Omdia: Smartphone screen shipments to reach 1.388 billion units in 2023

According to the long-term forecast of smartphone panel shipments released by Omdia in July (Figure 1), the number of smartphone screen shipments in 2023 will be about 1.388 billion, which is basically the same as 1.377 billion in 2022. However, panel manufacturers feel that the market demand in 2023 is much worse than that in 2022. The main reason is that the market share of Chinese mobile phone manufacturers has declined, and the confidence of mobile phone manufacturers in maintaining the original market scale has further decreased, and product price wars have been launched. On the other hand, the Gen6 AMOLED and G8.6 a-Si LCD production capacity released by Chinese panel manufacturers has reached the key node of fulfilling the planned output at the beginning of the factory construction. All manufacturers want to strive for their own shipment growth in the market where the total demand cannot grow, which has caused the prices of smartphone panels of various technical categories to fall from the third quarter of 2022 to the second quarter of 2023. This strategy of replacing low-end products with high-end technology products, and the price is not only unable to maintain, but even falling, has driven the unit price of the smartphone market to fall rapidly, thereby causing a sharp decline in revenue scale (Figure 2):

According to the shipment situation of panel factories in the first five months of 2023, compared with the same period in 2022 and 2021, the shipment of smartphone panels of panel factories in April and May were higher than the same period in the previous two years (Figure 3), showing signs of recovery, but the growth mainly came from a-Si LCD. The shipments of LTPS LCD and AMOLED both showed a year-on-year decline (Omdia's monthly shipment data tracking does not include Visionox, Everdisplay Optoelectronics and Truly).

The growth of a-Si LCD is mainly due to two reasons: first, the channel inventory is very low, and the cell price has fallen to a historical low, so customers and agents actively replenished their inventory in March, causing the cell price of a-Si LCD to stop falling and rebound slightly. Second, HKC's Gen 8.6 line continues to release mobile phone production capacity, which has led to a significant increase in a-Si LCD supply.

The sharp drop in LTPS LCD shipments is due to smartphone brands upgrading LTPS LCD to AMOLED. Therefore, LTPS LCD manufacturers are also actively planning the transformation of LTPS LCD production lines. On the one hand, they lower prices to absorb low-priced orders from HD to FHD, and on the other hand, they accelerate the transition from mobile phone applications to other applications such as in-vehicle, IT and smart home. At the same time, Japanese manufacturer JDI withdrew from the Android smartphone market and stopped supplying LTPS LCD cells from the second quarter of 2023. In addition, OPPO and Samsung have upgraded some products from HD to FHD, which makes the LTPS LCD incremental cycle encounter the volume cycle of in-vehicle and smart home products. Tianma, Huaxing and BOE's LTPS LCD factories all experienced orders in the second half of the year. Therefore, not only will there be problems with the delivery of some projects that were quoted below cost, but the price of LTPS LCD will rebound, and the LTPS LCD business of panel manufacturers is expected to stop losses or even make a profit.

As for AMOLED, although the shipment volume has fallen year-on-year, the growth of AMOLED generally occurs in the second half of the year, and there has been a major structural change in AMOLED shipments in the first half of this year, that is, the flexible AMOLED of Chinese AMOLED manufacturers has replaced the rigid AMOLED of Samsung Display. Therefore, Samsung Display's smartphone panel shipments fell sharply year-on-year in the first five months of 2023 (Figure 4), but considering the low base of Samsung's AMOLED shipments to Chinese manufacturers in the second half of last year and the fact that the iPhone15 series screens have begun mass production, Samsung Display's AMOLED shipment decline will narrow in the second half of the year. AMOLED shipments of Chinese panel manufacturers will continue to grow in the second half of the year. Although there is still some gap from the full production of the previous panel factory, the flexible AMOLED group production lines of Chinese AMOLED manufacturers will gradually be fully loaded, so low-priced projects with serious losses will also encounter delivery problems. Although manufacturers' shipments and utilization rates have increased significantly, the price they paid was to reduce the price of flexible AMOLED to cash flow costs and even BOM costs. The increase in shipments to Android customers failed to bring performance growth, but instead exacerbated losses. Therefore, Chinese AMOLED manufacturers began to review their existing pricing and customer strategies, and low-price competition has come to a temporary end. The ramless solutions that brands used to further reduce the price of flexible AMOLED will be given the lowest priority in panel factories. However, even if there is room for price increases, Chinese manufacturers' flexible AMOLED business still has a long way to go to turn losses around. Panel manufacturers need to formulate reasonable product and customer combination strategies to stabilize the price of flexible AMOLED.

From the perspective of mobile phone brands, they also need to strengthen their awareness of risk resistance in product procurement strategies and cannot be blindly cost-oriented. Although there is an overall overcapacity, panel suppliers have customers in multiple fields after all. When the utilization rate is low, they grab orders at low prices, and when the utilization rate is high, they drop orders. This has always been the price adjustment method of panel manufacturers. Although the consumer electronics market is currently sluggish, products in various market segments are undergoing structural adjustments. No matter which application market the customers are in, it is difficult to make an accurate assessment of the demand in other application areas. Therefore, it is necessary to pay attention to the profit and loss situation of panel manufacturers and carefully evaluate the supply stability risks of the products supplied by suppliers.

This round of AMOLED shipment growth by Chinese manufacturers is aimed at replacing the market of Samsung's rigid AMOLED and their own LTPS LCD. Although the smartphone screen market has always relied on product upgrades to maintain the average unit price of screens, this product upgrade not only failed to maintain the average unit price, but also caused a sharp drop in the average unit price. Therefore, how to maintain the average unit price of the smartphone screen market in the future, increase the revenue scale of the smartphone screen market, and achieve real repair of the industry is probably a problem that the entire industry must seriously consider.