EL SEGUNDO, CA -- The market for large-sized liquid-crystal displays contracted in July, an ominous indicator not only because it shank for the second straight month in a row but also because the dip occurred at the start of the normally hot third quarter, according to a new report from IHS. Global shipments of large-sized LCD panels amounted to 65.46 million units in July, down 4.5% from 68.56 million units in June. While the contraction was an improvement over the 5.3% decline from the May to June period, the July retreat reprised an unwelcome phenomenon that hadn’t been seen since the beginning of the year. Shipments last shrank for two months in a row back in January and February.

On an annual basis, the LCD panel shipments in July represented a negligible 0.1% increase compared to the same time last year—the smallest uptick of any month so far in 2013. July’s imperceptible gain paled next to the 22.9% expansion posted in January or even last month’s 4.6% growth, which had been the smallest increase at the time.

The depressed result in July is casting a cloud over the outlook for the rest of the third quarter, traditionally a hot time for the market marked normally by bullish back-to-school orders and lively preparations leading into the busy holiday season. But instead of focusing on the sales of new products, downstream vendors are consumed at this time with what must to be done to shift stagnant inventory. As a result, vendors everywhere are unhappily revising business targets downward.

TV, monitor and notebook use of panels down. In the four major applications where large-sized LCD panels are used, shipments in July fell in three categories—televisions, monitors and notebooks. The only area to see an increase was tablets.

For the TV panel space, shipments went down 2.7% because of tepid demand in both the US and China markets where business was strongest. TV panel sizes 50-inches and larger were especially affected.

Even so, one area in the TV panel business proved encouraging. Ultra-high-definition panels continued to make inroads, posting their largest shipment numbers yet in July, reaching some 290,000 units for the month.

Monitor panel shipments also took a dive in July, down 2.2% for the month. To be sure, most panel makers have already shifted capacity to higher-demand products, such as tablets or small- and medium-sized panels for smartphones. Samsung Display, for instance, has aggressively cut its monitor panel output, even though competitors like BOE and CEC of China are working to ramp up monitor panel orders to fill the gap.

The largest contraction in July occurred in notebook panel shipments, down a steep 17.9% for the month. After overstocking panels in the first half, vendors are now busy trying to get rid of the inventory overhang. The only bright spot in the notebook space was in the 13.3" panel with pixel resolution of 2560 x 1600, thanks to the launch of Apple’s new MacBook Air. Here shipments of the panel by Samsung Display and LG Display shot up a whopping 187% and 448%, compared to levels in June.

The lone performing segment of the LCD panel market was tablets, up 6% percent on the month. Even though tablet orders remain sluggish in China from white-box and non-Apple vendors, demand from Apple was strong, overcoming any negative momentum and boosting numbers on the whole.

The 7.9" tablet panel fared particularly well, with shipments up 53% on the month. LG Display, the main supplier of the 7.9" for Apple, sent out 2 million units, a monthly increase of 81%.

Other new tablet sizes are also being produced, albeit in limited quantities. Tianma of China, for instance, has started production on the 8.1" tablet, while AUO and CPT from Taiwan are supplying the 10.4" tablet. Samsung is likewise actively involved, manufacturing approximately 8,000 units of the 10.2" tablet.

TAGS: Apple, Samsung, LCD, displays, tablet, market growth