Small/Medium LCD Suppliers Prepare for Q4 Slowdown

After a strong third quarter, vendors weary of the traditional lull.

The last six months have been very good for small/medium display panel vendors, with prices stabilizing and even increasing in some cases, as demand has returned and utilization rates have risen.

However, these vendors are prepping for what they believe will be a deceleration in demand in the fourth quarter—traditionally a slower period because of the end of the holiday buying rush, according to iSuppli Corp. Furthermore, Tier-1 OEMs in the third quarter pulled in orders for the holiday season and the Chinese Golden Week. This allowed panel suppliers to achieve 93 percent of their third-quarter 2008 shipment levels in the first two months of the third quarter of 2009 alone. It also meant that some order that might have been placed in the fourth quarter were pulled in to the third quarter.

Given these factors, combined with the ongoing recession, it isn’t surprising that panel suppliers are being cautious in their outlooks and are reducing capacity and keeping a tight reign on inventories in order to stabilize prices.

Strong August
In the small- to medium-sized display sector, panel shipments rose for most suppliers in August but declined for three of the seven Taiwanese suppliers that iSuppli tracks on a monthly basis. However, the drop suffered by these three suppliers was not due to any inherent weakness on their part. Rather, it was mainly because of the large numbers reported in July, which made August appear weak in comparison for these specific suppliers. Overall, August shipments were strong compared to the earlier months.

Also helping the Taiwanese suppliers is strong demand for non-mobile medium-sized panels, which are used in low-cost netbook PCs, portable DVD players and Digital Photo Frames (DPFs).

The strong results experienced by the Taiwanese did not apply to Japanese LCD suppliers, which are being impacted by the slowdown in demand for mobile-phone displays. Financial restructuring among the Japanese, the closing of their old fabs, and their reliance on Tier-1 OEMs will lead to a 9 percent decline in shipments from Japan in 2009.

Overall, a slowdown in the small/medium-panel market is expected in the fourth quarter. Suppliers are planning to reduce capacity utilization in anticipation, but the decline in capacity will allow the industry to better manage price declines.