Demand spurs further panel price increases in 1HApr

TAIPEI, TAIWAN: According to WitsView’s forecast for Apr09, downstream clients will continue to show a strong demand for monitor and TV panel products. Amid the tight supply of some components and high demand of the below 40W segment, capacity allocation between the TV and monitor panels of the G6 lines has been difficult.

As the shortage of some panel sizes will persist until Apr09, downstream clients will make sure a sufficient amount of inventory is replenished. Thus, this will help allow both monitor and TV panel prices to see additional increases. In the monitor segment, the 16:9 products will experience a more notable price increase.

In the wake of the worldwide eco-friendly trend, white LED backlit 16:9 NB panels are projected to see a rising penetration rate in 2Q09. PC brand vendors are set to launch several new models during 2Q09 in replacing the original CCFL backlit 16:10 products. Due to the different material costs, white LEDs are $5 or more expensive than CCFL backlights.

However, the intense market competition has prompted panel makers to adopt a very aggressive pricing strategy. Still, as the large-sized NB market remains sluggish, and the fact that the panel price of the LED NBs is still lower than the cash cost (see figure), panel makers have been forced to readjust their pricing. For Apr09, there is a chance for the LED NBs to experience a small price rebound. Meanwhile, prices for the 16:10 products are expected to stay flat.

There have been market rumors of China planning to extend the number of Labor Day holidays in May in stimulating the local market demand. The Guangdong provincial government has even been the first to announce such an extension. However, China’s government has officially stated no such decisions have been made whatsoever.

Either way, TV brand vendors are still aggressively preparing for this important event. The inventory restocking and shortage of some components has made the panel supply tight. As most of the demand is concentrated in the 32W and below, the glass substrate consumption of the G7 and above is limited. This will create further price pressure on the 40W and above panels.

In general, there are still many uncertainties surrounding 2Q09. First of all, Q2 remains a traditional slow season. Coupled by the still existing global macroeconomic woes, if most of the panel demand is due to the inventory replenishments and not from the end market, a market readjustment will be seen in May09.

In addition, in Q2, at least six new production lines, one G5.x, two G6 and three G8.5 lines, are set to come online. By also taking into account the recent utilization rate increases of the production lines in Taiwan and China, if the 40W and above do not see an notable demand increase from the end market, it will undoubtedly lead to an excess supply of monitor panels. This will be especially notable during Jun09. This is because June marks the quarterly end and mid-year financial accounting, thus the inventory and sales pressure will be big.

On the other hand, if demand of the large-sized panels grows too sharply, it could stem from consumers purchasing ahead of the traditional strong latter half of the year. Thus, WitsView believes amid the influx of rush orders, the utilization rates must be effectively controlled. This avoids any potential oversupply from occurring again. Moreover, amid the still unclear market visibility, it avoids any excess panel ordering, which if it occurs again could seriously impact the component supply chain. Taiwan-based panel makers should be especially careful on this matter.

The panel prices for 1H Apr. will be released by WitsView on April 3.