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Electronics Production | September 21, 2006

Strong Second Half Shaping<br>up for Large TFT-LCD Panels

Despite achieving unit shipment growth of only 2.7 percent in the second quarter, the large-sized TFT-LCD panel market is in shape for an excellent second half of 2006, as tight supply and price increases bolster the market, according to iSuppli Corp.
Following weak conditions in the first half, the large-sized panel market is on the path to recovery with strong growth expectations in the second half for all three major applications: desktop PC monitors, notebook PCs and televisions. iSuppli believes large-sized TFT-LCD panel unit shipments growth in the third quarter will rise by 9 percent sequentially, while in the fourth quarter unit shipments will be even better, managing 10.9 percent quarterly growth.

Because of this growth, iSuppli has updated its TFT-LCD unit forecast for 2006 to 49.5 million panels shipped for television, 135.1 million units shipped for monitors and 75.9 million units shipped to the notebook PC market.

iSuppli's worldwide forecast for large-sized TFT-LCD panel unit shipments by quarter is shown in the figure below and attached. iSuppli defines large-sized LCD panels as those having a diagonal dimension of 10-inches or more.

The move to cut utilization rates in order to reduce inventory and control oversupply seems to have paid dividends for large-sized LCD panel suppliers. As demand has started to recover in the PC market bolstered by lower prices, the back-to-school push and wider expectations for the holiday season, the supply situation for LCD panels for desktop monitors has shifted to a condition of tightness.

Furthermore, strong demand has been reported for wide-format monitor panels, especially for the 19-, 20- and 22-inch sizes. The notebook market is already recovering and also is transitioning to larger sizes and wider format.

"Lower system prices are expected to boost demand considerably, especially during the holiday season," said Sweta Dash, director of LCD and projection research at iSuppli. "The problem is that due to a shift among suppliers to making larger-size, wider-format panels, supply is expected to fall short of demand, which may throw a wrench into how large of a rebound this market will experience. If panel price increases are too high, too fast, they may curtail demand before it reaches its
full potential."

While the future quarters hold good news for panel suppliers, they may bring worry for panel buyers, as ever-increasing prices add to their concerns regarding having a sufficient quantity of LCDs for the holiday season. Although some buyers are trying to hedge by double booking their LCD orders, this is actually making the market more unstable and is contributing to faster price increases, especially for 17-inch monitor panels.

After months of declining prices, mainstream desktop PC monitor panels have begun a sharp increase due to this lack of supply. For example, 17-inch panels now are being offered at a price between $120 and $125-about 18 percent to 23 percent higher than the July Average Selling
Price (ASP) of $102. iSuppli expects prices to increase for most desktop monitor and notebook panels throughout the second half of 2006, especially in the fourth quarter.

"It's not just the PC side; some suppliers already are reporting tight supply for 32-inch television panels as well," Dash said. "LCD-TV panel supply also is going to be tight as demand increases for the holiday season and consumers continue to make the upgrade from CRT TVs."

In the second quarter of 2006, Samsung Electronics Co. Ltd. and LG Philips LCD Co. Ltd. (LPL) maintained their hold on the No. 1 and No. 2 positions in the TFT-LCD panel market with 20.4 percent and 18.4 percent shares of unit shipments, respectively.

AU Optronics Corp. was third with 15.9 percent of the market, up a full percentage point from the second quarter. In contrast, Quanta's share of the market declined in the second quarter by 0.55 of a percentage point.

AUO's gain in the second quarter came mostly from the notebook market, where Quanta has a stronghold. The AUO/Quanta Display Inc. merger is expected to be completed in October. Taiwan-based Chi Mei Optoelectronics Inc. held onto the fourth position with 11.2 percent of
the market followed by Taiwan's Chunghwa Picture Tubes Ltd. (CPT) with 8.9 percent and Quanta with 5.7 percent.

The table below and attached presents iSuppli's estimate of large-sized TFT-LCD panel suppliers' unit shipment market share in the second quarter.

iSuppli's second quarter market share figures indicate Taiwanese firms continue to lead the overall large-sized LCD panel market with a 48.5 percent share of unit shipments, followed by Korea at 40 percent.

However, Korea is still leading in the LCD-TV panel market with 44.9 percent market share, and Taiwan is following closely behind with 41.6 percent of the market.

Increasing production from seventh- and 7.5-generation fabs has helped Korea to increase its lead and to gain market share in the second quarter. Korea also leads in notebook LCD panel production with a 49.7 percent market share. Taiwan holds a 55.7 percent unit share in the monitor market, followed by Korea with a 34 percent share.

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