LCD | October 18, 2007

Large LCD panel suppliers expected<br>to post robust results for Q3

Suppliers of large-sized LCD panels are set to report strong third-quarter results due to robust demand from all the major application markets, combined with price increases during every month of the period, according to iSuppli Corp.
iSuppli defines large-sized LCD panels as those having a diagonal dimension of 10-inches or larger.

When all the results are in, global large-sized LCD panel revenue in the third quarter is expected to increase by more than 17 percent compared to the second quarter and 45 percent compared to the same period in 2006, iSuppli believes. The large-sized LCD market has been on the road to recovery since the second quarter of 2007.

“iSuppli estimates that revenue rose to $16.7 billion in the second quarter, up from $13.4 billion in the first,” said Sweta Dash, director, LCD and projection research for iSuppli. “Despite an anticipated softening in demand growth in the fourth quarter, with the strong third-quarter results we expect, large-sized LCD panel revenue for all of 2007 to rise by more than 27 percent to $68.7 billion, up from $53.9 billion in 2006.”

As for shipments, the large-sized LCD market is expected to reach 370 million units by the end of 2007.

“iSuppli expects 20 percent unit growth for monitor panels, 35 percent growth for notebook panels and 51 percent growth for the TV panel market in 2007 compared to 2006,” Dash said.

LG.Philips LCD, the first major panel maker to announce third-quarter results, started the earnings season off impressively, announcing an 18 percent increase in revenue compared to the second quarter and a 43 percent rise compared to the third quarter of 2006.

Samsung followed with an equally impressive 20 percent increase in LCD revenue compared to the second quarter, and a 34 percent increase compared to the third quarter of 2006.

Supplies of large-sized panels fell short of demand in the third quarter due to customers placing orders for the holiday season earlier than usual. Other factors behind the shortage included cuts in panel suppliers’ fab utilization rates in the first half of 2007, slowed production expansion plans and greater capital-spending discipline among LCD makers.

Supplies of desktop-computer monitor, notebook and 32-inch and smaller TV panels remained constrained throughout the third quarter, spurring significant price increases.

Most mainstream notebook and monitor panel prices increased by 7 to 10 percent from June to September, after a 10 to 15 percent price increase from April to June. The average 32-inch and below TV panel price rose by only 2 to 3 percent from June to September after a 4- to 5-percent price increase from April to June.

The 40/42-inch TV panel price decreased by less than 5 percent from June to September.

Profitability among the large-sized LCD suppliers was better in the third quarter than the second. Monitor panels were particularly profitable.

TV panel profitability lagged behind the notebook and monitor panels in the third quarter. This resulted in a partial shift in production capacity from TV panels—especially the 32-inch size—to monitor panels.

The phenomenon contributed to the supply tightness in the third quarter, resulting in panel price increases and higher profitability compared to the second quarter. The 32-inch and 40/42-inch WXGA TV panels still generated only a 5 to 15 percent profit margin in the third quarter.

The LCD-TV market is shifting to larger sizes due to the increased availability of bigger panels at lower prices. Furthermore, the move to the thin form-factor and wide-format LCD display technology means that consumers can more easily fit televisions with larger screen sizes into their homes. This trend, combined with High-Definition (HD) resolutions, means such large-screen sets are practical for more consumers.

This shift to larger-sized panels will boost revenue and profitability for the TV panel makers. The monitor panel market also is shifting to the 19-inch, 20-inch and 22-inch sizes.

There have been concerns that holiday sales in the United States may be negatively impacted by the slowdown in the housing market, the credit crunch and general uncertainty regarding the economy. Moreover, panel buyers usually decelerate their purchasing in the fourth quarter due to seasonality and also to prepare for the typically slow first half of the following year. The early “pull in” of orders means most panel purchasing activity for the holiday season is already completed, especially for the television market. This may impact panel pricing in the fourth quarter, especially near the end of the period. However, concerns about tight supplies in 2008 may lead some buyers to continue purchasing even during the slow season.

The global LCD-TV panel market in 2008 is expected to expand to 102.5 million units, up 27.2 percent from 80.5 million in 2007. This will mark the first time shipments will surpass the 100 million mark.
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