversized OLED or LCD panels.
Under these conditions, large-sized panel prices began to fall in June 2017. According to the latest quotes from the WitsView Optoelectronics Research Center (WitsView), after panel prices loosened in June, they fell even further in August. By late August, the 55-inch TV panel prices ranged between $200 and $209 per unit, with an average of $206, a $4 decrease from the previous period. The 43-inch panel averaged $135 per unit, down $4 from the prior month, while the 32-inch panel averaged $70 per unit, down $1 from the previous period.
Jibang Consulting analyst Qiu Yubin told "Daily Economic News" reporters that, despite the decline in panel prices, it may take 2 to 3 months for these changes to reflect in the overall market. TV shipment forecasts have been revised downward by 5 to 6 million units compared to the same period last year.