Panel prices keep falling on weak demand

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Panel prices keep falling on weak demand

Owing to holidays and persisting market uncertainty, average utilization rates in 1Q09 for panels are projected to fall to roughly 65 percent, says WitsView

Wednesday, December 10, 2008

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TAIPEI, TAIWAN: Based on WitsView's market survey, mainstream IT panel prices fell by 6~9 percent ($5-6) in 1HDec, while TVs dropped by 5-10 percent (about $10-30). Due to the lack of a strong local brand support, the utilization rates of the Taiwan and China-based panel makers have declined to historical lows, promoting them to drastically reduce their 2009 capex.

Although the sharp Korean Won depreciation and strong local brand support has allowed the Korean players to rapidly expand their market share, the financial pressures are growing too, as profits are sharply dragged down by the falling panel ASP. In the last month of 2008, panel makers must also deal with the year-end inventory accounting. To obtain more cash, they have been forced to sell their products at near or below the material cost level. At the moment, there is still no evident sign that prices have hit bottom.

WitsView analysts said the average utilization rates of panel makers have fallen to roughly 70 percent in 4Q08. Given the four-day New Year and nine-day Chinese Lunar New Year holidays, there will be fewer working days in Taiwan during Jan09. Coupled by the persisting market uncertainty, the average utilization rates in 1Q09 are projected to fall to roughly 65 percent.

The rate of decline in the panel output is already outpacing the drop in demand. In addition, to minimize losses, more moderate panel price quotes are expected to be offered by panel makers. They should gradually become more inclined by producing on a by-order basis.

Whether the TFT-LCD industry hits bottom in the 1Q09 largely depends on the panel makers' "attitude". Naturally, the general market environment is also an important factor. But if market share expansion is no longer the primary goal of panel makers, there is a chance to see prices stop falling. By contrast, if market share is still the priority, despite prices having already declined to the material cost level, the cut-throat competition is set to only worsen further.

©CIOL Bureau

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