EL SEGUNDO, CA – Following a 3% sequential decline in the third quarter, global unit shipments of large-sized LCD panels decreased another 5% in the fourth quarter of 2008, according to iSuppli Corp.
 
“Television, 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 the first quarter of 2009.”
 
iSuppli defines large-sized LCD panels as those having a diagonal dimension of 10" or more.
 
The large-sized LCD panel market has been struggling through severe oversupply conditions since the beginning of June, as a result of 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 because of the financial crisis that impacted US and global demand in the second half of September, says iSuppli.
 
“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 40% to 45% since June. Notebook prices also have decreased 35% to 40% during the same period. Meanwhile, television panel prices have dropped 25% to 30%.”
 
Some television panel prices have been declining since the first quarter of 2008, while monitor panel prices have been dropping since the end of the second quarter. The average 32" television panel price declined from $335 in January 2008 to the $200 to $210 range by November.
 
Faced with severe cuts in panel profitability in the third quarter and continued price reductions, LCD suppliers have cut their utilization rates in the fourth quarter. Some suppliers already are reducing utilization rates 40%, and are running their fabs at 60% capacity. Some fabs are even running below the 50% level, according to the research firm. Most panel suppliers are planning to maintain this level of utilization in the first quarter of 2009.
 
Despite the drop in utilization rates in the fourth quarter, the panel market is still suffering from oversupply. Most brand manufacturers and retailers are reporting slow holiday and corporate sales in the fourth quarter. They are reducing target inventory levels drastically and canceling orders. This has caused inventories to swell throughout the supply chain, says iSuppli.
 
iSuppli has reduced its large-sized LCD forecast for 2008 and 2009 as a result of the recent financial crisis and the recession in the US and worldwide. Although the change in the unit shipment forecast is still less than 5% for 2008, the revenue forecast for the year is reduced 8%. However, the revenue impact may be even greater in 2009, unless the market can stabilize by the third quarter.
 
“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 the third quarter of 2008.
 
“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.
 

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