FWIW, I am doing my part for the cause. Yesterday I bought my first TFT screen after my monitor went out. I may have bought at the wrong time though as it sounds as though there may be bargains coming.
LCD price rise screeches to a halt
Weaker demand, new capacity promise bargains for buyers
By Spencer Chin
EBN
(08/16/02 01:58 p.m. EST)
The market for TFT (thin-film-transistor) LCDs continues to keep both OEMs and suppliers on a yo-yo string. After nine months of rising prices and shortages, the volatile sector has done an about-face, with panel prices dropping as demand slows and concerns resurface about the industry's long-term health.
The falling TFT-LCD prices are good news for PC OEMs, particularly as the back-to-school and holiday seasons loom. But some analysts question whether falling panel prices will be enough to reverse weak global demand and shore up an industry for which a second-half recovery had been expected.
To make matters more complicated, Korean vendors have announced they will be producing large quantities of TFT-LCDs in the next few months, followed shortly by Taiwanese suppliers, likely creating another overcapacity situation and placing further pressure on prices and margins, according to analysts who expressed surprise that prices have already fallen.
“We had expected more-or-less stable prices in the second half of 2002,” said Sweta Dash, an analyst at Stanford Resources Inc., the display research arm of iSuppli Corp., El Segundo, Calif.
Instead, average weighted prices on 15in. XGA panels for desktop monitors have fallen from $266 in June to $258 this month, while 17in. SXGA panels have dropped from $391 to $376 over the same period, according to Stanford Resources.
Dash added that prices will temporarily stabilize on 15in. TFT-LCDs in September, but warns of further price drops if sluggish demand continues, threatening the financial stability of some suppliers.
Already, one Taiwan-based panel vendor, Chunghwa Picture Tubes Ltd., has lowered what it expects to get from a pending stock offering because of soft demand. (See story below.)
Weakening consumer confidence and declining corporate spending are adversely affecting demand not only for TFT-LCDs made for desktop monitors but also for notebook PCs, according to Ross Young of DisplaySearch, Austin, Texas.
“We had expected notebook PC shipments to rise 5% in 2Q '02, to 7.7 million units, but it looks like they will decline 3% instead,” Ross said. Conse- quently, he projects a double-digit decline for notebook TFT-LCD panel shipments in the third quarter.
Will history repeat itself?
The near-term outlook for TFT-LCD suppliers could hinge on whether falling prices once again attract OEMs and consumers as they did in the latter part of 2001, when attractive tags triggered a buying spurt that eventually depleted inventories and sent prices soaring the past nine months.
PC makers, afflicted with sluggish sales, say they would welcome a further price drop after absorbing part of the higher prices they paid for TFT-LCDs earlier this year instead of passing the costs on to customers.
“Last year we saw a seasonal uptick in PC sales in September and October. If panel prices drop it could happen again,” said a spokesman for Hewlett-Packard Co., Houston.
How far LCD prices would need to fall to help improve demand is unclear, Stanford Resources' Dash said, adding that OEMs might decide to wait until the last minute.
The wisdom of that gambit was questioned by Joel Girksy, chairman and chief executive of Jaco Electronics Inc., a Hauppauge, N.Y., component distributor that sells value-added TFT-LCDs.
“If I wanted to make, say, an Apple PC and decided to withhold ordering an LCD because of lower anticipated prices, that would not be a good business decision [because I could lose my market opportunity],” Girksy said.
Suppliers of desktop TFT-LCD monitors say they are already feeling the effect of falling panel prices and are trying to stimulate sales.
“We've recently extended rebates to resellers on our 15in. LCD monitors,” said Chris Connery, director of LCD monitor marketing at NEC-Mitsubishi Electronics Display of America Inc., Itasca, Ill.
Connery expects the company to increasingly market 17 and 19in. flat-panel displays to improve margins, though he concedes NEC will likely cut 17in. monitor prices soon to keep up with the competition.
Shortages are gone
Slowing TFT-LCD demand has also meant an end to the tight inventories that plagued the industry earlier this year and stretched some lead times to several months.
“The shortages are over,” Jaco's Girksy said, noting that TFT-LCD supplies are now abundant.
But some suppliers and analysts point out that inventories could rapidly tighten if there is a seasonal surge in display consumption.
“It doesn't take a lot of demand to consume what's in the channel,” said Joel Pollack, vice president of the display business unit at Sharp Microelectronics of the Americas Inc., Camas, Wash.
Pollack said that while some soft spots exist in TFT-LCD sales, other areas, such as flat-panel LCD TVs in Japan, are strong. To meet demand, Sharp is moving ahead with plans to build a Generation-7 fab in Kameyama City, Japan, to make displays for flat-panel LCD TVs beginning in May 2004.
DisplaySearch's Ross agrees that the TFT-LCD market could quickly turn from surplus to shortage, but believes it is more likely that additional capacity from Gen-5 and more modern fabs will increase the panel surplus and rate of price reductions.
Korea-based LG.Philips LCD Co. Ltd. began operating its P4 Gen-5 LCD fab in Kumi in May and expects to double monthly production from 30,000 1,000 ¥ 1,200mm sheets to 60,000 sheets a month by year's end. Korean archrival Samsung Electronics Co. Ltd. is expected to open its Gen-5 fab in the fourth quarter of this year.
Several Taiwan manufacturers, including AU Optronics, ChiMei Optoelectronics, and Chunghwa are slated to bring Gen-5 fabs on line in 2003, further increasing the likelihood of overcapacity. |
