industry news
LCD Glut Depress Prices, Profits and Capex
The LCD industry is operating at a loss as oversupply has led to price declines, erasing profits and delaying spending on new equipment. Recovery will not be in the cards any time soon. For example, according to DisplaySearch ( Austin, TX) (www.displaysearch.com), first-tier 17-inch LCD monitor makers in Taiwan will need to wait until the second half of this year, at the earliest, before losses will end, even though prices are now stabilizing due to shortages in this size. Due to the decreasing costs for producing panels, margins for LCD monitor panels will rise to 10% to 15% in the next two years, DisplaySearch explained.
Prices of LCD panels began to fall rapidly from the middle of 2004, as supply began to increase with new factories opening up in Taiwan and South Korea. The huge amount of new supply squeezed margins at manufacturers, such as Taiwan's AU Optronics Corp., Korea's Samsung Electronics Co., and rival LG.Philips LCD Co. even as panel shipments increased.
DisplaySearch expects large-area panel shipments to rise 31% this year to more than 181M units. Of those, shipments of LCD monitor panels are expected to reach more than 99M units globally, while LCD-TV panels are expected to reach more than 18M.
But, at the same time, supply will continue to increase as major LCD producers begin to ramp up their latest-generation plants. As a result, the market research firm projects the global LCD market will see revenue contract by 2% from 2004 to $47.2B this year.
Ross Young, president of DisplaySearch said double-digit growth is expected to return in 2006, with an increase around 22%, to $57.6B.
ASP of LCD-TVs (US$) |
|||||
|
2004 |
2005 |
2006 |
2007 |
2008 |
ASP |
1,527 |
1,499 |
1,194 |
893 |
657 |
Y/Y |
(2%) |
(20%) |
(25%) |
(26%) |
(28%) |
"Even though the surplus will worsen by adding capacity, panel suppliers are continuing to make investments in large substrate fabs as a means to lower cost and boost demand," said Young. "While these investments will succeed in lowering costs, they will worsen the surplus, given the amount of capacity coming online."
Global spending on equipment for liquid crystal display (LCD) plants, which reached $12.5B in 2004, up 97% from the previous year. But according to DisplaySearch, it is set to fall 26% this year, dropping for the first time in four years.
LCD-TV sales forecast 2004-2008 (million units) |
|||||
|
2004 |
2005 |
2006 |
2007 |
2008 |
Sales |
8.57 |
15.01 |
25.53 |
38.54 |
53.19 |
Y/Y |
75% |
70% |
51% |
38% |
23% |
In light of the price declines for LCD panels, Taiwan's Chi Mei Optoelectronics Corp. and others are postponing construction of large factories. DisplaySearch estimates that capital spending in 2006 will decline 46% to $5.1B dollars. Taiwan spent the most on LCD equipment between 2003 and 2005, but is expected to hold off on so-called seventh-generation LCD investments until 2007.
DisplaySearch expects South Korea to regain the lead on continued strong investment as the global LCD panel market grows 21% to $43B this year.
2004 Global TV market (million units) |
|
|
Sales volume |
LCD TV |
8.57 |
Total |
170 |
LCD TV market share |
5% |
Global LCD-TV market forecast (million units) |
|||
|
2004 |
2005 |
Y/Y |
IEK |
8.57 |
15.01 |
75% |
IDC |
8 |
13.8 |
73% |
DisplayBank |
7 |
11 |
57% |
DisplaySearch |
8.8 |
16.1 |
83% |
ISuppli |
8.56 |
15 |
75% |
Topology Research |
8.22 |
N/A |
- |
Source (all tables): Research firms compiled by DigiTimes, 03-05 |
|||
Meanwhile, the Industrial Economics and Knowledge Center (IEK) of the Taiwan government-sponsored Industrial Technology Research Institute (ITRI) reported the ASP (Average Selling Price) of LCD-TVs is expected to drop 20-28% annually over the next three to four years, as panel makers continue ramping capacity at their sixth-generation (6G) and 7G TFT-LCD plants. Also, an aggressive cost-reduction plan will be implemented by the South Korean government the report said.
The ASP of LCD-TVs is expected to fall to less than $1,000 in 2006 or 2007, down from about $1,499 this year, IEK stated.
The ramping of sixth- and seventh-generation TFT-LCD line production will greatly reduce the cost of producing large-size LCD-TV panels, while increasing their supply in the market, IEK pointed out. By 2007, all of the major Taiwan-based TFT-LCD makers will have already started volume production at their 6G plants, while several Korean and Japanese makers will be producing 7G panels.
In addition, the South Korean government is undertaking a program that is meant to assist panel makers reduce the costs of producing 30 to 40-inch TFT-LCD panels. Currently, the cost of producing these large-size LCD-TV panels is about $20 per diagonal inch of screen size. According to the government targets, the cost should be reduced to about $7 per diagonal inch by 2008, IEK explained.
IEK projects that demand for LCD-TVs will reach 15M sets in 2005, up 75% year on year. Demand may reach 53M units by 2008, rising at a compound annual growth rate (CAGR) of 58% from 8.6M in 2004 (see related demand story this section).
DisplaySearch, Arie Braun, 512-459-3126 x108, arie@displaysearch.com
Contact:
Insight Media
Annmarie Gabisch, 203-831-8564
annmarie@insightmedia.info