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Large-area TFT LCDs profit margin to drop to zero

Posted: 15 Sep 2015 ?? ?Print Version ?Bookmark and Share

Keywords:IHS? TFT LCD? TV? notebook? tablet?

Large-area thin film transistor liquid crystal display (TFT LCD) profit margins approached 10 per cent in 1Q15, their highest level since 1H10, according to the latest report from IHS. However, high factory utilisation rates at leading panel makers, and rising inventories at set makers, are pressuring prices and margins downward. The market research firm also revealed that large-area TFT LCD profit margins are expected to drop to zero per cent in 4Q15.

Based on the report, large-area TFT LCDs have remained profitable since the end of 2012. However, this year, end-market demand for TVs, monitors, notebooks and tablets has weakened significantly. The demand outlook has deteriorated, due to a variety of product and economic reasons. In particular, the rise of the U.S. dollar against most other global currencies has caused local prices for a variety of consumer electronics products in many countries to rise, stifling demand in those regions.

Large-area TFT LCDs profit margin forecast

"Despite declining demand, panel manufacturers have maintained high utilisation rates well above 90 per cent at their larger glass fabs since last year," said Charles Annis, senior director at IHS.

"Even with recent price declines, many large panel sizes currently sell at marginal profits," Annis said. "At least for now, panel makers have decided to keep utilisation high and minimise overhead costs, in order to chase as much profit as possible while they are still able to. The downside to this strategy is that panel inventories at set-makers have ballooned, widening the gap between TV panel shipments and TV set shipments."

As this excess inventory is sold down, panel prices are also expected to decline rapidly. Large-area display profitability will likely follow the same trajectory. At the same time, a substantial number of new eighth-generation (Gen 8) factories are ramping up production. Dedicated capacity for large-area displays will grow at a rate of 6 per cent in 2015 and 8 per cent in 2016, the highest rates in several years.

"Growing concerns about the global economy and its effect on end-market demand, combined with high utilisation rates, inventories at set makers and increasing capacity, will likely weigh heavily on large-area display profit margins for the remainder of 2015 and even well into 2016," Annis added.

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