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Analyst: Bleak holidays await LCD market

Posted: 11 Oct 2007 ?? ?Print Version ?Bookmark and Share

Keywords:LCD televisions? computer monitors? LCD market?

Market research firm iSuppli Corp. has released a report on LCD product performance, including LCD TVs and computer monitors.

From April through September, LCD makers raised the prices of their products at a rate of 15-25 percent for notebook and monitor panels, and at 5-7 percent for 32-inch and smaller TV panels. However, this trend is expected to turn, as vendors are being forced to cut their prices to move inventory. While the biggest concern is the North American market, Asian manufacturers and the global supply chain will be affected.

TV trends
Prices for TV models with features such as support for 1080 progressive (1080p) and/or LED backlights rose in July and remained steady through August. These prices are expected to go down in Q4 when OEMs offer promotions and special offers for the holidays.

The average price of the 32-inch LCD-TV panel remained stable to slightly up in September compared to August, but some customers still reported tight supplies and panel price increases of more than $5. In March/April many panel suppliers shifted capacity away from 32-inch TVs to computer panels to take advantage of better profitability of the latter. Meanwhile, many panel makers are moving production of 32-inch TV panels to 7.5- and eighth-generation fabs.

Notebook panels impacted
Long-term demand for notebook panels is positive, thanks to the launch of Microsoft Corp.'s Vista OS and Intel Corp.'s Santa Rosa microprocessor. However, notebook production may be affected by component shortages, and the move of manufacturing capacity for these displays to fast-growing small- to medium-size applications, such as digital photo frames, personal navigation devices, car TVs and ultramobile PCs. Panel suppliers Innolux, CPT and AUO are planning to shift more of their fourth and 4.5-generation capacity in some of their fabs to small- and medium-sized panels. Some are even planning to use some fifth-generation capacity for those size panels. Notebook panel prices increased by between 1- 2 percent in September compared to August.

Although the forecast for notebook PC shipments in the second half of 2007 is strong, actual shipments may fall short of expectations due to component shortages. Besides LCD panels, notebook PC manufacturers are reporting shortages of integrated circuits, batteries, optical drives and PCBs. Many notebook PC suppliers said they expected these component shortages to last until October, while others are concerned that they may continue through the end of the year. If notebook PC production is indeed impacted by this component shortage throughout the remainder of 2007, it will impact panel demand, adding to the overall uneasiness being felt in the LCD industry.

PC monitor panels as TVs
Wide-format desktop PC monitors are being used for television applications. Panel makers are embracing the trend because they have shifted their focus to profitability and away from market share, after suffering major losses in 2006. Average prices for 19-inch wide-screen monitor panels started to stabilize in September compared to August, and there were some signs of inventory buildups and slower demand growth in September. For some suppliers, using 19- inch wide monitor panels in the TV market can account for 20-30 percent of their total 19-inch wide panel shipments.

The 17-inch to 19-inch SXGA standard monitor panels are in tight supply, with the price increasing by 1-2 percent in September. This is lower than the 4-5 percent month-to-month increase in July. The monitor industry is reporting shortages across the board, mainly created by supply shifts away from the standard-format to the wide panels.

Demand for 22-inch wide-format monitor panels also is reported to be strong as monitor vendors are vigorously promoting this size as a replacement for 19-inch standard monitors. Many Taiwan-based panel suppliers such as CPT and CMO are planning to increase their 22-inch widescreen monitor output in Q4 2007.

Difficult times ahead
"While LCD panel suppliers expect prices to increase for the remainder of 2007 due to supply tightness, iSuppli believes that inventory increases will result in softness in panel demand among end-product makers and channel participants, especially in the monitor market," said Sweta Dash, director of LCD and projection research at iSuppli. "This may affect fourth-quarter pricing of large-sized panels. The issue could become more of a problem if consumers stop spending and tighten their purse strings because of the mortgage problems in the fourth quarter."

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