WitsView: TFT-LCD Industry Outlook In 2010

Taking a brief overview of the TFT-LCD panel industry in 2009 – in 1Q09, downstream customers’ demand was sluggish after the financial downturn, panel production capacity was over-adjusted after panel makers suffered severe losses, and panel maker’s demand freeze led to a substantial gap in the supply chain of upstream components. In 2Q09, downstream customers’ inventory replenishment resulted in a demand boom, and panel makers’ capacity utilization ramped up; however, panel capacity was constrained by the gap in the upstream supply chain where the supply of several components was limited. In 3Q09 and 4Q09, Japan- and Taiwan-based panel makers’ capacity faced another bottleneck caused by a glass supply shortage, which effectively offset concerns of a panel oversupply. 

Amid gradual recovery in the global economic environment and the boom of China's domestic market, demand for panels surged since 2Q09, which stimulated an uptrend in panel prices, lifting panel makers out of their financial losses. Monitor panel prices were adjusted in late September, earlier than expected, followed by moderate price declines in LCD TV and notebook panels. In 4Q09, shipments of LCD TV panels benefited from downstream customers’ advanced stocking-up in preparation for demand during New Year and Chinese New Year in 1Q10; demand for notebook panels was bolstered by the launch of new models with Window 7 platform, as well as Intel’s next generation consumer product platform Calpella, which also cushioned the price decline of LCD TV panels and notebook panels. As a result, market optimism towards 1Q10 led to a stronger down cycle.

According to WitsView’s projections, global panel demand of large-size LCD TVs, monitors, notebook (including Netbook) will likely exceed the 500 million mark in 2009, and the figure is expected to reach 570 ~ 590 million units in 2010 (see below). Of the 2009 total, a portion of the LCD TV and monitor panels (to be used in the set assembly) will be deferred until 1Q10 due to the stronger down cycle in 4Q09.

Outlook for panel price trend in 2010 – the annual cycle of the overall TFT-LCD industry was shorted due to several manipulated variables in the market, taking year 2009 for example, material shortage in major upstream components became a key element in stabilizing market supply and demand. In addition, the boom of China's domestic market altered the traditional boom-bust cycle in the TV market. After a new wave of consolidation in the industry, the relationship between upstream and downstream customers had to be adjusted. Moreover, the turning point of panel prices deviated from the market supply and demand, and another wave of price increase from panel makers took place at the end of 2009; behind such market condition was several complex manipulated factors. In 4Q09, shipments of monitor panels showed a stronger down cycle. Will the simmering pressure from the rising inventory lead to a turning point in panel prices at the end of 1Q10? If China’s domestic demand during New Year and Chinese New Year booms, it will be possible to stabilize panel prices; and if so, the second turning point will likely take place in mid-2Q10. The key issue still lies in the inventory of IT panels – as the first half of the year is not a traditionally hot season for IT products, and the timing of mid-2Q10 is after China’s Labor Day holiday, and still 4 months from the National Day holiday; compounded by the pressure from the semi-annual report, downstream customers will be making adjustments to their inventory, and reduced demand will lead to increased pressure to lower prices. In 2H10, capacity management will play a key role in maintaining balance in supply and demand, this is because there is potential for expansion in the existing capacity in 2010; new capacity ramp up will lead to pressure of oversupply, and the closer to year end, the greater the pressure. In light of the above, WitsView holds a conservative attitude toward panel price trends in 2H10, as it is to be determined by actual market conditions in due time.