KYOTO, JAPAN: DisplaySearch reports in its Quarterly TFT LCD Supply/Demand and Capital Spending Report that 2008 is expected to see sales of equipment used to manufacture TFT LCDs surge 58 percent to $13 billion, reaching near historic levels not seen since 2004.

According to DisplaySearch Vice President of Manufacturing Research Charles Annis, “Despite dramatic module price declines, inventory build-up, lower fab utilization and macroeconomic concerns that have grown over the past month, only a small percent of the machines scheduled to ship this calendar year for manufacturing equipment, already ordered and are currently being assembled, are at risk of being delayed.”

Annis, the author of the report, continued: "Reduced fab utilization in July by panel manufacturers combined with seasonal demand affects could lead to healthier supply/demand in September and October. Panel makers still have aggressive expansion plans in place for 2009, but how the supply/demand balance plays out through the remainder of 2008 will determine how many official orders are placed for plans that are further out."

Just a few of the topics analyzed in great detail in the 10 chapters of the Q2’08 report include:

* Spurred by the large number of new fabs being built this year and ramping next, TFT LCD array capacity is expected to rise at a CAGR of 35 percent from 4.5M m2 in 2000 to more than 235M m2 in 2013. Color filter capacity is on a similar growth path, expanding from 5.3M m2 in 2000 to more than 253M m2 in 2013.

* Multiple older PDP lines are being shut down, especially those not able to meet 1080p precision requirements. Pioneer is completely withdrawing from PDP manufacturing; while LG Electronics is de-emphasizing its PDP business. On the other hand, Matsushita is pushing ahead with an enormous 16-up 42” equivalent PDP fab, while Chinese players Changhong and Nanjing Huaxian Technologies believe in a bright future for PDPs and are building new fabs. Huaxian plans to implement a novel shadow-mask-based PDP technology that avoids the barrier rib process and reduces costs.

* The top five LCD makers: Samsung, AUO, LG Display, CMO and Sharp, are forecast to continue to invest at the highest rates increasing their total share of capacity from 80.5 percent in Q1’08 to 82.5 percent in Q1’10.

* TV real demand is forecast to grow from 38M m2 in 2008 to more than 68M m2 in 2012. While there is some evidence that demand is shifting from larger to smaller TVs, more than 120 million LCD TV modules are expected to be shipped this year, and shipments are forecast to grow to nearly 200 million in 2012.

* Exposure is the largest single TFT LCD equipment segment. TFT array lithography tools alone are expected to generate more than $1.4 billion in revenue in 2008 and maintain this high level throughout the forecast range due to high average selling prices.

* In 2008, Korea will account for 40 percent of total TFT LCD equipment spending; Taiwan, Japan and China will have shares of 37 percent, 10 percent and 14 percent, respectively. Over the next couple of years, Japan will increase the amount it spends on TFT manufacturing equipment as Sharp builds the world’s first Gen 10 fab and IPS Alpha builds a large new Gen 8 fab. China is gradually increasing its relative amount of spending, but it is unclear how many of its many rumored future investment plans will actually come to fruition.

* In Q1’08, average panel maker pre-tax profit margins remained a high 19 percent. Four quarters of continued profitability combined with reduced capital spending in 2007 helped all panel manufacturers clean up their balance sheets. AUO, which reduced its Debt-to-Equity ratio from 0.96 in Q1’07 to 0.54 in Q1’08 and its Liability-to-Equity ratio from 1.41 to 0.95 over the same period is just one example of this. In 2008 and moving into 2009, this trend may reverse as panel makers start building new fabs and supply/demand issues are forecast to lower average large area profit margins from 14 percent in Q2’08 to only 4 percent in Q1’09.