Large-sized LCD panel shipments decline

Paul Boughton
Following a 3 per cent sequential decline in the third quarter, global unit shipments of large-sized LCD panels decreased by another 5 percent 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.”

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 U.S 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 per cent to 45 per cent since June. Notebook prices also have decreased by 35 per cent to 40 per cent during the same period. Meanwhile, television panel prices have dropped by 25 per cent to 30 per cent.”

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 of 2008. The average 32-inch 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 utilisation rates in the fourth quarter. Some suppliers already are reducing utilisation rates by 40 percent and are running their fabs at 60 per cent of capacity level. Some fabs are even running below the 50 percent level. Most panel suppliers are planning to maintain this level of utilisation 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 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 per cent for 2008, the revenue forecast for 2008 is reduced by 8 per cent. However, the revenue impact may be even greater in 2009 unless the market can stabilise by the third quarter of the year.
“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.

“Since a strong demand recovery is difficult to mount in the current economic environment, adjustments must come from the supply side in order to bring the industry back to stabilisation. Panel suppliers must cut production and reduce their expansion plans now more than ever to achieve a market recovery.”

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