Samsung Display has temporarily ceased purchasing LCD panels after lower-than-expected demand for TVs has resulted in a surplus of unsold stock, according to a report in TheElec.
Sources say that the company, which recently brought forward the end of its in-house LCD production in favour of buying cheaper panels from other manufacturers, informed its suppliers in mid-June that the move would last until the end of July at the earliest or until the backlog is cleared.
Samsung's current inventory of LCD panels is apparently large enough to cover around 16 weeks of sales in the current market, far exceeding the seven to nine weeks' worth of stock the company operated pre-pandemic.
In 2020 global supply chain issues and a scarcity of shipping containers initially prompted the South Korean tech giant to increase the number of LCD units it shipped to overcome any potential lack of availability for consumers during the pandemic home entertainment boom.
However, the recent downturn in global markets has seen demand and sales drop this year across North America and Europe.
According to TheElec, in a recent strategy meeting, Samsung slashed its shipment target for the rest of the year from 45 million units to 40 million. That's down from 50 million in 2021, which was an increase of over 10% from 2020.
Analyst firms Display Supply Chain Consultants (DSCC), and Omdia have also revised their projections of the number of LCD panels Samsung is forecast to buy this year from 53 - 54 million LCD panels down to 44 million units.
Like many other TV manufacturers, Samsung Display's profits from LCD production have been declining for several years due to increased competition from Chinese and Taiwanese manufacturers. However, the COVID-19 pandemic saw a surge in demand for LCD TVs, with the average price index peaking at a record high of 87 in June 2021, 58% higher than where it stood last month.
Brands including LG, TCL and Sony have all followed Samsung's lead, dropping their annual shipping targets for 2022 and purchasing fewer LCD panels. Samsung Display's fellow South Korean counterpart LG Display is reported to be considering its own exit from LCD panel production and is expected to report a loss for the second quarter of 2022.
According to Omdia, the average display panel factory operation rate was at 77% in early June, down 4.5% from May and the lowest rate in five years. While unit price drops might mean low profitability for display panel companies, it could be good news for cash-strapped consumers looking to buy a new TV. With Prime Day just around the corner, bargain hunters are advised to keep an eye out for some excellent TV deals.
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