Monday, September 15, 2008

Commentary: LGD's lowered forecast sets tone for LCD panel industry's coming quarters

Max Wang, Taipei; Rodney Chan, DIGITIMES [Friday 12 September 2008]

The price slumps for LCD panels, as expected, are taking their toll on suppliers' profits, with LG Display (LGD) having lowered its earnings guidance for the third quarter. The Korean maker's grimmer outlook actually sets the tone for the coming quarters during which the panel market will be put to a tough test.

The LCD monitor market will continue to slow down, while panel suppliers will have to rely on the notebook and TV segments for growth. Currently most notebook panels are processed at 4-5G lines, making limited contribution to the utilization of 6G and above capacity. The LCD TV market may grow 30% to as many as 140 million units in 2009, but the size of the LCD TV market will not be big enough to digest the industry's capacity, which will increase sharply starting next year.

LGD will add new capacity at 6G and 8G lines in the first half of 2009; Sharp is reportedly considering moving up the scheduled ramp at its new 10G plant to the second half of 2009; IPS Alpha's 8G line will come online in January 2010; AU Optronics (AUO) and Chi Mei Optoelectronics (CMO) will kick off their 8G volume production in the second half of 2009; and Samsung Electronics and Sony's joint venture, S-LCD, is expected to begin volume production at its second 8G line in the second quarter of 2009.

LGD is apparently aware of the challenge ahead, judging from its latest deployments for the TV segment. With LG Electronics (LGE) a major player in the brand-name TV market, LGD has hit a snag trying to sell its panels to Samsung and Sony. LGD is now seeking partnerships with second-tier brands or TV makers in order to expand its market. It has already teamed up with China's Skyworth and Taiwan's Amtran Technology separately to build LCM plants.

However, LGD's existing clients may not be able to digest all of the panel maker's capacity. Industry sources estimate that LGE may account for 30-40% of LGD's TV panel capacity, and clients from Taiwan and China at most 20-30%. Orders from Sony and Samsung would be vital for LGD's LCD TV panel shipments.

LGD is in a head-to-head competition with Taiwan makers to increase market share, and all of them face the same issue: industry-wide oversupply stemming from capacity expansion, faster-than-expected price declines, and slower-than-expected growth in demand, and all happening amid a global economic downturn that promises to continue to plague 2009.

Friday, August 1, 2008

LCD TV and monitor makers trimming shipment targets, says CPT

Rebecca Kuo, Taipei; Esther Lam, DIGITIMES [Thursday 31 July 2008]

Chunghwa Picture Tubes (CPT) vice president Brian Lee has revealed the company is seeing branded LCD monitor and second-tier TV vendors trimming their shipments targets. CPT has already cut its own shipments target, and Lee said only a short-term recovery will be seen in the second half of 2008.

Citing internal estimates, Lee indicated that, on average, branded LCD monitor vendors have revised down their annual shipments targets by 13%. This translates to an annual shipment of 143 million units. Second-tier TV vendors are also likely to trim their targets as price competition from Sony and Samsung Electronics is expected to erode their market share, Lee predicted, but would not give concrete figures for the extent of the cuts.

A safe inventory level for LCD monitors should be 1.5 months, but most system integrators (SI) and distributors are currently carrying inventory levels 1-2 weeks higher, Lee said. Inventory levels for LCD TVs are also about 3-4 weeks higher than the safe level, he added. Leading TV vendors have already frozen inventory procurement, he noted.

Among all end applications, Lee said only notebook panel shipments have maintained previous targets. Panel inventory levels at notebook vendors are at about 1-2 months and as vendors pre-stocked during June and July, no inventory buildup will be seen in August, he said.

CPT is expected to see its average selling price (ASP) for IT and TV panels drop 15% and 5%, respectively, on quarter, a similar price drop as foretold by rival AU Optronics (AUO), industry watchers estimated.

Thursday, July 31, 2008

CPT lowers 2008 LCD panel shipment goal by 6%

Rebecca Kuo, Taipei; Rodney Chan, DIGITIMES [Wednesday 30 July 2008]

Chunghwa Picture Tubes (CPT) vice president Brian Lee told investors that the panel maker has lowered its large-size panel shipment goal by 6% for the year, in order to reflect weaker-than-expected demand in the LCD panel market, with reduction for various panel segments being in the 5-10% range.

For monitor panels, the original goal for 2008 was 19.2 million units, with 9.5 million units for the first half of the year and 9.7 million units for the second half. The revised goal is 17.9 million units for the entire year, with 9.4 million and 8.5 million units for the first and second half.

For notebook panel shipments, the original goal for 2008 was 6.8 million units, with 3 million units coming from the first half of the year and 3.8 million units from the second half, Lee said. The goal now is 6.1 million units for the whole year, 2.9 million units of which coming from the first half and 3.2 million units from the second.

But CPT raised its shipment goal for TV panels, which were originally expected to reach 1.4 million units in the first half and 1.3 million units in the second half for a total of 2.7 million units for 2008. The revised goal put 2008 shipments at 2.9 million units, 1.4 million units coming from the first half and 1.5 million units in the second half of the year, Lee said.

CPT president Chuang-Yi Chiu said 2008 shipments still look satisfactory. CPT has lowered its utilization rate by 10%, but the company expects it to be a short-term measure that will last only till the end of August when demand in the panel market rebounds, Chiu said.

Most of the major panel makers have already cut their production, with Samsung Electronics being an exception. Asked if Samsung's decision to not cut production will affect the panel industry's supply and demand, Chiu said it will have impact in one way or another.

But he commented that it is understandable why Samsung is not reducing its panel output because the Korean vendor has a strong LCD TV and monitor brand, so it has strong capabilities to digest inventories.

Wednesday, July 30, 2008

Commentary: LCD panel makers may still have satisfactory 3Q if production cut can accelerate inventory clearance

Rebecca Kuo, Tainan; Rodney Chan, DIGITIMES [Tuesday 29 July 2008]

With most major LCD players having cut their production amid slumping prices and a global economic downturn, the LCD panel market in the third quarter looks bleak. But global panel shipments in the third quarter may still stay flat, rather than drop, compared to the second quarter if the market is able to clear its inventory in time.

The sharp declines in prices may stimulate demand. Panel makers still hope back-to-school demand will provide momentum for IT applications, while LCD TV vendors are running pricing campaigns to boost sales.

LG Display (LGD) has joined AU Optronics (AUO) and Chi Mei Optoelectronics (CMO) in cutting production by about 10%. But LGD said its output reduction will last until the end of August, and utilization will rise again in September. It is a demonstration of LGD's expectations that the panel market will still see a seasonal upturn in September.

AUO has said its TV panel inventory is still at healthy levels, and clients are still making preparations for the high season. Although the inventory of monitor panels is about 1-2 weeks higher than normal, the excessive inventory will have been digested by the end of August. Notebook panel inventory is still as satisfactory levels, AUO said.

Panel makers believe the production cut will help clear inventory and bring a rebound sooner.

Tuesday, July 29, 2008

AUO to launch 10-inch netbook panel in 3Q08

Susie Pan, Taipei; Joseph Tsai, DIGITIMES [Monday 28 July 2008]

AUO senior VP and general manager of IT display business group, Paul Peng has noted that AUO is planning to launch a 10-inch panel for netbooks in the third quarter this year.

Peng noted that since 8.9-inch panels are most suitable for internet browsing, it is only logical for 8.9-inch panels to replace 7-inch ones. However, since 10-inch panels have the same resolution as 8.9-inch, replacement will not be as fast.

Peng said the netbook market is still developing making forecasts difficult, however since Asustek and Acer expect to ship five million units, while Dell and Hewlett-Packard (HP) both plan to launch new products, therefore annual shipments in 2008 will not be less than 10 million units.

AUO has has landed orders from Acer, Dell and HP, in addition to Asustek. In 2008, AUO will hold a more than 50% share of the netbook panel market, Peng claimed.

Monday, July 28, 2008

AUO may delay ramp at hybrid 7.5-8.5G plant if panel market is weak next year

Rebecca Kuo and Siu Han, Taipei; Rodney Chan, DIGITIMES [Friday 25 July 2008]

AU Optronics (AUO) may delay the ramp-up at its hybrid 7.5-8.5G LCD panel plant if the panel market is weak next year, but the company does not believe that the market will be as bad as others are predicting, according to AUO CEO HB Chen.

Many observers are warning that the LCD panel market may see oversupply when makers ramp up production at their next-generation lines, and the situation may get even worse if the market continues to be hit by a weak economy.

But Chen told an investors conference Thursday that unless something uncontrollable happens, the 2009 market will not be too bad. As for the capital expenditure (capex) for 2009, AUO will remain flexible, but it may delay the production ramp-up at its hybrid plant if the market is weak, Chen said.

AUO plans to kick off mass production in the third or fourth quarter of 2009.

Chen said AUO's capex for 2008 will remain at NT$130-140 billion as originally planned although the company will only run at 90% of its capacity for the third quarter. While the lower utilization is expected to impact the company's margins and profits, AUO still expects growth in the third quarter: 5% sequential shipment increase for the large-size segment, and 15% for the small- to medium-size segment.

But the average selling price (ASP) for IT applications will fall 15% sequentially and down slightly for TV panels in the third quarter, during which the ASP for overall large-size panels will decline 5%.

Chen said although the high season in the third quarter looks weak, demand may still pick up after the channel clears inventories in mid August. He said clients still have hopes that the Beijing Olympics and the long holiday around China's October 1 National Day will boost sales of LCD TVs.

AUO said its inventory increased to 40 days in the second quarter from 33 days in the first quarter. In order to keep the inventory at 40 days or so, AUO has to reduce its utilization rate to 90% in the third quarter, it explained.


Photo: Rebecca Kuo, Digitimes

Friday, July 25, 2008

PVI says Korean government red tape delaying Hydis takeover

Susie Pan, Taipei; Rodney Chan, DIGITIMES [Thursday 24 July 2008]

Prime View International (PVI) has revealed that the formal takeover of BOE Hydis has yet to take place because of slow progress by the Korean government working on completing the acquisition.

The Taiwan-based panel maker, which had previously expected to complete the takeover in mid June, said it has already paid the sum needed for the acquisition. It said it has also dispatched its personnel to Korea to help improve Hydis' operations, but Hydis' top management will not be changed in the meantime.

The bankrupt Hydis is currently under the administration of the Korean government, which has been slow in processing the acquisition, PVI said.

PVI Wednesday decided to issue unsecured overseas convertible bonds and overseas depositary receipts to raise about US$188 million to repay short-term loans it has taken out from banks to fund its takeover of Hydis.

PVI last November announced a deal to spend 260 billion won (US$257.68 million) to secure a 95% stake of Hydis.

Thursday, July 24, 2008

AUO and CMO not delaying construction of 8.5 lines

Rebecca Kuo, Tainan; Rodney Chan, DIGITIMES [Wednesday 23 July 2008]

While the LCD panel industry is seeing its players delaying equipment installation for their 6G plants because of weak demand, AU Optronics (AUO) and Chi Mei Optoelectronics (CMO) have not changed their schedules for equipment move-in at their 8.5G lines, according to sources at TFT LCD equipment suppliers.

The sources explained that initial capacity at AUO and CMO's 8.5G plants will be low. However, the two biggest panel makers in Taiwan will not want to lose out to foreign competitors in the race to next-generation production, and therefore need their 8.5G plants to ramp up production as scheduled, the sources commented.

CMO has already reduced its utilization rate to 90%, while AUO has been said to have followed suit by cutting utilization by 10%. Chunghwa Picture Tubes (CPT) vice president James Wu confirmed today (July 22) that the company has already cut its output 10%.

While lowering their utilization rates, panel makers are also considering slowing their 6G expansion, the sources said. Panel makers are now in talks with equipment suppliers for a delay in the installation of equipment at their 6G lines, the sources revealed.

Citing CMO as an example, the sources said the maker initially planned to ramp up its 6G capacity to 80,000 substrates by the end of 2008, but it now wants to delay the installation of equipment for a capacity of 10,000 substrates.

Wednesday, July 23, 2008

Taiwan LED makers see improved gross margins in 2Q

Siu Han, Taipei; Joseph Tsai, DIGITIMES [Tuesday 22 July 2008]

Although LED demand did not surge during the industry's traditional peak season in the second quarter, LED makers are expected to see improved gross margins in the second quarter as compared to the slow season in the first quarter.

Affected by weak demand for LEDs used in backlight units (BLU) for small- to medium-size LCD panels, Unity Opto Technology saw its revenues in the second quarter drop 11% sequentially, but its gross margins are expected to increase to around 16-17%, up from 10% in the first quarter.

Bright LED Electronics' gross margins are expected to rebound to 20% in the second quarter, up from 14% in the first quarter. Market watchers also expect Epistar's gross margins to increase to 23-24% in the second quarter, up from 20% in the first quarter, while its earnings per share (EPS) will be around NT$0.5 (US$0.016)

Tuesday, July 22, 2008

LCD panel pricing trending toward production costs in some segments

Rebecca Kuo, Tainan; Rodney Chan, DIGITIMES [Monday 21 July 2008]

LCD panel makers are seeing prices for some popular segments, such as in the 32-inch TV panel segment, drop close to production costs, and prices could fall below production costs by the end of the fourth quarter, according to industry sources.

Typical 32-inch TV panels for the second half of July are being quoted at US$285, down US$13 from the first half of the month, according to DisplaySearch's latest panel pricing figures.

The sources indicated that first-tier panel makers' average costs for 32-inch TV applications in the third quarter are about US$260. And if the pace of current downward trend continues, prices for the 32-inch segment may have dropped below production costs by the end of the fourth quarter, the sources remarked.

For 42-inch full HD TV panels, DisplaySearch figures put quotes of typical panels at US$505 for the second half of July, down US$5 compared to the first half of the month.

The sources noted that while first-tier panel makers production costs' for the 42-inch segment are about US$490 for the third quarter, there is a good chance that the quotes may drop below production costs in the third quarter.

Panel makers are now reducing their output in hopes to curb the price slump. The sources commented that prices in August may fall at a much slower pace because of a seasonal increase in demand, but the end of the high season later this year may trigger another wave of pricing pressure.