TFT-LCD Panel Prices Peak: Display Cycle Softening, Valuations Less Attractive

The May 2026 panel price data confirm that the TV price hike cycle has ended, with IT panels also approaching a plateau. The fundamental outlook for core display earnings is weakening, and current valuations for Taiwanese panel makers already price in peak-cycle dynamics. We prefer BOE (000725.SZ) over its peers due to scale, display concentration, and cheaper valuation.

TV Panel Prices: Momentum Breaks, Downside Ahead

Conclusion: Mainstream TV panel prices (32″–75″) were flat MoM in May, ending the modest uptrend that began in early 2026. This aligns with the view that the restocking tailwind is fading and prices will start trending down from 3Q26.

Evidence: After rising 1–2% MoM in Jan–Mar and flattening in April, all five major TV sizes were unchanged in May. Demand slowed as early pull-ins for the Winter Olympics, World Cup, and China 618 tapered. On the supply side, panel makers cut utilization during the May holiday to match output with orders. Quarterly average prices for 2Q26 are still expected to show a low-single-digit QoQ increase, but that masks the loss of momentum into June.

Investment implication: TV panel shipments will likely be below seasonal norms in 2H26 given the strong 1H base. This weakens panel makers' pricing power. The direction of TV panel prices points downward from 3Q26, though supply discipline (utilization ≤85%) limits the magnitude of decline.

IT Panel Prices: Stable Near-Term, Structural Overhang Looms

Conclusion: Monitor panel prices edged up 0.4% MoM in May and NB prices were flat. IT panels should hold up relatively better than TV over the next few quarters, but the medium-term threat from Gen 8.6 OLED ramp-ups adds pricing pressure.

Evidence: Monitor demand remains more consistent with seasonality, allowing panel makers to retain the upper hand in price negotiations. NB panel makers are less optimistic on 2H26 demand due to rising component costs and tight supply of key parts, hence they moderated price hike requests in 2Q26. Meanwhile, the ramp of Gen 8.6 OLED fabs in Korea and China will eat into LCD-based IT addressable markets (especially NBs and tablets), creating structural downward pressure on pricing.

Investment implication: Near-term IT panel pricing stability provides a temporary cushion for earnings, but the structural shift to OLED in IT will pressure LCD margins over time. Panel price declines in IT are expected to start later (4Q26) than TV, but the direction is also negative.

Industry Dynamics: Structural Supply Discipline but Cyclical Softening

Conclusion: The display industry has shifted to a "production-to-order" model with consolidated supply, which will prevent a sharp price crash. However, the current cycle is peaking, and the core display business will soften in 2H26.

Evidence: Utilization averaged 80–85% in 1Q26 and is expected to stay there in 2Q26. Chinese panel makers have prioritized profitability over volume, with fewer subsidies reinforcing discipline. Recent consolidation (LG Display's Guangzhou fab sale to TCL, Sharp's Sakai fab shutdown) supports a healthier supply backdrop. Nonetheless, the price-hike cycle is ending, and the contribution from emerging businesses (e.g., glass for advanced packaging) remains small and speculative in the near term.

Investment implication: While structural changes improve the floor for pricing, the cycle itself is turning. The favorable risk/reward from price momentum has passed. Emerging business optionality is real but too distant to support current valuations for Taiwanese names.

Risk/Reward: Valuations Less Attractive, Prefer BOE

Conclusion: Valuations for Taiwanese panel makers (AUO at 0.9x P/B, Innolux at 1.3x P/B) are at or above mid-cycle averages, leaving limited upside from the display cycle. BOE (1.1x P/B) offers a better risk/reward due to scale, a higher proportion of display revenue, and lower relative valuation.

Evidence: AUO trades at 0.9x 2026e P/B vs. its 0.8x mid-cycle average since 2022; Innolux at 1.3x vs. 0.5x mid-cycle. The premium reflects hopes for FOPLP and advanced packaging, but these will take time to contribute meaningfully. BOE (1.1x P/B) vs. its mid-cycle average of 1.2x appears cheaper than TCL (1.5x vs. 1.4x mid-cycle). BOE also has greater scale and concentration in display, making it a purer play on the cycle without conglomerate discount.

Investment implication: On an equal-weight basis for TW panel names, we have a relative preference for BOE. The risk/reward for AUO and Innolux is less attractive given the peaking cycle and lofty valuations. Investing purely on the emerging-business theme seems speculative at current levels.

Key Risks

• Stronger-than-expected end demand could extend the price-hike cycle and push shipments above seasonal, improving earnings for all panel makers.
• Aggressive output cuts by major panel makers could support prices even as demand softens, narrowing the downside.
• Faster progress in non-commodity display businesses (advanced packaging, FOPLP, OLED) could unlock upside to earnings and justify higher multiples.

Appendix Data Summary