The growths are due to several factors:
a) September is the end of Q3 for most brand makers, which will be active in pushing shipment;
b) Brands pulled in their stock in expectation of the production capacity loss during the National Day Holidays;
c) Distributors began to prepare for the coming year-end promotion in the US and Europe.
In terms of shipment outlook in October, although some of the brands are continuing preparation for the Q4 hot season, as most brands have already stocked up in advance in September, shipment in October is expected to drop slightly by 1-3 percent. SIs are also expected to see a 4-6 percent drop in October both due to the production capacity drop in the October and the fact that the September base period was higher to begin with.
Most notably, some brands with their own factories are impacted by lower-than-expected sales, resulting in production capacity stagnation. These brand makers have begun to increase their in-house manufacturing ratio while others have turned to producing all products with their own factories (i.e., Samsung). By increasing in-house production portion when end-market demand is sluggish, brands can have an edge in cost competitiveness and stabilizing its work force.
However, this practice will take a toll on the performance of pure SI makers, as they have to look for new clients without their own factories to remedy with the situation. WitsView pointed out that such change in business model highlights the importance of both vertical integration and having stable overseas shipment outlets when there’s a market downturn. Therefore, from Taiwan’s display industry, the critical challenge ahead is to search for overseas shipment outlets.
Source: WitsView, Taiwan.
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