The Australian market is set to be hit hard by a global shortage of LCD panels with mass market retailers being given preferential treatment over HD TV stock. Set to benefit are plasma manufacturers including Hitachi, Panasonic and Pioneer.
Among the vendors which have admitted to shortages are Sony, Samsung, Sharp and LG and it is also believed that Toshiba has sold most of its new HD LCD TVs to Harvey Norman. Also set to be hit are brands that have direct control over production. SmartHouse has also been told that Sony is set to ship analogue LCD TV with retailers told to sell set top boxes to deliver a HD capability.
The shortages are not limited to just LCD TV screens monitor manufacturers such as Samsung, Viewsonics, BenQ, Sony, and Acer are all experiencing shortages.
Shortages have also surfaced in smaller panel sizes used for such high-demand categories as digital photo frames, notebook PCs and personal navigation systems.
The result has been slowing availability of LCD TVs in certain screen sizes followed by attempts to stabilize or even raise panel pricing in some segments. But analysts add that increased expansion plans in Gen 7 and 8 LCD panel factories planned to go online in late November 2007 should avert some shortages but not in time for the peak buying period between September and November.
Industry observers said end of year LCD TV supply issues resulted, in part, from panel suppliers slowing down production in the first quarter following an industry panel glut in the fourth quarter of 2006 and early 2007. This was followed by stronger-than-expected consumer demand for LCD TVs in the second quarter.
“Panel shortages are affecting everybody in everything from TVs to portable DVD players, and car entertainment products,” observed one senior industry executive “On the regular TV side for everybody it’s been a struggle. You may get 70 to 80 percent of what you order. You just have to factor that into your buying, and I think the buyers understand what’s going on today. So they are hedging their bets.”
With LCD TV supplies now low in some areas, several panel suppliers have used the opportunity to raise prices slightly to make up for thin or even negative margin conditions that existed in some screen sizes,
“What is happening now is a result of panel supplier behaviour in Q1 07, quarterly losses from Q2 ’06 to Q1 ’07 for the TFT LCD industry, reduced supply growth and tight glass supply,” said Ross Young, president of DisplaySearch. “In Q1 ’07, even though demand was lower than expected producing a 12 percent surplus and less than 90 percent factory utilization, panel suppliers ended the quarter with arguably record low IT panel inventories as they focused on minimizing panel inventory growth as well as component inventories.”
Young said that at the same time, panel buyers also ended the quarter with minimal inventories as they expected healthy price reductions throughout the first half on seasonal weakness.
“However, with long lead-time components also in tight supply, panel makers could not meet all of their OEMs’ demand, creating a shortage and price increases in April,” he said. “Due to better inventory management, as well as tight glass supply, panel price increases have continued in TVs up to 37-inch panels through June and are expected to continue to increase or remain stable in July and August.”
Sweta Dash, iSuppli LCD and projection research director, “The 52-inch panel price has been going up for Q2. Even in 37-inch I see price stabilization, and 40-inch and above panel prices continue to go down, but the rate of reduction is very small.”
Another factor impacting the industry has been revenue disparity for certain panel and glass sizes. For example, there is a large gap in revenues per glass substrate between 32- and 40-inch panels on 7 Gen fabs and between 17- and 32-inch on 6 Gen fabs, said Young.
In May, assuming 100 percent yields, panel makers were expected to “generate 24 percent higher revenues by producing 8-up 40-inch rather than 12-up 32-inch,” Young observed. “And at 6G, there was a 16 percent difference in revenues by making 25-up 17-inch instead of 8-up 32-inch. So, panel suppliers had very little incentive to produce 32-inch panels.
“Thus, they insisted on price increases to make 32-inch, which is the single highest volume panel in the LCD TV market. From April to July, average 32-inch panel (not TV) prices have risen 7 percent from $298, to $317, and we expect average prices to rise again in August,” said Young.
“A number of brands also told me there that they were looking to raise 32-inch LCD TV prices to retailers, given that their costs had gone up $20, but it was going to be a struggle,” he said.
iSuppli’s Dash agreed that LCD TV price hikes may be wanted, but are not likely to stick.
“Despite panel price increases, pricing on finished goods is not expected to rise,” Dash said. “TV is a consumer market and there is too much competition. They also have to compete with rear-projection TV. So, in 40-inch and above where there is rear-projection TV, there won’t be price increases because the manufacturers have to stay more aggressive just to compete with the other technologies.”
As for supply during the next 6 months, Dash said that since many manufacturers are planning large panel plant expansions, “overall we are expecting production to be better at the end of Q3 and Q4.”
The Samsung and Sony S-LCD joint venture Fab will add an 8 Gen factory in August, and that is most efficient at producing 52- and 46-inch product. That factory will mostly do TV panels. Sharp is also increasing capacity from the first half to second half in their 8 Gen fab (efficient for 52- and 46-inch panels). They started last year. “So, for the 46-inch and above LCD TV market we will be getting a lot more capacity in the second half,” said Dash.
“Overall, some tightness will continue, even in Q3, but by Q4 we expect capacity to come back,” she said.