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Order delays haunt LCD tool makers

Posted: 07 Nov 2008 ?? ?Print Version ?Bookmark and Share

Keywords:delay order? LCD? display market?

It's a double-whammy for the equipment industry. First, fab-tool makers face a major IC downturn. Now, they see a big slowdown in LCD production.

Amid a slowdown in the flat-panel display market, LCD manufacturers are projected to push out some $600 million worth of LCD equipment purchases by the end of 2008, according to The Information Network, a market research company.

"An economic slowdown, credit crisis, record-breaking consumer confidence, and declining profit margins are keeping LCD display companies from investing in new equipment through the end of 2008 and have pushed out purchases by $600 to 2009," said Robert Castellano, president of The Information Network, in a statement.

Despite the bad news, LCD equipment revenues will still grow by 50 percent in 2008, according to the firm. The pushouts into 2009 will result in a revenue increase of nearly 14 percent for equipment, despite weakening prices and inventory corrections in the fourth quarter of 2008.

There is more good and bad news. Good news: Demand for large-sized LCDs in 2008 will be 390 million panels, a 5 percent growth over 2007, the firm said.

The downturn has led LCD panel supplierssuch as Taiwan's AU Optronics and Chi Mei Optoelectronicsto cut output to deal with falling prices.

"Panel makers are stringently controlling costs while improving the technology innovation at this time," added Castellano. "We estimate that LCD panel makers will continue to cut their output in the fourth quarter, with the production drop reaching 20 percent and continuing into the first quarter of 2009."

It's also doom-and-gloom for ICs. With semiconductor equipment manufacturers reporting rapid declines in orders and shipments and the world experiencing a financial crisis that is projected to further cripple already waning end-user demand for chips, analysts and equipment executives are increasingly drawing parallels between the current climate and the devastating downturn of 2000-2001.

David Barnes, an analyst with DisplaySearch Inc. noted that TFT-LCD manufacturers are also reducing fab utilization to avoid oversupply and steep panel price drops.

"Stock market declines have impacted consumer investments and, in general, consumers aren't saving very much money, which can impact their purchasing decisions during the holidays," said Paul Gagnon, another analyst with DisplaySearch, a research firm.

"To combat this, retailers are expected to pull out all the stops this holiday seasonlowering HDTV prices, offering bundled electronic packages with HDTVs and Blu-ray disc players, using 'creative' financing deals when possible such as in-store credit or 'pay when you get your tax return' options with the hopes of achieving their sales targets this holiday season," Gagnon said.

For notebook PCs, DisplaySearch believes that traditional "Black Friday" and late December sales will jump in volume, but it forecasts conservative shipment growth of 14 percent quarter-over-quarter for the fourth quarter.

Mini-note PCs are also forecast to experience huge growth in Q4, with a 1,650 percent growth year-over-year.

On the other hand, suppliers of small/medium displays (under 10-inch in diagonal) will face a slowdown. In Q4, small/medium display shipments will be down 2.2 percent year-over-year, according to the firm. By comparison, unit growth was up 26 percent in the like period a year ago.

The outlook for Q4 08 revenues is only slightly better, up only 3 percent year-over-year, much lower than the 26 percent growth a year ago.

The market for small/medium displays will reach $25.6 billion and 2.67 billion units for the entire year in 2008, up 15.8 percent and 7.9 percent, respectively, from 2007, according to the firm.

Half of all small/medium display revenues come from mobile phones. The rest include portable navigation devices, MP3 and portable media players, digital photo frames, automotive monitors, printers, and many other applications.

The mobile phone segment has much weaker demand this holiday season. In Q4, mobile phone display revenues are forecast to increase only 2 percent year-over-year.

"Despite certain hit products like the new 3G iPhone, the overall demand for mobile phones seems to be weakening amid economic uncertainty," notes Chris Crotty, an analyst with DisplaySearch.

"Replacement cycles are lengthening in more developed regions as consumers are increasingly reluctant to spend on unnecessary upgrades. In developing economic areas including China, production and job cutbacks have reduced demand for lower-end models," he said.

"In addition, the outlook for some other segments is even weaker due to higher penetration rates, feature convergence, oversupply and reduced demand resulting from slowing economies around the world. For example, unit shipments of displays for digital cameras, often a popular holiday gift in years past, are actually forecast to decline from 2007," he added.

- Mark LaPedus
EE Times

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