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Electronics Production | March 13, 2007

iSuppli Raises LCD-TV Forecast

Rapid price reductions are boosting sales of large-sized Liquid Crystal Display Televisions (LCD-TVs), prompting iSuppli Corp. to increase its forecast for LCD-TV panel shipments in 2007.
iSuppli predicts 75.2 million LCD-TV panels will be shipped in 2007, up 42.7 percent from 52.7 million in 2006. This represents a 3 percentage point increase compared to iSuppli's previous forecast issued in the fourth quarter of 2006 of 72.9 million LCD-TV panel shipments in 2007.

While such growth is impressive, it still represents a significant slowdown compared to 2006, when shipments rose by a whopping 95.8 percent to reach 52.7 million units.

“This strong growth in 2007 will pave the way for LCD-TV panel shipments to exceed 100 million units in 2008 and then grow to 171.6 million units by 2011," said Sweta Dash, director of LCD and projection research at iSuppli. “By that time, LCD-TVs will dominate the market accounting for 65 percent of all television unit shipments worldwide."

The figure attached presents iSuppli's shipment forecast for worldwide LCD-TV panels for the period from 2005 through 2011.

Priced to move
Prices for large-sized LCD panels used for televisions are declining precipitously in 2007. For example, the price of a 32-inch LCD-TV panel is expected to fall by 17 percent in the first half of 2007 compared to the fourth quarter of 2006.

Increased production from seventh- and 7.5-generation fabs also is contributing to the increase in supply and the reduction of production cost. The price for a 40/42-inch WXGA panel is expected to decline by 18 percent during the period from the fourth quarter of 2006 to the end of the second quarter of 2007.

Such panel price reductions in the first half will allow television makers to cut their product prices and to offer more, and more affordable, large-sized sets. This is increasing the consumer adoption rate for 40-inch and larger LCD TVs.

Other factors contributing to the accelerated shift to larger-sized LCD TVs include the switchover to High Definition Television (HDTV) and the increasing adoption of wide-screen format sets.

But while the price reductions may be a volume driver for LCD panel makers—and a bargain-basement bonanza for consumers—they are having a deleterious impact on the panel suppliers' bottom lines. Panel price declines are running ahead of cost reductions as suppliers battle for market share by flooding the channel with product. This has resulted in declining margins and profitability.

Pricing for 32-inch panels already has fallen below the manufacturing cost level for some suppliers this month.

The inventory story
Most panel suppliers increased their production capacity in October, due to strong demand at the beginning of the quarter. However, in November, television makers slowed their rate of panel ordering so as to reduce inventories in preparation for the slow sales season following the end of the holidays.

This resulted in slower growth of panel shipments in the fourth quarter of 2006 compared to the same period in 2005. LCD-TV panel shipments grew by only 17 percent in the fourth quarter of 2006 compared to the third quarter. In contrast, shipments grew by 37 percent during the same period in 2005.

The weaker growth in the fourth quarter, combined with start of the slow season in the first half of 2007, resulted in an inventory pileup in December, followed by significant price reductions in January and February. These reductions are expected to persist through the first quarter and into the second.

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