LCD Panel Market Roundup

In Will Taiwan LCD Makers Move to China? we observed that Taiwan panel makers may move to China and we also noted China's struggle in developing the LCD market. Although legislation being passed is for lower generation plants, it seems some Taiwanese panel makers are still interested in Taiwan. Reuters reports AU Optronics will invest in a new 10G plant in Taiwan. Reuters wrote:

AU Optronics would invest at least T$400 billion ($12.7 billion) to build four new LCD plants after Taiwan's government makes a decision on the location of a new production zone, a local newspaper said on Wednesday.

AU Optronics, the world's third-largest LCD maker, has invested T$600 billion in the industrial science parks in central Taiwan, and AU would build four LCD factories using more advanced generation 10 and above technology, the Economic Daily News reported, without citing sources.

Later on Wednesday, Taiwan's government is expected to choose a site where local companies can expand production from one county in central Taiwan, the Chinese-language newspaper said.

An AU official would only say that the company needs a large piece of land where it can build new plants over the longer term. AU, which competes with larger rivals Samsung Electronics and LG Display of South Korea, has said it is planning to build a new state-of-the-art LCD plant to tap future demand for flat-screen televisions.

However, a current inventory oversupply and a decline in demand has caused a downswing in the panel market as a whole. Digitimes notes this downturn may have a negative effect on the LCD driver IC design houses. Digitimes observed:

Taiwan TFT-LCD panel makers believe falling price for panels will be end by the end of August. However, the panel makers are looking to reduce average prices on their components, placing pressure on Taiwan LCD driver IC suppliers, which are seeing disappointing order visibility, casting a shadow on their sales growth and margin expectations for analog IC design houses this quarter, according to market watchers.

The sources mentioned although LCD driver IC suppliers expect sales in the third quarter to grow from the second quarter, the range of growth has shrunk about 50% this year. In addition, TFT-LCD panel makers usually implement a cost-down strategy when demand is weak, meaning driver IC suppliers have to cut their prices by 10-15%. Therefore, Taiwan LCD driver IC design houses are facing the pressure of both disappointing sales and declining margins.

The downswing in the market has also caused delays in China developing their LCD panel market and has led Digitimes to question whether the next generation fabs will be developed in China. Digitimes notes in a commentary:

There have been talk coming out of China about Shanghai-based SVA Group planning to build its 6G LCD panel plant. But while the panel market is being hit by a price slump, as well as worries about serious over-supply emerging next year when major makers ramp up their next-generation productions, one cannot help but wonder how soon SVA will kick off construction of its 6G plant, if it ever materializes at all.

Since last year, reports coming from China's media have almost invariably indicated that SVA is going for a 6G line for its next-generation project, in line with government directives concerning the feasibility of panel production at the generation.

But such a project has been dogged by a persistent sense of uncertainty. Just last month, SVA was said to be considering teaming up with Sharp to build a 7.5G LCD plant in China while abandoning its original 6G plan. The 21st Century Business Herald, which made the claim, indicated that while SVA already obtained government approval to build the 6G line with a ground-breaking ceremony having been scheduled for September 28, over-supply from the world's 6G capacities was causing the company to consider skipping 6G in its production migration.

Of course these rumors have been denied and China still says the original 6G fabs will be built.

Not all is doom and gloom for the panel market though. iSuppli is predicting the large panel market sector will pick up. iSuppli observes:

After nearly three months of plummeting profitability and precipitous price plunges, the large-sized LCD panel market finally is due for a recovery in September, iSuppli Corp. predicts.

“The large-sized LCD panel market has been mired in a state of severe oversupply since the start of June, due to lower-than-expected panel demand and high inventory levels throughout the supply chain,” said Sweta Dash, director of LCD and projection research at iSuppli. “Conditions have worsened in August, with poor economic circumstances causing prices to decline at an even faster pace than before. However, panel production cuts, combined with the clearance of inventory and a recovery in demand from televisions, desktop PC monitors and notebook PCs are expected to shift the supply/demand equation back to balance in September. This will lead to a recovery in pricing.”

iSuppli defines large-sized LCD panels as those having a diagonal screen dimension of 10 inches or larger.

It seems the panel sector, like increasingly more sectors in the global economy, is struggling. Although there is good news about the potential recovery of the large screen sector and optimistic investments by AUO in Taiwan, the market is still struggling. Some believe a global meltdown is just around the corner. Of course, predicting the future is difficult, so we won't try.

Reuters: Taiwan's AU to invest T$400 bln in new LCD plants -paper
Digitimes: LCD driver IC design houses feeling the pain of panel makers
Digitimes: Are China's next-generation LCD fabs really coming?
iSuppli: Large-Sized LCD Market Set for September Recovery