China LCD panel industry analysis

The analysis of the effective protection rate of the tax rate adjustment is one of the issues that the government cares most about when formulating tariff policies. At present, the protection rate is usually used to measure the degree of protection of domestic industries by tariffs.

The protection ratio is divided into the nominal protection rate and the actual protection rate. Although the nominal protection rate is relatively simple and clear, due to the existence of intermediate products, it is not enough to explain the true degree of protection, because the result of protection will inevitably be affected by the protection of the processing link, not only the protection of the final product itself. In addition, an industry that competes with imported goods is not only affected by the tariffs imposed on imports, but also affected by the tariffs imposed on imported raw materials used by them. That is, due to the existence of intermediate products, the nominal protection rate has failed to reflect the effect of tariff allocation on resources. Therefore, this article mainly uses the effective protection rate to analyze the effect of the increase of LCD panel tax rate.

Compared with the nominal tariff rate, the effective protection rate examines the value-added process of production and measures the impact of the tariff on the production process of an industry. The difference in the effective protection rate of various industries causes the domestic production costs of the products to be different, so it is a better one. Indicate the direction of resource flow.

It is understood that the optical software of liquid crystal glass substrates and liquid crystal display backlight modules, which are the main intermediate products, each account for about 60% and 20% of the total cost of the liquid crystal panels; in 2012 and 2013, the liquid crystal glass substrates and optical software in China were respectively Implementation of a tentative import tax rate of 4% and 2%, while the nominal protection rate of liquid crystal panels increased by 2%, the effective protection rate increased by 10%. The calculation results show that the final high tariffs and low tariffs on intermediate goods can increase the effective protection; but under the conditions of large input and output coefficients, the intermediate tariff rate higher than the final tax rate will reduce the effective degree of protection, and even lead to negative protection. . Therefore, when China adjusts and optimizes the tax rate of LCD panels to protect and develop domestic industries, it must pay attention to adjusting and optimizing the tax rate of its intermediate goods, so as to avoid weakening effective protection effects and even negative effects.

Some scholars and people in the industry pointed out that the increase in LCD panel tax rate will increase the price of LCD panels and will cause greater pressure on domestic TV makers in a certain period of time. This requires in-depth analysis.

According to the "Tariff Tariff," China's LCD TVs, color analog TV receivers, digital TV receivers and other TV receivers have an import tariff rate of 30%. According to statistics from the National Development and Reform Commission, from 2001 to 2006, panel costs accounted for 80% of TV production costs, although in recent years it has fallen, but also about 70%; another important intermediate product LED LED input-output ratio is about 10 %, China imposes a minimum tax rate of 0% on it. According to this calculation, the import tax rate for LCD panels increased by 2%, although the effective protection rate of color LCD TVs can be reduced by 7 percentage points, but the decline is limited relative to the overall degree of protection, that is, LCD TV industry will be subject to LCD panel The adverse effect of the tax increase is limited but limited. If the dynamic effect of tariff protection is taken into account – the scale of production of the liquid crystal panel industry of the infant industry under the protection of tariffs will continue to expand, the production efficiency will continue to increase, and the cost and price will gradually decline, the input cost of the color TV will be gradually reduced, which will help to improve the color TV. The competitiveness of the industry, that is, the color TV industry will be able to win the advantages of sustainable development.

Since the beginning of 2009, China has adopted a trapezoidal tariff structure to protect the LCD TV industry and optimize the development environment for the industry. LCD TV output, export volume, and export volume have grown rapidly. The proportion of total color TV sets has steadily increased, such as 2009 to 2011. The output rose from 41.55 million units to 103.447 million units, and the export volume increased from 39.654 million units to 53.938 million units. The export value increased from US$9.386 billion to US$126.66 billion, indicating that the trapezoidal tariff structure has indeed played a certain industrial protection effect.

It must be noted, however, that trapezoidal tariff structures may be inconsistent with national industrial policies and are not conducive to the optimization of industrial structures—high protection of the final product will stimulate a large number of marginal producers to join in the production of the final product, resulting in inefficient expansion of the final product industry. The middleware industry is often slow to develop due to lack of effective protection. For example, the production scale of LCD TVs has expanded rapidly and there has been excess production capacity, while the LCD panel has been heavily dependent on imports. In 2012, the dependence on LCD panel imports was as high as 80%, and processing trade imports were prevalent, while LCD panel upstream accessories (such as semiconductors) Wafers, glass substrates, chips, etc. are more dependent on imports. Therefore, our country strives to avoid repeating the mistakes of the color TV industry. While protecting the LCD panel industry by raising the tax rate, we should pay attention to the protection and support of the upstream accessory industry so as to effectively increase the localization rate of LCD panels and optimize the industrial structure.

“The pain of lack of screen” prompted the adjustment of import tax rate in previous years. In order to reduce the import cost of LCD panels and support the development of electronic information industries such as domestic color TV sets, China’s implementation of lower levels of imports for some LCD panels without backlight modules Tax rate, such as the tax rate for liquid crystal display panels with 26-inch and above that does not include backlight modules adjusted to 3% in 2009, the tax rate for other LCD panels is 5%; in 2011, the tax rate below 32 inches is 5%, 32 inches and above The tax rate is 3%. These measures have played a catalytic role in the rapid development of China's LCD color TV industry, but at the same time, the core components of liquid crystal display panels have lagged behind due to lack of protection. They rely heavily on imports, and the long-term “painless screen” has also constrained the development of the color TV industry. .

The development of the color TV industry has led to an increase in the demand for LCD panels and has led to the flow of capital to the LCD panel industry. Over the past few years, many domestic LCD panel production lines have been launched one after another. The supply and demand conditions in the LCD panel market have changed, and the domestic LCD panel industry has emerged. With its naive industry characteristics, it should be appropriately protected.

As a result, the Ministry of Finance issued a notice to protect domestic child industries, reduce the dependence on related products, and promote the sustainable development of the LCD TV industry. Since April 1, 2012, it has imported 32-inch and above without backlight module. The liquid crystal display panel resumed 5% of MFN's import duty rate to improve the protection of the domestic LCD panel industry, and stimulated domestic OEMs to purchase domestic panels to create a favorable environment for their development.

The analysis of the equilibrium effect of import tax rate adjustment The analysis of the so-called partial equilibrium effect of import tariff is based on the assumption that the quantity of supply and demand for other markets and commodity prices remains unchanged. Only the changes in the price and quantity of taxable commodities and their taxation are considered. The market for taxable goods, without studying the impact of taxation on other markets, uses the power model of the country for analysis.

The theory of import tariff balance among big countries believes that increasing the import tax rate will have the following static partial equilibrium effect. Price effect: Decrease the world price (import price) of LCD panels, increase domestic sales prices; Demand effect: As domestic prices rise, domestic demand declines, and consumer welfare declines, it will increase the direct consumer of LCD panels - domestic downstream manufacturers ( For example, the cost of intermediate input products of TV manufacturers increases their competitive pressure, causing huge losses in their welfare, and may trigger a chain reaction, that is, raising the cost and price of domestic downstream manufacturers, further reducing the welfare level of the final consumers; Protection effect: As domestic prices rise, domestic production rises and producer welfare rises; Trade effect: As domestic demand declines and supply rises, import volume and import dependence decrease; Fiscal effect: Tariff collection will increase tariff revenue, ie The increase in government revenues; total welfare effects: There is uncertainty, mainly due to the balance of supply and demand, supply and demand elasticities of the two countries under the pre-tax trade equilibrium conditions.

The analysis of static partial equilibrium effects shows that protection of domestic industries by increasing import tax rates may be subject to uncertain risks of total welfare effects; however, if domestic industries can increase scale and improve production efficiency during the protection period, the negative effects of tariff can be reduced. Control is at a minimum or even eliminated to obtain dynamic welfare benefits. However, whether the dynamic welfare effect can be achieved depends on whether domestic manufacturers can expand the scale and increase production efficiency within a reasonable period of protection. Therefore, in order to implement domestic protection for an industry, it is necessary to adopt ways such as supporting research and development, encouraging innovation, protecting intellectual property, and strengthening competition, so as to increase the technology and production efficiency of domestic manufacturers.

In general, the collection of tariffs, in addition to impacts on imports and substitutes, has also led to changes in relative domestic prices that have led to factors of production between the tradable and non-tradable sectors, import substitution and export sectors, upstream industries and downstream industries. Transfers, thus affecting the general equilibrium of domestic production and consumption in importing countries.

The increase in liquid crystal panel tax rate will lead to an increase in the relative domestic prices of LCD panels, which will increase the owner's income of the intensive use of LCD panels, which will in turn cause investment increments and asset stocks to tilt toward the liquid crystal panel industry, eventually achieving the purpose of adjusting the industrial structure; LCD panel domestic prices, domestic production, and increased demand for intermediate products, which will be met through expansion of imports and/or expansion of domestic production; increase in input costs and product prices of downstream manufacturers (such as LCD TV manufacturers), impact Its output, sales, international competitiveness and development; increased social costs, resulting in loss of social welfare, such as the new consumption point where the indifference curve is lower than the inconsistency curve of the initial consumption point.

The empirical analysis of the tax rate adjustment effect Since the LCD panel tariff adjustment in April 2012, the import prices of LCD panels have shown a downward trend. For example, the import unit prices for 2009 to 2012 were US$19.01, US$18.71, US$16.73, and US$13.92, respectively; the import unit prices for the first quarter to fourth quarter of 2012 were US$15.59, US$15.67, US$12.54, and US$13.10, respectively.

In the same period, the import volume of LCD panels increased first and then decreased. In the first quarter to fourth quarter of 2012, the imports of LCD panels were 670 million, 7.4 billion, 1.11 billion, and 1.1 billion, respectively, which fell only slightly in the fourth quarter. The reason why it is contrary to theoretical analysis may be as follows.

First, the elasticity of demand for imported LCD panels is low. Imports of LCD panels mainly depend on domestic production needs rather than import costs, that is, output of LCD TVs increases (eg, production in the first three quarters of 2012 increased by 17.27%, 13.32%, and 5.18. %) The demand for LCD panels increased, while the negative growth of LCD TV production in the fourth quarter of 2012 was 6.82%, accompanied by a decline in the import volume of LCD panels.

Second, the import structure of LCD panels has been adjusted. That is, 32-inch and above LCD panels have fallen due to the increase in tax rates; LCD panels below 32 inches have shown relative advantages due to the maintenance of low tax rates, which has led to an increase in imports, which has exceeded the decline in large-size LCD panels, resulting in an increase in overall imports. However, due to the lower unit price of the small-size LCD panels, the unit price of the LCD panels as a whole is decreasing.

Third, there is a lag in tariff adjustment effects. That is, there is a lag between the signing of contracts and actual imports. In the initial stage of the implementation of the New Deal, its contracts may have been signed before the implementation of the New Deal, and only the original prices and quantities can be executed; however, imports have declined in the fourth quarter of 2012, indicating an increase in import tariffs. The effect gradually emerged.

It should be noted that China's LCD panel industry is gradually improving its competitiveness. From the second quarter of 2012, domestic LCD panel prices began to rise. TV LCD panels such as 32-inch, 40-inch, and 42-inch prices began to rise; BOE's 8.5-generation line produced 32-inch LCD panels, OpenCell Typical models from 2012 3 The month's 98 dollars rose to 104 dollars in late October and further rose to 106 dollars in late November.

Benefiting from the increase in tariffs, the output of the domestic LCD panel industry, especially the TV panel industry that has been protected in key areas, has grown rapidly. According to the "2012 Electronic Information Industry Statistical Communiqué", the global market share of LCD panels in China exceeded 10% in 2012, and domestic TV panel supply self-sufficiency exceeded 20%. Quzhi Consulting expects that China's TV panel shipments in 2013 are expected to increase year-on-year. 49.6%, global market share reached 16.2%; Citi thinks that China's LCD TV panel self-sufficiency rate is expected to reach 40% and 60% in 2013 and 2015. In terms of enterprises, BOE has leapt to the sixth place in the global LCD panel industry. And may be ranked fifth; in December 2012, China Star Optoelectronics 32-inch LCD panel product shipments ranked first in the world, outside the supply ratio of 60%.

At the beginning of 2012, domestic panel companies began to pick up, and by the third quarter, the performance began to turn positive and reversed the loss situation in consecutive years. Due to the consideration of keeping market share after tariff adjustment, the international giants also accelerated the transfer of production lines to the domestic market. The 8.5-generation lines such as Longfei Photoelectric Kunshan, Samsung Suzhou and LG Display Guangzhou started construction in 2012; BOE Chongqing and Hefei Xinxun 8.5 The line will also start construction in 2013.

However, it must be noted that the increase in the nominal and effective tariff protection rates for liquid crystal panels may lead to the rapid development of processing trade in liquid crystal panels: a large number of imported liquid crystal glass substrates and other intermediate products, a large number of export LCD panel products, such as the third quarter of 2012, LCD The export of the panel saw a large increase, breaking one billion (one billion US dollars) in one fell swoop, and lagging behind the import of liquid crystal glass substrates by one month, highlighting the processing trade characteristics of LCD panels to some extent.

The analysis of the effective tariff protection rate shows that increasing the nominal tax rate for LCD panels with a size of 32 inches or more will cause the domestic LCD TV industry to bear pressure and adversely affect its production and sales. As Skyworth Group stated, the biggest impact of tariff adjustment on TV makers is rising costs – panel purchases account for more than 70% of total machine costs, and liquid crystal panel tariffs are raised by 2%, putting significant cost pressure on television manufacturers. Affected by the lagging effect of tariff adjustment of LCD panels, domestic LCD TV production has shown negative growth in the fourth quarter of 2012 after maintaining a period of growth.

In 2012, China’s LCD TV shipments increased quarter by quarter, but in the third and fourth quarters, they have dropped by 5.99% and 2.74% year-on-year, with a limited decline, which is in line with the analysis of the effective tariff protection rate of LCD TVs.

In summary, using the effective tariff protection ratio and import tariff equilibrium theory, and using relevant data analysis in 2012, it shows that the policy objective of protecting and developing the domestic liquid crystal industry through the increase of import tax rates has begun to gradually realize, but there are still the following issues to be noted: Constantly adjust and optimize the tax rates of liquid crystal glass substrates, optical software and other intermediate products, avoid reducing the policy protection effect due to unreasonable tariff structure, and even lead to negative protection, or induce the proliferation of LCD panel processing trade, and repeat the core components of color TV industry, etc. It is difficult to effectively develop domestic industries and enhance industrial structure by relying on the dependence of intermediate goods on high externalities; various preferential measures are implemented for the LCD panel industry and even its core component industries to encourage investment in R&D, expand scale, and increase production efficiency and international competitiveness. To realize the dynamic equilibrium effect of tariff protection as soon as possible, reduce or even eliminate the negative effects of tariff protection. (Author: Department of Economics and Business Administration, Shanghai Customs College)