January 13, 2010

LCD shortage intensifies in first quarter

Converge LCD Update.

Few could forget how the LCD market staggered and tumbled just a year ago. Well, things have changed in just a short time, with panel makers having a tough time fulfilling worldwide demand.

One factor that contributes to the current market dynamic is the recent shortage on certain key components, which include polarizer, driver IC and glass. One other factor is seasonal, as most of the LCD manufacturers cut back 10-15% of production capacity during the December holidays. The more encouraging factor has to do with an increase of overall demand for LCD panels from all major markets. Customers in Europe, in particular, are placing additional forecasts to refill their inventories, which were nearly depleted amid strong December sales. Demand from Asia is also healthy, as Chinese New Year is a few short weeks away. Among various applications, TV panels are having the toughest time reaching their customers.

Lead times quoted by most factories have extended to 12 to 16 weeks on average for TV panels, particularly those 24 inches and under, with fulfillment rates dropping to around 30%. This means that many factories are able to fulfill only 30% of their existing orders. Although January pricing had not been officially released at the time this report was written, it is safe to expect a 6-8% increase from the current level. Supplies on TV panels over 24 inches seem to be in better shape, as fulfillment rates are in the 75% range. Lead times have also extended from the six to eight weeks seen in December to eight to 10 weeks in January. A 3-5% increase in pricing is anticipated.

The shortage on desktop panels of 18.5 inches through 22.0 inches continues in the first quarter of 2010. Prices are expected to go up by 5-8% in January for the mainstream form factors, with the current fulfillment rate at approximately 50%. Most panel production plants are fully booked through the end of March. Factory lead times have also extended to six to eight weeks. Notebook panel supplies will be subsequently affected as the shortages spill over. Expect to see a 3-5% increase for the month in pricing for 10.1-inch through 17.3-inch notebook panels. Although the shortage remains moderate, with roughly 85% fulfillment rate for LED models, the old-school CCFL models are becoming depleted in the channel. Market pricing for notebook panels will likely become less stable going forward.

The demand for industrial panels remains healthy. Certain advanced desktop models, including the LM190E08 and LM201U05 series by LG Philips, are popular among industrial customers. While CMO and AUO continue to gain a foothold in the industrial panel market, especially in the range of 5.7 inches to 12.1 inches, Sharp and Mitsubishi remain a top choice for many discriminating users.

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