Large-sized LCDs set for Sept. recovery

Large-sized LCDs set for Sept. recovery

Panel production cuts, clearance of inventory and recovery in demand from TVs, desktop PC monitors and notebook PCs likely to shift supply/demand equation back to balance

Thursday, August 21, 2008

USA: After nearly three months of plummeting profitability and precipitous price plunges, the large-sized LCD panel market finally is due for a recovery in September, iSuppli Corp. predicts.

“The large-sized LCD panel market has been mired in a state of severe oversupply since the start of June, due to lower-than-expected panel demand and high inventory levels throughout the supply chain,” said Sweta Dash, director of LCD and projection research at iSuppli. “Conditions have worsened in August, with poor economic circumstances causing prices to decline at an even faster pace than before. However, panel production cuts, combined with the clearance of inventory and a recovery in demand from televisions, desktop PC monitors and notebook PCs are expected to shift the supply/demand equation back to balance in September. This will lead to a recovery in pricing.”

iSuppli defines large-sized LCD panels as those having a diagonal screen dimension of 10 inches or larger.

LCD suffer June swoon
After rising by 6.9 percent in May, global large-sized LCD panel unit shipments declined by 9.6 percent sequentially in June. Prices dropped by 4 to 7 percent for mainstream notebook, monitor and TV panels from May to June and another 3 to 15 percent in July, and are expected to decrease by 4 to 20 percent for the entire month of August.

Because of this, large-sized panel prices now are approaching the manufacturing-cost level, especially for some television and many monitor panels.

However, panel suppliers and equipment makers moved quickly this year to adjust to weakening market conditions.

“Reacting to weak sales and declining profitability, panel suppliers began to slash their utilization rates starting in July,” Dash noted. “LCD-TV and desktop PC monitor manufacturers also are starting to cut their prices in order to reduce inventories and boost end-user demand. These developments, along with recovering demand from the notebook segment, will bring stabilization to large-sized LCD panel pricing in September. Some panel prices may even increase by 1-3 percent especially those which are reaching at or below the cost levels.”

No Olympic gold for LCDs
Falling housing prices, struggling financial markets, a slowdown in the job market and rising inflation have resulted in a slowdown in consumer and corporate spending in the United States and worldwide. Despite the boost from the US government economic stimulus package, concerns are rising regarding second-half economic growth.

China's consumer spending on LCD-TVs was expected to be strong this year due to the impact of the Summer Olympic Games in Beijing. However, China suffered natural disasters in the first half of 2008 that have dampened consumer sales. In general, the Olympic sales pickup in China and elsewhere fell short of expectations.

On the supply side, LCD makers in the first half of the year shifted production of television panels away from sixth-generation fabs and into seventh- , 7.5- and eighth-generation facilities. Eighth-generation fabs are capable of producing large-sized panels much more efficiently than sixth-generation factories, boosting productivity throughout the industry.

This rising production contributed to declines in average LCD-TV panel prices throughout 2008, falling by as much as 15 to 20 percent from the start of 2008.

Monitoring monitors
LCD monitor panel prices for desktop PCs have already fallen by 20 percent to 25 percent since May. Panel suppliers reported about one to two weeks of excess monitor module inventory in July. Channel participants and brand vendors also reported two to three weeks of extra inventory in July.

Branded vendors in Europe and parts of North America have started cutting prices to reduce inventories. Because of this, orders for finished monitors began to increase in August and are expected to rise again in September.

Notebook troubles
Notebook panel prices have fallen by 12 percent to 16 percent since May. Second-quarter sales for notebook PCs were lower than expected, due to the increasing cost of key components, tight supplies in some other parts such as batteries, and order adjustments made for mid-year inventory.

While orders continue to be cut, the end-market demand remains to be the most resilient among large-area panel applications. Notebook OEMs and Original Design Manufacturers (ODMs) still are expecting at least 15 percent to 20 percent sequential growth in unit shipments in the third quarter, due to strong end demand.

©CIOL Bureau