Chinese corporations BOE and CSOT are reported to have begun adjusting their liquid crystal display (LCD) panel production due to the tariff barriers imposed by the Trump administration hampering their exports to the United States. Chinese corporations plan to actively target alternatives such as Europe and Asia instead of the U.S.; however, it is analyzed that securing clients in a short period is difficult and with the reduction of subsidies from the Chinese government, they have no alternative other than reducing production.
The production cuts by Chinese corporations, which had previously spurred competition in the global display market by aggressively pushing low-cost supplies, are likely to act as a boon for the domestic display industry. On the other hand, the tariffs on Chinese products could lead to rising prices for electronics and IT products in the United States, one of the largest markets, creating a challenging market environment for Samsung Electronics and LG Electronics.
According to industry sources on the 9th, the operating rates of factories for Chinese display corporations such as BOE and CSOT have gradually decreased. Lee Chung-hoon, CEO of market research firm UBI Research, noted, "It is a natural measure for Chinese corporations, which had been aggressively pushing low-cost display panels, to reduce production in response to the tariff barriers imposed by the U.S. on Chinese products."
Considering that Chinese corporations have been leading the supply glut in the large LCD and IT LCD fields, it is expected that LG Display, relatively free from tariff pressure, will benefit in its exports to the U.S. It is also anticipated that the price increase effects from supply adjustment will help improve profitability.
An official from the display industry stated, "With the influence of Chinese corporations diminishing in the IT LCD market, which accounts for 30-40% of LG Display's revenue, there is a possibility for improved profitability," adding, "As production cuts are expected to keep large LCD panel prices stable or rising, the advantages of large organic light-emitting diode (OLED) panels will be more pronounced."
However, there is a view that the reduction in the supply of finished goods and parts from China to North America, one of the largest markets, could lead to inflation and weak demand. In particular, many assembly corporations producing finished goods for the U.S. such as Apple, Dell, and HP are located in China, and if the tariff policies against China are prolonged, it is argued that this will suppress demand for electronic products and panels.
Lee Chung-hoon analyzed, "The adjustment of supply by Chinese display corporations is likely to lead to increases in the prices of finished goods," adding, "If the market size in the U.S. remains to some extent while blocking the entry of Chinese corporations, meaningful benefits are expected; however, if the market itself contracts, it will not be significant."
Meanwhile, market research firms are also predicting that the display market will see a general decline in LCD shipments this year, with growth in the OLED market. According to market research firm Omdia, it is anticipated that LCD TV display shipments will decrease by 2.2% compared to the previous year, while large OLED shipments are expected to increase by 20.4% in terms of units and 12.9% in terms of area compared to the previous year.