Panel makers forecast to maintain high fab utilization rates in Q3

The overall utilization rate of display panel fabrication (fab) plants is expected to remain high in the third quarter of 2017, recording similar levels for the fifth consecutive quarter, according to IHS Markit (Nasdaq: INFO).

Figure 1

Figure 1

According to the latest Display Production & Inventory Tracker by IHS Markit, the overall fab utilization rate is expected to reach 91 percent in the third quarter, up 1.8 percentage points from the previous quarter and up 1.1 percentage points from the same period last year.

Figure 2

Figure 2

“One of the main contributing factors for higher utilization rates in the past few quarters is that display panel makers are making sure their inventories are optimized at healthy levels,” said Alex Kang, senior analyst at IHS Markit.

Production of large LCD panels, which take the majority of overall display production in terms of area, is expected to be 2.2 percent higher than actual shipments in the third quarter. This is a result of display makers wanting to build contingency, or wriggle room, in their utilization plans as part of their strategy to offset any unexpected lower utilization rates, which could trigger off higher costs.

“As a result, panel makers’ inventory will increase, but it will still remain within healthy ranges,” Kang said.

According to IHS Markit, panel makers are expected to keep high utilization rate throughout the second half of 2017. As production capacity increase has slowed down and panel makers are expected to keep managing inventory levels within healthy limits, they will still have some room to stock up from production surplus volumes.

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