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Large-sized LCD panel shipments declined in Q4 08

Posted: 07 Jan 2009 ?? ?Print Version ?Bookmark and Share

Keywords:LCD decline shipment? 2008 LCD revenue? oversupply large-sized LCD?

Following a 3 percent sequential decline in Q3, global unit shipments of large-sized LCD panels decreased by another 5 percent in Q4 08, according to iSuppli Corp.

"TV, monitor and notebook PC makers are slashing orders for large-sized LCD panels due to weak holiday season sales, reflecting the global downturn in consumer and corporate demand," said Sweta Dash, senior director of LCD research at iSuppli. "The recession in the global economy has impacted all areas of the electronics value chain, including large-sized LCDs, an area that will continue to struggle into Q1 09."

Struggling through severe oversupply
The large-sized LCD panel market has been struggling through severe oversupply conditions since the beginning of June due to lower-than-expected panel demand and high levels of inventories building up throughout the LCD supply chain. To make matters worse, the market was pushed back into a state of further oversupply, rather than recovering at the end of September, due to the financial crisis that impacted the United States and global demand in the second half of September.

"Panel prices are continuing to fall, even though some prices are already at or even less than the cash cost level," Dash said. "Monitor panel prices have declined by 40 percent to 45 percent since June. Notebook prices also have decreased by 35 percent to 40 percent during the same period. Meanwhile, TV panel prices have dropped by 25 percent to 30 percent."

Some TV panel prices have been declining since the Q1 08, while monitor panel prices have been dropping since the end of the Q2 08. The average 32-inch TV panel price declined from $335 in January 2008 to the $200 to $210 range by November.

Utilization rates reduced
Faced with severe cuts in panel profitability in Q3 and continued price reductions, LCD suppliers have cut their utilization rates in Q4. Some suppliers already are reducing utilization rates by 40 percent and are running their fabs at 60 percent of capacity level. Some fabs are even running below the 50 percent level. Most panel suppliers are planning to maintain this level of utilization in the Q1 09.

Despite the drop in utilization rates in Q4, the panel market is still suffering from oversupply. Most brand manufacturers and retailers are reporting slow holiday and corporate sales in Q4. They are reducing their target inventory levels drastically, and cancelling orders. This has caused inventories to swell throughout the supply chain.

iSuppli has reduced its large-sized LCD forecast for 2008 and 2009 due to the recent financial crisis and the recession in the United States and worldwide. Although the change in the unit shipment forecast is still less than 5 percent for 2008, the revenue forecast for 2008 is reduced by 8 percent. However, the revenue impact may be even greater in 2009 unless the market can stabilize by Q3 09.

'Industry in double trouble'
"Oversupply and drastic price reductions are nothing new to the large-sized LCD panel market as the industry generally uses the strategy of capacity expansion, price reduction and demand creation to boost sales and increase the LCD's dominance in the display market," Dash observed. "However, this time, the industry ended up being in double trouble, when panel suppliers faced the worldwide economic and financial crisis right after confronting their own industry oversupply issues in Q3 08."

There has been some concern about cash issues among suppliers, especially smaller component makers, which may significantly disrupt the LCD supply chain. It may take the LCD industry a long time to recover even when market demand returns. Since a strong demand recovery is difficult to mount in the current economic environment, adjustments must come from the supply side to bring the industry back to stabilization. Panel suppliers must cut production and reduce their expansion plans now more than ever to achieve a market recovery.





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