TFT LCD manufacturing equipment sales to jump 40pc

AUSTIN, USA: DisplaySearch, the worldwide leader in display market research and consulting, reports that sales of equipment used to manufacture TFT LCDs is likely to surge 40 percent to more than $11.6 billion in 2008, and will likely remain at a similar level through 2009 in its Quarterly TFT LCD Supply/Demand and Capital Spending Report.

According to DisplaySearch Vice President of Manufacturing Research Charles Annis, "2007 turned out to be an excellent year for TFT LCD panel makers. Unfortunately, it was a very challenging year for equipment companies, who generated only $8.3 billion in revenues, down 35 percent from 2006 levels.

"These dynamics of reduced investment and healthy panel maker earnings, coupled with continued strong demand, are now setting 2008 up to be a bumper year for almost all segments of the LCD industry and a reversal of fortune for equipment companies."

"New investments in 2008 and 2009 will increase capacity, help keep prices on a declining curve, and likely push demand further than even previously expected," Annis added. "However, the entire TFT LCD supply chain needs to be careful, if all panel makers rush to dramatically increase capacity in the next two years, the industry could once again set itself up for a significant over-supply and a repeat of the crystal cycle in 2010."

Additional highlights from the DisplaySearch Q4?07 Quarterly Supply/Demand and Capital Spending Report include:

* Compared to the previous estimates, new investments and capacity expansions have been increased and pulled in so now 46 individual fab investments are forecast between the start of Q3-07 to the end of Q3-10, eight of which will be for new LTPS lines, conversions of a-Si to p-Si or expansions of current capacity.

* Counting a new IPS Alpha fab, AMLCD TFT array capacity is expected to rise at a compound annual growth rate of 34 percent from 4.5 million m2 in 2000 to over 209 million m2 in 2013. Color filter capacity is on a similar growth curve, expanding from 5.3 million m2 in 2000 to over 216 million m2 in 2013.

* Multiple older PDP lines are being shut down as more productive lines come on stream, especially those not able to meet 1080p precision requirements. And even despite the recently announced Matsushita, Hitachi and Canon alliance, Matsushita is still expected to forge ahead and build a 12-up, 42? equivalent PDP mega fab that should focus on 50? and larger TV production.

* The top five LCD makers -- Samsung, AUO, LPL, CMO and Sharp -- are forecast to continue to invest at the highest rates increasing their total share of capacity from 79.6 percent in Q3-07 to 82.9 percent in Q3-09.

* In terms of TFT LCD capacity, supply/demand was extremely tight from Q2-Q4-07. Supply/demand is now closely linked to seasonality, and is likely to be loser in Q1-08, but then grow tight through the end of the year, helping to keep panel pricing firm. Based on the current outlook, 2009 and 2010 supply/demand should grow progressively looser.

* Supply/demand of key components such as CCFLs, glass substrates, CF, TAC film and PVA film also affect panel maker?s ability to utilize capacity. In Q3-07 and Q4-07, color filters and glass substrates were in shortage, restricting the amount of panels that could be produced. Key component supply will remain a gating factor for panel production in 2008 and then should loosen in 2009.

* TFT fab utilization as an industry average continuously increased from a very low 85.4 percent in Q1-07 to a very high 95.7 percent in Q3/Q4-07, which is the highest level recorded since DisplaySearch started tracking this segment in 2000.



* With Gen 10, lots of Gen 8 and other expansions, including a second IPS Alpha fab, going forward TFT equipment makers should see significantly higher revenues than 2007.

TFT LCD makers achieved pre-tax profit margins of 17 percent on average in Q3'07, the best performance since Q2'04 and exceeding the prior peak. Large area TFT LCD panel margins are forecast to be even higher in Q4-07 and push into the 20 percent level during 2008. Most industry participants are quite optimistic about 2008.