WitsView: If capacity controlled well in 1H11, bright outlook expected for 2H11

According to WitsView, a research division of TrendForce, since the TFT-LCD industry posted a stronger than usual traditional weak seasonality in 1Q10, downstream customers were aggressive in restocking earlier in 2Q10 under the expectation of the insufficient panel supply in 3Q10. Thus, panel shipments reached the record high in 2Q10. However, due to the weak end-market demand in China, Europe and the US in 1H10, the inventory problem led to the weaker hot season in 3Q10, and resulted in the plummeting panel prices and declining profitability.

Panel makers had slashed the input capacity in 3Q10, coupled by the inventory adjustment toward the monitor and NB inventory among downstream clients, the glut ratio was lowered to 2.1% from 12% projected in Q2, which led to the supply/demand balance in early Q4. However, the demand in Q4 was mainly from the inventory replenishment and the early restocking for the next Chinese New year holiday. With the panel price rebound, panel makers started to increase the utilization rate aggressively from November, which may once again cause the oversupply problem.

If the end-market sales performance was not as outstanding at the year-end season, the risk of panel price decline, caused by the rising inventory level, may hike in 1H11.

In 2010, the strategic manipulation of TFT-LCD industry directly reflected on the market structure of the stronger slow season and the weaker hot season. The reason that caused the worldwide panel oversupply problem – it has been almost five year since the global first G7 fab started the mass production in 2005, and the first G8 fab began the operation in 2006; yet, the average size of LCD TV still stayed at around 33~34” to date.

The growth of the average size was far from the capacity expansion of G7 and above fabs. On the other hand, the global financial crisis in 2008 shattered the development of TFT-LCD industry, and which was sustained by the emergence of the China market and the recovery of macroeconomic over 2009. However, instead of aggressively increasing the size of LCD TV, the focus was mistakenly placed on the promotion of LED and 3D TV in 2010 whose development in both hardware and software as well as the cost structure were still immature, which left the oversupply problem there.

In 2011, the key for the supply/demand balance in the TFT-LCD industry is the panel capacity control. If the capacity is controlled well in 1H11, the demand is expected to robust in 2H11.

Based on WitsView’s estimate, the worldwide large-sized LCD TV, monitor, NB (including netbook and tablet devices) panel shipments will potentially reach at 633 million units in 2010. In 2011, driven by the demand for the new technology such as tablet devices, AIO, LED, and 3D, panel demand will be likely to reach up to 730 million units, growing by 16% YoY (see the table below).