LCD factory utilization rate is expected to decline in the second quarter, lower than the first quarter! Chinese manufacturers are waiting and watching

CINNO Research Industry Information, according to a report by Korean media thelec, the display industry predicts that the utilization rate of global LCD factories in the second quarter of this year will be lower than that in the first quarter. This is because before the second Trump administration imposed tariffs, the whole machine manufacturers and channel manufacturers began to stockpile inventory from December last year, and the uncertainty that caused the stockpiling has not been eliminated yet.
US President Trump announced on the 1st local time that an additional 10% tariff would be imposed on Chinese imports and a 25% tariff on Canadian and Mexican imports. The additional 10% tariff on Chinese imports took effect on the 4th. The 25% tariff on Canadian and Mexican imports was suspended for one month. The display industry believes that "the additional tariffs on Chinese imports are not as high as expected." During the presidential election in November last year, Trump declared that all Chinese imports would be subject to tariffs of up to 60%. At the same time, whether the US government will impose a 25% tariff on Canadian and Mexican products, and whether it will impose tariffs on products from Vietnam, one of the three largest trade deficit countries in the United States, has also become the focus of industry attention. That’s because the additional tariffs on Chinese imports aren’t high, and if tariffs are imposed on products made elsewhere, they could offset the impact on Chinese imports. As of the end of last year, the United States did not impose tariffs on most display devices imported into the country, such as personal computers, monitors and smartphones, regardless of the country of origin. For TVs, a 3.9% tariff is imposed on TVs made in other countries, except Mexico (0%) and China (11.4%). Last year, the tariff on Chinese-made TVs was 11.4%, which was the sum of the regular tariff (3.9%) and the 7.5% punitive tariff imposed on Chinese-made TVs since the fourth quarter of 2019. After the US government imposed an additional 10% tariff in February this year, the tariff on Chinese-made TVs will reach 21.4%, and the tariff on other Chinese-made products will be 10%. Since the outbreak of the US-China trade war in 2019, the proportion of Chinese-made TVs in the US imports has dropped to 10% in 2023. In 2023, the proportion of Mexican-made TVs was the highest, reaching 78%. If the U.S. government imposes a 25% tariff on Mexican-made TVs, the rate will be higher than the 21.4% tariff on Chinese-made TVs. Of course, the possibility of the U.S. government imposing additional tariffs on China cannot be ruled out. Since December last year, channel manufacturers and TV manufacturers have been stockpiling TV and panel inventories respectively in order to prepare for Trump's tariff measures. However, uncertainty remains. At present, companies lack the motivation to stockpile further.
This is also the reason why the industry expects global LCD factory utilization rates to be lower in the second quarter than in the first quarter. The global LCD factory utilization rate is expected to be in the mid-to-late 70% in the first quarter and in the upper 70% in the second quarter. "TV manufacturers and panel manufacturers have slightly increased component orders since December last year, but after reaching a peak in March, the order volume may decrease again," said an industry insider. "As TV demand remains weak, some component orders in the first quarter may be postponed to the second quarter," he added. Generally speaking, the utilization rate of LCD factories in the second quarter is higher than that in the first quarter. In the first quarter after the year-end sales season, companies usually consume inventory, and from the second quarter, they tend to stock up on panels and components for TVs sold in the second half of the year. Another industry insider said: "The utilization rate of LCD factories in the second quarter will be lower than that in the first quarter," but also commented that "part of the demand in the first quarter was brought forward to the second quarter, which is an internal adjustment of production in the first half of the year." He said that "uncertainty caused by the US government's tariffs still exists" and predicted that "in the short term, Chinese panel manufacturers will continue to wait and see."