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.