Electronics Production | February 25, 2009

Mobile Handset Display market to contract in 2009

Global shipments of displays for mobile handsets are expected to decline by more than 6 percent in 2009 and remain flat in 2010 as worsening economic conditions continue to impact the wireless industry, according to iSuppli.
iSuppli forecasts the mobile handset display market will decline to 1.5 billion units in 2009, down 6.2 percent from 1.6 billion units in 2008. Shipments will rise by a marginal 0.3 percent in 2010. The market won’t recover to exceed the 2008 level until 2011, when shipments will reach 1.65 billion units.

The attached presents iSuppli’s mobile handset display market forecast for the period of 2007 through 2012.

“The handset display market already was struggling in 2008 due to declining Average Selling Prices (ASPs) and dwindling margins,” said Vinita Jakhanwal, principal analyst for mobile displays at iSuppli. “However, the downturn now is beginning to impact unit shipments, leading to revenue declines for the industry this year and next.

“The decreasing replacement rate for handsets due to deteriorating economic conditions will be the main cause for the market downturn. New handset demand from the emerging countries will not be sufficient to offset this decline.”

Beyond the slowdown, a major buildup in inventories of finished handsets will make the decline more severe in the beginning. Indications of an inventory correction already had a major impact on the industry in the fourth quarter. In response to this, handset display shipments from the top suppliers declined by more than 40 percent in the fourth quarter compared to the third.

During the current quarter, demand is expected to shore up slightly due to the demand associated with the Chinese New Year. This demand is being driven by the domestic Chinese handset makers as well as the top-tier mobile-phone brands.

Price drop
The mobile handset market has been characterized by declining display prices over the last few years. This has mainly been due to the expansion of TFT-LCD capacity as new investment has enabled newer-generation fabs to meet the expanding demand for monitors, notebooks and LCD TVs.

Despite the economic slowdown, mobile-display panel pricing for all screen sizes and technologies is expected to maintain its historical annual decline rate of 15 percent to 20 percent in 2009. iSuppli believes that the ASP decline in 2009 won’t be as severe as it was in 2008 for some specific panel types. Most suppliers have implemented capacity cuts and reduced their fab utilization rates in response to the slowing demand. This will help mitigate some of the more precipitous declines in prices.

No undersupply
Despite decreases in pricing and declines in shipments, it is unlikely that top-tier customers will have difficulties procuring panels in 2009. With the current cuts in capacity utilization, the level of oversupply in the small/medium TFT-LCD industry may shrink, but it is doubtful that any shortages will occur. When suppliers see orders increasing, they can ramp up production again easily.

Wait for the recovery
It won’t be an easy 2009 for small/medium TFT-LCD mobile handset display suppliers, and 2010 will be only marginally better. But if the suppliers can withstand the price cuts, volume reductions and capacity utilization drop-offs, they should be positioned for a turnaround in 2011.


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