Flat-TV Shipments to Surge but Profits?

3.15.2005

Korean research firm DisplayBank (Seoul, South Korea) (www.displaybank.com) expects worldwide TV vendors, mostly based in Japan, South Korea and Taiwan, to produce a total of 15M LCD-TVs in 2005, compared with 8.1M units last year with global shipments of LCD-TVs expected to grow 86% this year, helped by a drop in prices of flat screens.

"For the year of 2005, demand for LCD-TVs will likely be higher than last year as TV makers try to sell their products at a cheaper price," said Ji Byung-yong, a senior researcher at DisplayBank. "However, there is a hint of stabilization in LCD panel prices during the first half of this year," he added.

In 2004, global shipments of LCD-TVs jumped 104% from the previous year as vendors made more LCD-TVs during the fourth quarter due to the decline in prices of panels, DisplayBank said.

Last year, Japanese TV vendors, such as Hitachi, Matsushita and Toshiba produced a total of 4.9M LCD-TVs, followed by 1.8M units from South Korean companies, such as Samsung and LG Electronics. Revenues from LCD-TVs jumped 105% from a year earlier to $11B last year, according to DisplayBank.

The research firm also predicts international sales of plasma display panel (PDP) screens will rise 74% this year. The expected sales surge follows falling retail prices, which have, in turn, galvanized demand.

About 6.3M units of the flat-panel screens are expected to be sold this year, a whopping increase from 3.6M units in 2004.
Throughout 2004, the price of a 42-inch surface-discharge PDP screen fell 35% to $840, while a 42-inch high-definition PDP screen dropped by 32% to $1,020, according to DisplayBank. For more details on the PDP and LCD markets see our coverage this issue in the Business and Strategic section.

Quixel Research's (Portland, Oregon) (www.quixelresearch.com) LCD-TV Market Review for 4Q'04 reveals 130% year-to-year growth in both value and units shipped, with the fourth quarter alone topping $1B. "Consumers are opening their wallets for

LCD-TVs," comments Tamaryn Pratt, Quixel's principal. "This technology continues to expand its reach in the marketplace. This year's affordable price points for the 20-inch and under segments were the catalyst for the explosive sales."
The newly published LCD-TV Market Review also shows the fast-emerging trend toward larger screen sizes, with the 30-inch and above screen size segment experiencing the greatest growth, with a 270% increase from 2003 to 2004. This increased consumer demand for larger screens will ramp up sales for mid-size LCD-TVs at more affordable price points, driving the market to new heights in 2005.
Quixel Research forecasts that the LCD-TV market will more than quadruple in revenues over the next four years, with projections of sales surpassing a breathtaking $9B by 2008.

On the Plasma side, DisplaySearch (Austin, TX) (www.displaysearch.com) reported that PDP modules exceeded expectations by 3% in 4Q'04, rising 37% quarter on quarter and 98% year on year to a record 1.2M panels. This stronger-than-expected growth can be attributed to strong holiday and Super Bowl demand, supported by lower pricing and rising interest in flat-panel TVs and HDTVs.
The company was quick to point out that blended PDP module ASPs fell at a double-digit rate in 4Q'04 for the third consecutive quarter, but this still generated a 23% quarter-on-quarter and 31% year-on-year increase in revenues to a record $1.2B. See the full story on the DisplaySearch report this section.

While the growth in volume and revenue is healthy, Taiwan market researchers are looking at the bottom line and not seeing daylight. At MIC, a Market Intelligence Center (MIC) (Taipei, Taiwan) (www.iii.org.tw) analyst paints a bleak picture for manufacturers looking for profits.

The major concern for MIC is the number and capacity of new factories starting production this year, which will add to the current product glut. So, while unit sales of LCD panels will grow fast, this growth will be offset by price declines, resulting in flat sales in currency terms.
Amid harsh competition, Taiwan's LCD-TV manufacturers are applying a low-price strategy as they struggle for orders. Taiwan's production value of LCD-TVs amounted to $200M in the third quarter last year, as the average shipment price fell under $600 per unit. Although the average price posted a further drop of $20 in 4Q, the production value for that quarter increased to more than $300M because of the increase in the shipment volume.

The flat-panel display industry is unlikely to get out of the woods until the second half of the year, as new products scheduled to come out later this year will hurt chances of a quick turnaround, since consumers will hold back purchases in anticipation of the new products.
The bearish outlook came against the industry's anticipation of a pickup during the second quarter, as drastic price declines in the past quarters have whetted consumers' appetite for computer monitors and slim-screen TVs.

"Demand for liquid crystal display [LCD] panels has looked encouraging recently, but we doubt this strength will continue in the upcoming electronics off season amid growing output," said Annabelle Hsu, a senior analyst with MIC.

Major players in the thin film transistor (TFT) LCD industry, such as AU Optronics Corp. and South Korea's Samsung Electronics, are all scheduled to ramp up their next-generation factories, which will produce big glass substrates for LCD-TVs, in the first six months of this year.

"It's becoming more and more difficult for local Taiwan companies to make money from the highly volatile TFT-LCD industry," explained Hsu. "This ill-timed output expansion could dash the hope for an end to the overcapacity-driven glut."
MIC expects supply of TFT-LCD screens may exceed demand by 5%, or even 7%, in the first six months. Taiwanese makers of TFT-LCD panels for computers and TVs are more vulnerable to oversupply due to weaker cost-saving capabilities than their South Korean competitors, according to Hsu.

Weaker profitability of Taiwanese firms will be reflected in their bottom lines for the last quarter, when panel prices crumbled to break the cost level of local makers. A 17-inch LCD screen for computers plunged to an average $152 in January, according to online market researcher WitsView.

South Korean LG.Philips LCD and Samsung Electronics have beat most analysts' expectations by eking out profits amid industrial recession, while not one Taiwanese company has done so. AU Optronics, Taiwan's biggest maker of LCD panels, said it might lose (NT$1B) [$32M] in the last quarter.

Smaller local competitors said they would lose more. Local companies posted four straight losing quarters during the last industry slump in 2002, Hsu said. This time, they are likely to repeat that experience. The research house said there is still the likelihood that a prolonged overcapacity-driven glut in the second half could be reversed. "Strength in demand for LCD-TVs remains the key, especially when most new products are targeting this market," Hsu said.

Global demand for LCD-TVs is expected to soar 87% to 15.5M units this year, up from the anemic 8.3M estimate last year, boosted by falling prices, according to the MIC report.