On April 7th, market research institutions released a report showing that panel manufacturers will maintain a capacity utilization rate of over 80% in the first quarter of 2025, but are expected to lower the utilization rate in the second quarter of 2025. As the demand for early stocking in the first quarter of 2025 gradually diminishes in the early second quarter, terminal equipment manufacturers are adopting a more conservative display panel procurement strategy.

Currently, the United States has officially implemented a 10% "minimum benchmark tariff" on its trading partners, and personalized higher "equivalent tariffs" imposed on some countries will also take effect at 00:01 Eastern Time on April 9th. Major industries and supply chains around the world are facing severe challenges. Currently, downstream LED panel equipment manufacturers are constrained by brand customer order cuts and declining demand. The overall capacity utilization rate is expected to decrease from 80% in the first quarter, to below 80% in April, and further decline to 76% in May 2025.

The dual impact of shrinking demand and tariff barriers

The chain reaction caused by the misalignment of stocking cycles. The early stocking by terminal manufacturers in the first quarter of 2025 to avoid future uncertainty has led to a decline in demand at the beginning of the second quarter. When the demand for LED display terminals shrinks, the demand for key components such as upstream chips and driver ICs also shrinks synchronously, but there is a lag in capacity adjustment. This may lead to the dual pressure of "lagging raw material price reductions and leading finished product price reductions" for LED display companies, exacerbating the pressure on their profits.

The decline in demand has led to a decrease in the capacity utilization rate of enterprises in the LED industry chain. A capacity utilization rate below 80% means that a large number of production equipment is idle, the operating costs of the enterprise increase, and the profitability decreases. In the case of insufficient demand, competition between enterprises becomes more intense. In order to compete for limited market share, companies may resort to unfair competition tactics such as price wars, which may exacerbate market chaos.

The combination of the 10% benchmark tariff and targeted equivalent tariffs in the United States has led to an increase in overall costs for export-oriented LED display companies. In order to maintain price competitiveness, LED display companies have to reduce operating costs, which directly compresses the survival space of mid to downstream LED industry chain enterprises. More seriously, the uncertainty of tariff policies has led to a lag in long-term order signing, and some customers may change their original quarterly orders to monthly rolling orders, further exacerbating the difficulty of capacity planning.

Response strategies of LED screen enterprises

Faced with the dual challenges of declining demand and tariff policies, LED screen companies need to adopt a series of strategies to cope.

Technological innovation is the key to enhancing the competitiveness of enterprises. LED screen companies should increase their R&D investment and strive to enhance the technological content and added value of their products. By developing high-end LED display products with higher resolution, lower energy consumption, and longer lifespan, we aim to meet the needs of high-end customers. This can not only enhance the product's premium ability, but also to some extent offset the cost pressure brought by tariffs.

Under the influence of declining demand and tariff policies, optimizing supply chain management is particularly important. LED screen companies should actively adjust and optimize their supply chain management, reduce production costs, and improve supply chain efficiency. At the same time, strengthen communication and cooperation with suppliers to ensure the stability and reliability of the supply chain. For example, reducing costs through centralized procurement, optimizing logistics, and other methods.

In order to reduce the risk of dependence on a single market, LED screen companies should actively expand into diversified markets. In addition to the traditional European and American markets, Southeast Asia, the Middle East, Africa, and other regions have become emerging markets for LED display exports overseas in recent years. The market competition in these regions is relatively weak, providing broad development space for LED display companies in China. By collaborating with local businesses, we can better understand market demand and provide products and services that meet the needs of local consumers.

At the same time, it is necessary to strengthen brand building and marketing strategies. Brand building and marketing strategies are crucial for enhancing a company's visibility and reputation. LED screen companies should showcase their strength and product advantages through participating in international exhibitions, holding product launches, and other means. At the same time, strengthen communication and cooperation with industry associations, chambers of commerce, and other organizations to jointly promote the healthy development of the industry.

Strengthening industry cooperation and collaboration is particularly important when facing common challenges. LED screen companies should establish close cooperative relationships with upstream and downstream enterprises in the industry chain to jointly cope with the challenges brought by the decline in market demand and tariff policies. Enhance the competitiveness of the entire industry chain through sharing resources, collaborative innovation, and other means.

Industry insiders say that with the slowdown in demand and the impact of uncertain factors such as tariffs, LED panel factories are shifting from a high capacity utilization mode to a single production mode. The display panel market is entering a new cycle and is expected to stabilize in the second half of 2025. This round of cyclical fluctuations may drive some LED display companies to transform from disorderly expansion and extensive operation to refined and high-end operation.

When the capacity utilization rate falls below the critical point of 80%, LED display companies will face certain operational pressure. The elimination of excess capacity makes room for technological upgrading, while tariff pressure forces the formation of a new balance in the global supply chain. For LED screen companies, this is not only a challenge but also an opportunity to restructure their competitiveness. Only enterprises that adhere to technological innovation, optimize business structure, and deepen customer stickiness in this new wave of volatility can seize the opportunity in the next expansion cycle.

Although the current LED display industry faces many challenges, the future is still full of opportunities. With the continuous advancement of technology and the expansion of the market, LED display products will be applied in more fields. For example, LED display products will play an increasingly important role in fields such as smart homes, smart cities, and virtual reality. At the same time, with the gradual recovery of the global economy and the improvement of the trade environment, the export market of the LED display industry will also usher in new development opportunities.