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Pain Ahead Across the TV Supply Chain

TV brands are set for a stark reckoning in the second half of 2019, as a range of issues come to a head to create many losers and just one winner in what looks to be a zero-sum game.

While Futuresource anticipates global TV market shipments will grow by 2.1% in 2019, a number of global and regional issues are set to cause a lot of pain in the supply chain, with brands resorting to dramatic price cuts in the second half of the year to boost shipments – putting all the power in the hands of the consumer.

First up is the well-known, but seemingly unavoidable, panel oversupply situation, which is in part due to the ramping up of volume at new Gen 10.5 fabs during 2018 and 2019. The lead time for investment in these facilities means the potential overcapacity issues have long been known, but apparently ignored or underestimated, as national priorities and a need to maintain market share took hold.

In particular, government supported investment in China to develop the local supply chain has had a significant impact on the industry, with the local market’s growth to just shy of 50 million shipments in 2019 not increasing fast enough to soak up the additional supply.

The fallout from this glut is likely proving most difficult to absorb for the big South Korean players, Samsung and LG, which do not have the same level of government support and have the most to lose due to their exposure across production and as a brand. Indeed, including Sony, all three are doing their best to nudge their businesses away from the value end of the market toward premium sets that command a higher ASP, leaving room for the likes of TCL, Hisense and Skyworth to take up the slack.

This is a strategy they may come to regret, as it enables Chinese players to gain a stronghold in western markets, resulting in growing brand awareness and acceptance.
Then we come to tariffs and the fear of their implementation. With a forecast of 39.7 million units in 2019, the US TV market is second only to China in terms of volume, making it one of the most important for brands to target. However, the US government’s consistent use of tariffs as a threat to gain an edge in trade discussions has resulted in unstable trading conditions across a wide range of consumer electronics.

To counter this, some TV brands have shipped large quantities into the US during H1 2019 to help mitigate the short-term impact from any trade barriers. However, this has brought forward the production seasonality peak that would traditionally target higher demand in H2.

Add together this toxic mix of higher production capacity in H2, but fewer orders from brands due to a spike in H1 shipments, and we have a situation where prices will need to fall across the supply chain and through to the consumer to boost demand.

The big unanswerable question at this stage is whether price drops can jump-start demand in a saturated global TV market, where there are no impending innovations (8K is expected to only reach about 200,000 shipments in 2019) and with households in developed regions buying fewer but larger TVs.

Consumers will notice most cut-price sets will be 4K TVs, but discounting will be most pronounced for sets 60” and above, which are set to make up 9% of shipments in 2019, as this is where investment is now focused. However, with limited supply due to a more complex production process, OLED price drops will be relatively limited.

Regardless of the consequences, expect to see unprecedented discounting during the Black Friday and the Christmas shopping period this year, making consumers the real winners of the situation, as brands resort to desperate measures to outmanoeuvre each other to maintain volumes and market share.

Date Published:

Matthew Rubin

About the author

Matthew Rubin

Matthew joined Futuresource Consulting in 2018 as Senior Analyst and leads the professional display research and analysis team. Matthew covers the LCD, Projector and LED display markets, producing quarterly tracking data, annual reports and bespoke consulting projects.

Previous areas of focus include consumer display technology, including TVs, Media Streamers and Home Video products, in addition to Esports and display software ecosystems. Matthew is an Accounting and Finance graduate and has previously worked in research for Informa and IHS Markit.

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