In 2021, shipments of notebook computer panels increased quarter by quarter with record highs posted in each quarter. In addition to strong demand for display terminals, panel makers continued to invest in capacity and resources for notebook computer panel production. With notebook panel shipments hitting a record high in 2021, panel makers also set fairly aggressive BP targets for 2022.
Panel makers shipped 187.7 million notebook panels before the COVID-19 outbreak in 2019 and up to 287.9 million in 2021, an increase of more than 50% in two years. In 2022, panel makers planned to grow by an additional 14.1% to 328.5 million units. With such high expectations, the sudden shipment revisions in 1H22 were urgent and violent, catching panel manufacturers off guard.
In 1H22, terminal demand and inventory problems materialized at the same time
The Russian-Ukrainian war in 1Q22 had a dramatic impact on oil production capacity. In addition, strong terminal demand in the past few quarters drove up the prices of various commodities, causing the annual growth rate of inflation to climb, in turn changing interest policies from central banks to focus on suppressing terminal demand and inflation, and leading to plummeting terminal demand.
Shipments of whole devices in 1Q22 were lower than single-quarter shipments of any quarter in 2021, meaning pandemic-induced demand had weaker since the outbreak of COVID-19. However, China imposed restrictions to prevent resurgences of the pandemic in 2Q22. These measures affected the assembly capacity of notebook computer OEMs, and also reduced 2Q22 notebook computers shipments by 17.7%. Looking into the background of 2Q22, when China’s lockdown measures were implemented, brands did not scramble to request OEMs resume production and supply as they had in the past two years. Instead, brands lowered their annual BP and component orders, reflecting that when brands express a bearish attitude regarding waning pandemic-induced boons and pessimism towards future demand, canceled orders in the supply chain is unavoidable.
Before 1Q22, panels have always resided on the top 3 list of notebook computer components. Therefore, notebook computer brands have adopted overbooking and accumulated inventory in the past two years to respond to strong terminal demand and support performance. The average supply-demand ratio for the past 12 years of whole notebook computer panel devices fell at 12.5%. The supply-demand ratio exceeded the long-term average of more than 18% beginning in 3Q21, reaching an ultra-high level of 28% in 1Q22. A relatively high supply-demand ratio means that panel inventory on the brand side accumulated to a certain extent in 2H21 and rose sharply in 1Q22. A higher inventory level will lead to future revenue support when demand is strong but, when market demand reverses, high inventory becomes a heavy burden on financial reports.
In 2Q22, notebook computer panel shipments dropped by 24.3% QoQ, and this quarterly decline was much higher than the 17.7% QoQ decline in shipments of whole devices. This means that brands have begun to curb inventory and greatly reduce panel purchases. Looking at a wider perspective, the beginning of every downward economic cycle related to consumer electronics is accompanied by demand reversal and inventory problems. The Russian-Ukrainian war was only the last straw that led to this reversal．