Although an excess supply of liquid-crystal displays has significantly cut into prices in the first half of this year, OEMs could soon see the pendulum swing the other way.
Average weighted prices on large-area LCDs-those sized at 10.4in. and wider-have fallen by roughly 40% since the end of last year, according to DisplaySearch Inc. However, the Austin, Texas, market research firm expects prices to fall by less than 10% the remainder of the year, and possibly inch up as early as the fourth quarter.
Large-area LCD prices were not expected to bottom out until early next year, according to Sam Matsuno, an analyst at DisplaySearch. Pressured to recover thinning profit margins, several display manufacturers are reallocating their plant capacity to build small and medium-area LCDs for the portable market at the expense of larger displays, Matsuno said.
"Supply and demand is becoming more fragmented," he said. "In the past, LCD demand depended mostly on the notebook PC sector. Now, LCDs are used as monitors for desktop PCs and for small, portable products."
Suppliers of LCD modules, as well as of monitors that integrate the modules, already see display prices beginning to stabilize and supplies tighten.
"We're anticipating possible shortages of 15-in. UXGA LCDs as early as the third quarter," said Joel Pollack, vice president of the display business unit at Sharp Microelectronics of the Americas in Camas, Wash.
For Viewsonic Corp., a supplier of LCD monitors in Walnut, Calif., price and supply trends will vary depending on the display size.
"Prices on 14 to 17in. displays are bottoming out now, and they could rise by up to 5% by the fourth quarter if supplies get tight," said Marc McConnaughey, senior vice president at Viewsonic. "But 18 to 23in. LCDs could drop another 10% to 20% in price, because additional fabrication capacity in Taiwan that we planned for last year is coming online now."
NEC-Mitsubishi Electronics Display of America has seen prices of its 17 and 18in. LCDs fall by 50%, to $1,000 from $2,000, said Todd Fender, product manager for high-end LCDs at the Itasca, Ill., company.
Fender foresees prices leveling off in the third quarter, but doesn't believe there will be price hikes. NEC will try to maintain prices at current levels even if that means eating into the company's margins, he said. "Only if demand suddenly goes gangbusters would price increases occur."
A spokesman for Fujitsu Microelectronics of America Inc., San Jose, said that prices on 15 and 17in. LCDs, down 50% over the past year, will stabilize in the third quarter. However, he said that unless a significant application emerges to spike demand, prices probably will not increase this year.
But while large-area LCDs head into short supply, small and midsize LCDs could flood the market later this year.
DisplaySearch noted that while only four suppliers allocated more than 50% of their capacity to small and midsize LCDs in the first quarter of this year, at least 10 suppliers will do so by the first quarter of 2003.
As a result, the research firm expects the surplus of small and midsize LCDs to exceed demand by 20% in the fourth quarter of this year. Weak demand for cell phones, PDAs, and other portable products that incorporate smaller displays have created the imbalance.
"Many suppliers converted their lines to produce small displays because they anticipated rapid growth in next-generation cell phones, which didn't materialize as rapidly as expected," Sharp's Pollack said. He added that less than half of Sharp's LCDs go into PCs, with the remainder targeted at mobile products, games, and cell phones.