Prices of LCD monitor panels rising?

EL SEGUNDO, USA: Recently, it was reported by iSuppli Corp.'s LCD PriceTrak Service that prices for LCD monitor panels were rising, despite the weak economic situation and cuts in consumer spending.

I got into a conversation with Sweta Dash, director of LCD Research at iSuppli to find out more. Excerpts:

CIOL: What are the reasons for the LCD monitor panel prices to be doing reasonably well in these times?

Sweta Dash: Panel demand is strong due to “China’s rural consumer stimulus program”, which increased sales of small size TVs that uses monitor panels. Also panel demand was strong from branded manufacturers due to inventory adjustments.

Monitor brand manufacturers and retail channel orders mostly stem from demand for inventory replenishment because they have kept their stockpiles at lower-than-normal levels since the end of 2008. Now factory demand is strong as they need to buy panels for inventory adjustments.

CIOL: Is China's rural customer stimulus program the only major factor behind this?

SD: The other factor is inventory adjustment by brand manufacturers. TV sales in the US were also better than expected due to very aggressive prices by brand manufacturers. Some retailers reported that they couldn’t meet their demand due to low inventories level. Now they are trying to adjust inventory level.

Besides better than expected demand for TV and monitor panel, severe cut in factory utilization rates (severe cut in panel production) also contributed to the tight supply for the monitor panel and small size TV panel, which resulted in panel price increase.

CIOL: So, iSuppli still does not forsee a recovery any time soon?

SD: In the absence of a strong rebound in end-market demand, rush orders are not likely to be sustained in May with component shortages being resolved by then, and the forecast for panel demand is most likely remain conservative at that time. Also panel prices are still below cost level.

So, inspite of increasing panel demand suppliers are still losing money.  Also panel suppliers are rushing to increase their utilization rates and production.

CIOL: Overall, how does the year ahead look for LCD monitor panels?

SD: Monitor panel demand may face some softness after the inventory adjustment in Q209. That is why panel suppliers have to expand production cautiously; otherwise it has the danger of pushing the market back to over supply.

We still expect real end user demand to recover in the second half of 2009 especially by Q409. If panel manufacturers act cautiously and expand rationally in the first half of 2009, they can see real demand recovery in the second half of 2009.