Price Hikes Expected for Large-Sized LCD Panels

After reaching the cash cost level, vendors look to profitability.

The glass supply shortage and efforts by Taiwanese suppliers to return to pro?tability are expected to drive a signi? cant price increase for large-sized Liquid Crystal Display (LCD) panels in the coming months, according to iSuppli Corp.

Prices could rise by as much as a $6 to $10 increase for monitor panels, $10 to $15 for notebook panels and $20 to $30 for television panels.

The good news for panel makers is that after four months of consecutive price hikes, large-sized LCD panel suppliers were at the edge of breaking even in May. Prices for all three large-sized panel applications�televisions, monitors and notebooks�have climbed higher than the cash costs, with pricing for both television and monitor panels equal to or higher than the total cost of the panels. While pricing for notebooks remains at about an equivalent level to the cash cost, it is nearing the total cost.

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

Price increases during the previous months and the expected price hikes in coming months will move suppliers closer to reaching profitability once again in the second half of 2009. On the back of such aggressive price increases, Korean suppliers�which have a lower cost structure and higher television shipments�were set to become profitable in June. Taiwanese suppliers are expected to go into the black starting in July.

Because they already have returned to profitability, Korean suppliers are feeling less pressure to increase prices, unlike their Taiwanese rivals.

Price Correction
A price correction is still expected in the fourth quarter of 2009 after the peak seasonal pricing reaches its high point in the third quarter. Increases in pricing and shipments are expected to peak in August and then start to slow in September due to seasonality and the end of inventory build-up. Any risks in potential inventory overbuilding and sharp price corrections will be reduced in the face of the glass substrate shortage and the recovering economy.

Demand from China
LCD-TV demand continues to be sturdy as a result of the Chinese government�s various domestic stimulus programs�including the rural, urban and energy conservation subsidies.

Chinese-based television brands are eager to expand their market share and are aggressively building inventory. Because of this, domestic Chinese OEMs are paying extra in order to procure sufficient numbers of panels. For example, while the average pricing in the industry for a 32-inch panel was just about $190 to $200 in June, Chinese brands are agreeing to pay $220 to $225.

As a result, panel suppliers are shifting shipments to Chinese brands, which accounted for as much as 50 percent of the total television panel shipments from Taiwanese suppliers in June. That percentage could rise further. With sales remaining strong, panel suppliers have been unable to fully satisfy demand, and thus are raising prices aggressively to reduce overbooking.