LCD | August 04, 2008
Component makers first to be hit by persisting panel price falls
The recent large-sized panel price drops has once again highlighted the profitability pressure panel makers now face. Thus, their demand on upstream component makers for additional cost downs has grown as well.
According to WitsView’s latest report, the panel material cost down will be more severe in 3Q08 than in previous quarters. Although progress has already been made on the component cost down, due to the sharp ASP drops, some monitor panel sizes will soon touch the break-even point. For glass substrates, most of the price negotiations are conducted on a long-term basis. However, panel makers’ glass substrate input reductions will still bring price pressures to suppliers. We estimate the price fall will be 2~3%. For color filters, with the previous 5G shortage alleviated, the price of outside purchasing are expected to fall by 3~5%. As for the in-house portion, the cost in 3Q08 should fall by 2~3%. With the increase in the raw material price offset by the price cut in the prism film, it has resulted in limited price adjustments for the backlight unit. However, impacted by the weak market demand, the quarterly price drop of the backlight unit will still exceed that of the previous quarter, approximately 3~5%. Polarizers are expected to drop 2~4%. For some strategic product promotions, a near 5% drop may be seen. Finally, Driver ICs are expected to drop by 2~5%. Regarding the panel material costs, the decline for the mainstream NB products in 3Q08 is expected to be between 2.5~3%, which is relatively larger when compared to the mere 2% drop during the previous 2 quarters. For monitor panels, the drop for 3Q08 will not be too significant when compared to 2Q08- reaching roughly 2%. This is mainly due to the fact that the components used in monitor panels are considered mature products. The intense market competition has already pushed prices to a low point. Thus, additional declines will be limited. In contrast to IT panels, the cost drop for TV panels in 3Q08 will still be higher- roughly at 4%. WitsView believes that the panel production cutbacks will also be a key factor in affecting the material cost for 3Q08. Any production cuts will reduce the demand for glass substrates, which will give panel makers bigger negotiating power. By contrast, back-end backlight unit and driver IC suppliers are expected to be less willing to lower their prices, as shipments of such components will be lower-than-expected. Rather than accepting all the cost down requests from panel makers, suppliers will be inclined to focus on models and strategic customers which have a larger quantity or development potential. Based on the aforementioned factors, various component price differences will be seen for different panel makers and models in 3Q08
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