Not AMAT specific since they shed their TFT business but indicative of the strength of the PC market:
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LCD shortage won't ease for months, suppliers say
By Jack Robertson
Electronic Buyers' News
(07/30/99, 05:25:27 PM EDT)
An industrywide dearth of thin-film transistor (TFT) LCDs has already triggered a million-panel shortage in the notebook-PC market this year. And by most estimates, it's only going to get worse.
Panel makers and analysts don't expect increased production from Korea and Taiwan to start easing the supply shortage until late this year or the first quarter of 2000 at the earliest-with some prognosticators predicting the supply/demand imbalance will drag on for 18 months.
Omid Milani, senior product marketing manager for flat-panel display products at NEC Electronics Inc. Santa Clara, Calif., said “an unbelievable shortage of panels is holding back the notebook market.”
Paul Semenza, an analyst at San Jose-based display research firm Stanford Resources Inc., estimated the shortage of 12- through 15-inch panels-the most commonly sought-after size for notebook PCs-has grown to more than a million displays in the first half of 1999 alone. Semenza said the scarcity of displays will stall out 1999 shipments of these panel sizes at 15 million units, although this still represents a 27% increase over last year.
The shortfall in the notebook segment has been compounded by soaring demand for 14- and 15-inch displays for desktop monitors, Semenza added. “As much as 90% of the panel shortage in the second quarter was in 14- and 15-inch panels,” he said.
The shortage of smaller-size notebook panels has been exacerbated because many FPD vendors are focusing production on 17- to 20-inch screens, where profit margins are even higher, Milani said. A sheet of motherglass yields two to four displays of this size, roughly half the rate of the smaller panels.
Major FPD suppliers, including Mitsubishi, NEC, Philips Flat Display Systems, and Toshiba, said panel price increases are spiraling higher. Consensus is that mainstream 12.1-inch notebook panel prices have jumped 66% from Q4 '99 to about $350 today. The price tag for 14-inch panels has shot up 40% to $540.
One source feared the price hikes might become steeper, because Taiwan notebook contract assemblers have been using panel inventory they bought earlier this year at lower prices, which is now mostly exhausted. “The big Taiwan manufacturers will now be coming into the market en masse, bidding up prices further,” he warned.
Korean and Taiwan flat-panel companies are ramping to meet the accelerated demand for panels. Carl Steudle, FPD marketing manager for Samsung Semiconductor Inc. in San Jose, said his company is now expanding Line 3, which just opened a year ago in Chonan, Korea, and will start construction of a Line 4 fourth-generation fab which will launch production in mid-2000. And LG LCD Inc. is completing its Fab 3, which also starts production next year. FPD producers, however, are facing shortages themselves, as deliveries of panel equipment have been stretched out, Steudle said. “All the production expansion in Korea and Taiwan has hit equipment manufacturers with large orders at once,” he said.
So far, the high prices have done little to thwart demand from notebook OEM buyers, which are frantically searching for supply, according to several display vendors. “Mitsubishi is getting calls from OEMs we never sold to before, all asking us to name our price for immediate delivery,” said Dale Maunu, product manager for TFT-LCDs at Mitsubishi Electronics America Inc., Sunnyvale, Calif.
What's more, vertically integrated PC companies once again are tapping the bulk of their own internal panel production to satisfy notebook demand. While these companies are still servicing key external customers, some have jettisoned lesser accounts they were courting heavily just 18 months ago, when the market was in oversupply, sources said.
Bob Brown, president and chief operating officer of Toshiba America Electronic Components Inc., Irvine, Calif., said the Display Technology Inc. (DTI) joint venture between Toshiba and IBM Corp. is now producing panels solely to meet the needs of the two companies. In the market of several years ago, DTI had solicited orders from outside customers. Brown said Toshiba is still trying to supply panels to customers from its flat-panel factories in Japan.
Predictably, some suppliers are trying to leverage the seller's market by bundling in other purchases. Some Asian companies will provide scarce FPD panels only if given the contract to assemble the notebook PC as well, according to industry observers.
And most FPD makers in Japan and Korea report that they will forego their August vacation shutdown to keep production rolling, which could add as many as 14 days of production at some companies.
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