In 2021, when the trend of wild consumption is high, the panel industry at the back end of the supply chain is experiencing an industry fluctuation.

According to the research report of CITIC Securities, panel prices have risen comprehensively for 14 consecutive months since their low point in May 2020, with a cumulative increase range of 77.1% -169.7%. After August 2021, panel prices entered an adjustment period.

It is worth noting that this industry price adjustment is significantly different from the cyclical fluctuation logic of many years in the past.

The fluctuations in panel cycles over the years were mainly caused by the combination of supply side capacity growth and demand side changes. According to the quarterly reports of domestic panel giants JD.com and TCL Technology, the structural adjustment of panel prices is mainly due to logistics and demand side disturbances, while the supply side pattern has not changed.

The logic of cyclical fluctuations in the panel industry has changed.

Under the new cycle logic, what do Chinese panel companies rely on to cross the cycle? Becoming a hot topic of market attention.

01

The cyclical logic of the panel industry changes

The panel industry is a typical technology and capital intensive industry, with extremely high barriers to entry for high generation lines. The development of the industry requires the joint drive of policies, technology, and capital.

The global panel industry has experienced the process of the origin of the United States - Japan's development - South Korea's catching up - Taiwan's rise - Chinese Mainland's efforts. In the mid-term, Japanese and Korean manufacturers represented by Samsung and LG have emerged and gained nearly 20 years of discourse power in the panel industry.

The rise of China's panel industry has two iconic events.

In 2003, BOE acquired Hyundai's TFT-LCD business for $380 million. This was the largest overseas acquisition of China's high-tech industry at that time.

In 2009, TCL Huaxing invested 24.5 billion yuan to construct the 8.5 generation LCD panel project. This project was the largest investment project since the establishment of Shenzhen at that time, and also the first independently constructed high generation LCD panel project in China.

After more than ten years of development, Japanese and Korean manufacturers who lost their cost advantage gradually withdrew, and Taiwan, China manufacturers were squeezed into the field of small and medium-sized panels.

In 2020, TCL Huaxing acquired the Suzhou Samsung production line, and BOE acquired the Nanjing and Chengdu production lines of China Electronics Panda, once again consolidating the dual giant pattern in the panel industry.

Guoyuan Securities Research Report shows that by 2025, Chinese Mainland will account for nearly 70% of the global LCD panel production capacity.

In the past decades, the panel industry has experienced cyclical fluctuations under the competition of manufacturers in China, Japan, South Korea, Taiwan, China and other regions, along with the two-way impact of supply side capacity expansion and transfer and downstream demand.

At present, the trend of panel resources gathering towards top brands such as BOE and TCL Huaxing remains unchanged, and the supply side production capacity is relatively stable, with little impact on panel cycle fluctuations.

Due to the normalization of epidemic prevention and control, the demand in some countries in the global panel market has decreased, coupled with international shipping congestion and increased logistics costs, the first round of panel cycles with demand as the underlying logic has emerged.

This is a new test for global panel manufacturers.

According to the 2021 third quarter performance report of Shenzhen Tianma, due to insufficient market demand, the company's revenue from July to September 2021 decreased by 7.63% year-on-year, and its net profit decreased by 55.93% year-on-year.

TCL Huaxing's performance rose against the trend. According to its parent company TCL Technology's financial report, in Q3 2021, its semiconductor display business achieved a revenue of 66.56 billion yuan, a year-on-year increase of 106%; The net profit was 9.74 billion yuan, a year-on-year increase of 16.2 times.

Through the panel cycle under the new logic, what does TCL Huaxing rely on?

02

Full size layout to meet multi-dimensional needs

Under the cyclical fluctuations with demand changes as the underlying logic, the most fatal problem for enterprises is excessive reliance on a single product/service.

The most mainstream demand downstream of the panel is TV and mobile phones.

For example, Shenzhen Tianma's core business focuses on the small-scale field. The main reason for the decline in performance shown in its third quarter report is due to the impact of macroeconomic conditions. As its application market, smartphones lack sufficient market demand momentum.

Full size layout is a great way out.