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EL SEGUNDO, CA – After nearly three months of plummeting profitability and precipitous price plunges, the large-sized LCD panel (10" or longer) market finally is set for a recovery in September, iSuppli Corp. predicts.
“The large-sized LCD panel market has been mired in a state of severe oversupply since the start of June, due to lower-than-expected panel demand and high inventory levels throughout the supply chain,” said Sweta Dash, director of LCD and projection research at iSuppli. “Conditions have worsened in August, with poor economic circumstances causing prices to decline at an even faster pace than before. However, panel production cuts, combined with the clearance of inventory and a recovery in demand from televisions, desktop PC monitors and notebook PCs are expected to shift the supply/demand equation back to balance in September. This will lead to a recovery in pricing.”
After rising 6.9% in May, global large-sized LCD panel unit shipments declined 9.6% sequentially in June, says iSuppli. Prices dropped 4% to 7% for mainstream notebook, monitor and TV panels from May to June and another 3% to 15% in July, and are expected to decrease 4% to 20% for the entire month of August, the research firm adds.
Because of this, large-sized panel prices now approach the manufacturing-cost level, especially for some TV and many monitor panels. However, panel suppliers and equipment makers moved quickly this year to adjust to weakening market conditions, says the firm.
“Reacting to weak sales and declining profitability, panel suppliers began to slash their utilization rates starting in July,” Dash noted. “LCD-TV and desktop PC monitor manufacturers also are starting to cut their prices to reduce inventories and boost end-user demand. These developments, along with recovering demand from the notebook segment, will bring stabilization to large-sized LCD panel pricing in September. Some panel prices may even increase by 1 to 3%, especially those that are reaching at or below the cost levels.”
China's consumer spending on LCD-TVs was expected to be strong this year because of the impact of the Olympics. However, China suffered natural disasters in the first half of 2008 that have dampened consumer sales. In general, the Olympic sales pickup in China and elsewhere fell short of expectations, says iSuppli.
On the supply side, LCD makers in the first half of the year shifted production of TV panels away from sixth-generation fabs and into seventh, 7.5- and eighth-generation facilities. Eighth-generation fabs are capable of producing large-sized panels much more efficiently than sixth-generation factories, boosting productivity throughout the industry, says the firm.
This rising production contributed to declines in average LCD-TV panel prices throughout 2008, falling by as much as 15% to 20% from the start of 2008.
LCD monitor panel prices for desktop PCs have already fallen 20% to 25% since May. Panel suppliers reported about one to two weeks of excess monitor module inventory in July. Channel participants and brand vendors also reported two to three weeks of extra inventory in July.
Branded vendors in Europe and parts of North America have started cutting prices to reduce inventories. Because of this, orders for finished monitors began to increase in August and are expected to rise again in September, says iSuppli.
Notebook panel prices have fallen 12% to 16% since May. Second-quarter sales for notebook PCs were lower than expected as a result of the increasing cost of key components, tight supplies in some other parts such as batteries, and order adjustments made for mid-year inventory.
While orders continue to be cut, the end-market demand remains the most resilient among large-area panel applications, says iSuppli. Notebook OEMs and ODMs still are expecting at least 15% to 20% sequential growth in unit shipments in the third quarter because of strong end demand.
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