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IHS: demand for TVs, monitors and tablets has ‘weakened significantly’

End-market demand for TVs, monitors, notebooks and tablets has “weakened significantly” this year, according to IHS.

The research firm claims that the demand outlook has deteriorated due to a “variety of product and economic reasons” – especially the rise of the US dollar against most other global currencies, which has caused local prices for a variety of consumer electronics products in many countries to rise.

IHS said that large-area, thin film transistor LCD displays have remained profitable since the end of 2012, with profit margins reaching 10% in the first quarter of 2015, their highest level since the first half of 2010. However, these profit margins are forecast to fall to 0% in the fourth quarter.

According to the report, high factory utilisation rates at leading panel makers, and swelling inventories at TV set makers, are now pressuring prices and margins downwards, with many large panel sizes currently selling at “marginal profits.”

“At least for now, panel makers have decided to keep utilisation high and minimise overhead costs, in order to chase as much profit as possible while they are still able to. The downside to this strategy is that panel inventories at set-makers have ballooned, widening the gap between TV panel shipments and TV set shipments,” said Charles Annis, senior director at IHS.

The research firm said that as this excess inventory is sold down, panel prices are also expected to “decline rapidly”, with large-area display profitability likely to follow the same pattern.

At the same time, a substantial number of new factories are currently ramping up production, with dedicated capacity for large-area displays will grow at a rate of 6% in 2015 and 8% in 2016, the highest rates in several years, according to the report.

“Growing concerns about the global economy and its effect on end-market demand – combined with high utilisation rates, inventories at set makers and increasing capacity – will likely weigh heavily on large-area display profit margins for the remainder of 2015 and even well into 2016,” said Annis.