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LCD | November 06, 2008

Panel market slowdown to persist at least until 1H09

Based on WitsView’s market survey, mainstream IT panel prices fell by 2~4% ($2-3) in 2HAug, while TVs dropped respectively by 2% (about $5-10). Faced with the sluggish end market demand, panel makers are trying to grab a slice of a market pie that is starting to show signs of shrinking.
The price competition is only expected to become even more intense in the future. During 3Q08 some panel makers had already started to post a loss. Based on the current panel price drop rate, they are likely to drop to the material cost level earlier than originally expected, thereby further widening the losses of panel makers in 4Q08. WitsView believes the slowdown could persist at least to the first half of 2009. By looking at the current market conditions, the outlook is indeed bleak.

Compared to the Taiwan panel suppliers, the Korean players are situated at a better advantage, due to a favorable Korean Won exchange rate and earlier deprecation end of some production lines. Coupled by their strong own-brand support, the panel production capacity remains high, as well. For 2009, the scheduled ramp-up plans of their new panel production lines remain unchanged. In addition, plans for next-generation lines have also been announced. Undoubtedly, this will widen the gap with the Taiwan panel makers. For the Taiwan and China-based suppliers, with no strong support from the local brand vendors, their respective production utilization rates are now at a all-time low. Some are even operating only at 50%. If the market conditions do not show some improvement in the future, some panel makers may be forced to cease production of some lines and cut down the workforce.

Meanwhile, amid the drastic reduction of orders from panel makers, and payments being delayed by some clients, some component suppliers may be forced to close down their business due to a shortage of cash. When the market confidence eventually returns, a gap could emerge in the TFT-LCD supply chain. Ultimately, even the downstream brand vendors or retailers could be notably affected.

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