Holiday sell-through for LCD TV unexciting
Our industry checks indicate that North American LCD TV holiday demand
was lackluster and may have just met the low end of expectations, with low
single-digit yoy growth. We believe that set makers’ comments and industry
datapoints at the upcoming 2013 International Consumer Electronics Show
(CES) will corroborate our checks. Moreover, this raises the possibility that
LCD TV inventory levels may not be lean and that a normal seasonal panel
shipment correction (10%-15% qoq decline) could be possible in 1Q13.
We expect aggressive tablet volume targets
Meanwhile, smartphones and tablets did relatively well during the holiday
period. We expect this to continue in 2013 and tablet shipments to reach
167.8mn units, up 41.3% yoy, in 2013. However, early datapoints indicate
industry expectations are rising and set makers’ shipment targets following
suit, implying upside risk to our 2013 tablet shipment assumption.
Ultra high definition or AM OLED?
We expect TV set makers to showcase two new flat panel technologies at
CES: ultra high definition (UHD) TVs and AM OLED TVs. While most major
TV set makers will have UHD LCD TVs, we believe that only Samsung
Electronics (SEC) and LG Electronics (LGE) may showcase 55-inch AM
OLED TVs. We believe that SEC and LGE may position UHD LCD TVs as the
super premium TV of today and AM OLED as the premium TV of tomorrow.
Smart TV not a replacement cycle catalyst due to lack of killer app
Smart TV has historically been a hot topic at CES, but without a meaningful
killer application, we do not expect them to be a replacement cycle catalyst.
As such, we would caution against getting caught up in the Smart TV hype.
Buy Nitto Denko (on CL), Samsung Electronics, and Samsung SDI
Better-than-expected tablet demand could be positive for Nitto Denko and
Samsung SDI on better component demand. Meanwhile, we believe SEC
will use CES to demonstrate its product/technology leadership in consumer
electronics. Maintain Buy on Nitto Denko, SEC, and SDI. In our view, 1Q13
seasonal TFT-LCD panel correction could result in weaker short-term share
sentiment for panel makers (LG Display) and glass companies (Asahi
Glass) as expectations were previously for a milder correction.