Of three applications, panel prices posted a large decline which resulted from the weak demand in 3Q10 hot season. What the industry encounter recently are the diminishing profit from large-sized panels, and the necessity to lower the cost. WitsView, a research division of TrendForce, pointed out that based on the current panel prices, monitor and notebook panel prices have fallen below the cash cost and are approaching to the material cost. In terms of TV panel prices, although the condition was slightly better, panel price quotes are rapidly moving toward the cash cost due to the continuous price promotions.

 

Eric Chiou, the research director of WitsView, indicates that the profitability level among panel makers is the very valuable reference which reflects the component price adjustment for the upcoming quarter. That the profitability level goes down causes the pressure among panel makers, so they usually become more aggressive to reexamine the cost structure, and the most efficient and the fastest way to lower the total cost is to reduce the procurement cost of components.

 

Take the major component glass substrate for example, the utilization rate among some panel makers was revised downward in 3Q10, having a significant impact on the demand of glass substrates. During the first three quarters of the year, glass substrate price merely had a QoQ decline of 1~2% on average. However, due to the weakening demand, coupled by the buildup of inventory, a 4~5% QoQ price decline may occur in 4Q10.

 

The cost of backlight units accounted for the largest ratio of the material cost. Since the demand of LED backlight units was strong this year, prices of key materials such as LGP, reflector, and LED chip were on the rise, which also led to the limited price decline in backlight units. However, the market buzzed with that the sales performance of high pricing LED models was worse than expected. Thus, in order to achieve the sales target, brand vendors turned to the relatively cheaper CCFL models. In other words, demand of CCFL models increased while demand of LED models fell. The shift gave BLU makers substantially more pressure to lower the prices. In 4Q10, the prices of various CCFL backlight units was projected to fall by 4~5%, and LED TV prices may drop by more than 6% in order to boost more demand.

 

The market condition remained weak. In addition to the above-mentioned components, major materials of panels such as polarizer, driver IC, and liquid crystal extended the price decline significantly under the premise of spurring demand and clearing away inventory, according to WitsView. Eric Chiou further estimated that the material cost decline among major panel makers may potentially increase from 1~2% in 3Q10 to 3~4% in 4Q10 on average.