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FOR IMMEDIATE RELEASE: 11/22/2021


Flat Panel Display Revenue Hit All-Time High in Q3’21 but Profits Slipped
Bob O'Brien, Co-Founder, Principal Analyst

Ann Arbor, MI USA -

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Flat panel display maker revenue reached a new record in Q3’21, but declining LCD panel prices dented profits, according to the summary of their financial performance in DSCC’s Quarterly Display Supply Chain Financial Health Report (一部実データ付きサンプルをお送りします).

With all panel makers reporting their Q3’21 results, we can compile a full industry review for Q3’21; while not reaching the high profits of Q2, it was still an excellent quarter for flat panel makers.

The first chart in this section shows quarterly revenues for the 14 publicly traded panel makers. Total revenues increased by 4% Q/Q and by 27% Y/Y to $39.3B, a new all-time high. Starting in Q1’21, BOE passed Samsung and LGD for the top position in revenue share and maintained its lead in Q3 with revenues of $8.7B. Samsung revenues increased by 25% Q/Q and SDC’s share increased to nearly 20% while LGD’s share decreased to 16% with flat revenues. The two Korean giants remain #2 and #3 in revenue share as the only other companies with a double-digit share. Then there is a cluster of four companies between 8% and 9% share: AUO, Innolux, CSOT and Sharp, each with revenues in the range of $3.3B - $3.6B.

Flat Panel Display Maker Revenues, Q3 2019 to Q3 2021

Source: DSCC Quarterly Display Supply Chain Financial Health Report (一部実データ付きサンプルをお送りします)

The effect of the Crystal Cycle is clearly shown on the next chart of industry margins. The increase in LCD panel prices for TVs and IT products increased gross margins and EBITDA margins for five straight quarters to a peak in Q2’21 and the down part of the cycle started in Q3. Industry margins declined by 2% from their all-time highs set in Q2’21 but remained at historically high levels.

Note that these margin figures exclude certain companies from certain metrics: for example, Samsung reports operating margin for its display business, but not pre-tax or net margin. Nevertheless, the series is consistent over time, clearly demonstrating the industry’s long descent from 2017-2019, sharp recovery in 2020-2021 and the peak in Q2’21.

Display Industry Margins, Q1 2016 to Q3 2021

Source: DSCC Quarterly Display Supply Chain Financial Health Report (一部実データ付きサンプルをお送りします)

During the last down-cycle, display industry operating profits in 2018-2020 were dominated by Samsung Display, but with rising LCD panel prices, BOE took the top spot starting in Q1’21. In Q4’20, SDC’s operating profit of $1537M captured nearly 40% of the industry total, but in Q3’21 SDC’s share of industry operating profits remained less than 25% while BOE operating profits of $1.9B took 35% of industry profits. Ten of the 13 panel makers reported operating profits and eight companies reported operating profits greater than $100M for the quarter. The companies performing poorly were all focused on smaller panels and/or OLED: EverDisplay, JDI and Visionox. The total industry operating results decreased by 10% Q/Q but increased by more than $4B or 341% compared to a year ago.

Panel Maker Operating Results, Q3 2019 to Q3 2021

Source: DSCC Quarterly Display Supply Chain Financial Health Report (一部実データ付きサンプルをお送りします)

Net profit figures exclude Samsung and Sharp, which do not report net profits of their display businesses, but the rest of the display industry posted a net profit of $3.5B in Q2’21, the second highest total ever. BOE led the industry with a net profit of $1.1B, followed by Innolux, AUO and CSOT.

EBITDA by company is shown in the next chart, and EBITDA for the industry decreased by 9% Q/Q but increased by 135% Y/Y to $5.8B, also the second highest level ever. All ten panel makers reporting this result recorded positive EBITDA in Q3’21, with JDI and Visionox crossing into the plus column in the quarter. BOE again held the top spot in EBITDA with $1.9B in the quarter, but LGD, Innolux and AUO each recorded more than $1B in EBITDA. EBITDA totals exclude Samsung, Sharp and CSOT, which do not report depreciation/amortization for their display businesses separately.

Panel Maker EBITDA, Q3 2019 to Q3 2021

Source: DSCC Quarterly Display Supply Chain Financial Health Report (一部実データ付きサンプルをお送りします)

Turning to company balance sheets, we see a clear warning that the industry has shifted to oversupply in Q3’21. While panel maker inventories were constrained by tight supply in the second half of 2021, inventories have been increasing since Q4’20 and total industry inventory increased by more than $2B in Q3, up 17% Q/Q and 73% Y/Y. Inventory days increased by six days Q/Q and by ten days Y/Y to 40. High inventory will put continuing pressure on panel prices.

Panel Maker Inventory Value, Q3 2019 to Q3 2021

Source: DSCC Quarterly Display Supply Chain Financial Health Report (一部実データ付きサンプルをお送りします)

Profits in the last several quarters have allowed several panel makers to reduce their debt burden, or at least to reduce debt/equity ratios by increasing equity. BOE’s debt/equity ratio was reduced from 110% at the end of Q3’20 to 62% at the end of Q3’21, and LGD trimmed their debt/equity from 118% to 92% and AUO improved debt/equity from 66% to 29% in the same time frame. With strong Q3 profits, many panel makers increased their cash positions, so net debt/equity ratios improved even further. LGD’s net debt/equity decreased from 90% at the end of Q3’20 to 63% at the end of Q3’21.

Historically, panel makers have been notorious for their miserable performance on free cash flow (FCF). In prior Crystal Cycles, periods of profit were typically accompanied by heavy capital investment, so FCF was minimal at the top of the Crystal Cycle and negative at the bottom. In 2018, industry FCF was a negative $7.2B, and the industry booked another $5.1B of negative FCF in 2019. Increasing profits in the second half of 2020 allowed the industry to reach positive FCF for the full year 2020 at +$1.0B. The industry reported its fifth consecutive quarter of positive free cash flow in Q3’21 for the first time since at least 2015, and the second highest level of free cash flow ever, behind only Q2’21. BOE, Innolux and AUO booked more than $500M of FCF in the quarter and the industry booked $3.4B. Only newcomer EverDisplay and troubled JDI failed to record positive free cash flow.

Panel Maker Free Cash Flow, Q3 2019 to Q3 2021

Source: DSCC Quarterly Display Supply Chain Financial Health Report (一部実データ付きサンプルをお送りします)

The increase in demand for flat panels for both IT and TV, and the corresponding increase in panel prices, lifted the fortunes of panel makers across the industry in the best upswing of the Crystal Cycle in the history of the industry. The companies which benefitted most during the upcycle concentrated on LCD panels for large-area applications; this includes the Taiwan panel makers but also CHOT, BOE and CSOT in China. With the start of the downcycle in Q3’21, profit margins tended to converge among panel makers. TV-centric panel makers, which had exceptionally high margins in Q2, saw a decline in margins as LCD TV prices fell. Panel makers focused on small panels, including CPT China, JDI and EverDisplay, showed improved margins in Q3.

Q3’21 was the most profitable quarter in the history of the industry, except for Q2’21. Even with panel prices declining in the fourth quarter, 2021 will go down as the best year ever for flat panel display makers.

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Quarterly Display Supply Chain Financial Health Report

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