Large-Sized LCD Panel Market Rebounds

Real recovery set for the second half of 2009.

Large-sized Liquid Crystal Display (LCD) panel market revenue is estimated to have grown by 53 percent sequentially in the second quarter, after a decline of 13 percent in the first quarter, according to iSuppli Corp.

Still, second-quarter revenue is estimated be down by 25 percent compared to the same quarter last year. Full recovery is expected only in the second half of 2009, when strong panel demand combined with higher prices will bring the market back to profitability and revenue growth. In terms of units, the market is expected to grow by more than 41 percent sequentially to reach 130 million units in the second quarter.

Pushing Back Recovery
Low inventories throughout the supply chain combined with the severe cut in LCD fab utilization rates and production pushed the market to tight supply beginning in the first quarter of 2009. As a result, panel prices have been increasing since the beginning of 2009, especially for monitor and TV panels. Still, most prices were below total costs in the first quarter, with significant segments even below the cash cost. Despite near stabilization in shipments, demand revenue went down in the first quarter of 2009.

Healthy Inventories
Panel inventory stayed at low to normal levels in the second quarter. Inventory is expected to remain healthy until the third quarter.

Most panel suppliers reported only one to two weeks of inventories in the second quarter. Brand and system integrators also continue to report module inventories of only one or two weeks.

Panel inventory is expected to remain low, given that panel suppliers worried about overbooking will be controlling panel shipments to prevent inventory from building up at buyers. But panel buyers are starting to pull in orders in preparation for expected tight supply in the third quarter of 2009.

China’s Strong LCD-TV Growth
The Chinese government’s rural subsidies program has increased television demand in China. Now that it has been extended to nine cities, growth is expected to continue through future quarters.

Television panel demand, especially from domestic brands, is expected to be strong in the third quarter to support strong growth expectations. Branded TV manufacturers are beginning to offer discounts on new models in the United States, especially the Light Emitting Diode (LED) backlight-based sets and products with higher frame rates such as 120Hz and 240Hz.

More aggressive television set pricing, combined with stabilization in the global economy, will spur further demand in the second half of 2009. Television panel demand, without including monitor panels used for TVs, is expected to reach 130 million units by the end of 2009, representing 28 percent yearly growth from 2008.

Notebook Demand Recovery
Notebook panel demand is recovering in the second quarter after a slowdown in the first due to introduction of Intel’s Consumer Ultra Low Voltage (CULV)-based notebook product with a thinner form factor, 16:9 format panels and LED backlight. Preparation for back-to-school demand, as well as the expected launch of Microsoft Windows 7 products in October, will result in a strong demand for notebook panels in the third quarter. Notebook panel demand is expected to reach 170 million units, up 24 percent year-over-year.

What’s Driving Monitor Panels?
Monitor end-user demand growth has been muted due to the already high replacement rate and impact of the slowdown in the global economy for both consumer and business products. But demand for small-sized monitors that are used for televisions remained strong in the second quarter.
Many branded manufacturers also are starting to introduce all-in-one products that use 16:9 panels. Some brands are also reporting a recovery in enterprise demand. Monitor panel demand, including for use in televisions, and all-in-one use is expected to reach 200 million units in 2009, or about 8.5 percent yearly growth. Close to 15 million of those panels will be used for televisions.

Revenue Will Still Decline
Boosted by strong panel demand, the large-sized LCD panel market in 2009 is expected to reach 517 million units, a growth of 19 percent year-over-year. But revenue is still expected to decline by 8 percent year-over-year due to the below-cost pricing happening throughout the first half of 2009.

Panel suppliers are also already increasing prices at a higher rate in recent months to shift back to profitability. But too many price increases may impact end-user demand, leading to slow panel demand in the future. Also, panel buyers are starting to pull in orders early or are keeping slightly higher inventories to guard against a tight supply.

This may lead to slower panel demand in the fourth quarter of 2009 and put LCD panels back into an oversupply situation. But the price recovery and unit growth demand will push the market back on the recovery path in the second half of 2009.