Korean manufacturers raced past Japan to become the world's leading source for LCDs during the second quarter of 2001, but overproduction and a price war is turning their victory into a hollow one.
Together, Samsung Electronics Inc. and LG.Philips LCD Co. overtook Japa-nese suppliers as the leading manufacturers of LCD notebook and monitor panels with a 41.5% global market share in the June quarter, according to DisplaySearch, Austin, Texas. After a long reign, Japanese manufacturers fell to second place with a 39.5% share.
The victors are not celebrating much, however. A huge production ramp-up in the last year in Korea and Taiwan has sent LCD panel prices into a tailspin. According to a weighted average from DisplaySearch, the average selling price of an LCD monitor module, which was $414 in the first quarter, is expected to drop to $241 by the end of the year.
Although LCD unit sales at Samsung surged this year, the company's panel revenue still fell about 25%, from $3 billion in the year-ago period, according to Ross Young, DisplaySearch's president. LG.Philips' LCD revenue fell 7% during the same period, despite benefiting from higher sales into the LCD monitor market, where prices were not as hard hit as in the notebook sector.
Young said none of the major LCD notebook panel suppliers are currently profitable due to the price war. LG.Philips confirmed that financial data it must report to the Korean government showed a loss in the most recent quarter, but said this was due to unidentified special charges. DisplaySearch's Young said LG.Philips' panel sales to the LCD monitor market, where it is the world's largest supplier, were profitable.
Despite the pricing challenge, both Samsung and LG.Philips are determined to hold on to their leadership position and are even adding manufacturing capacity to raise production based on expectations of higher LCD sales ahead. DisplaySearch projected that LCD monitor OEM shipments could reach 14 million units this year, double the amount from 2000. In the third quarter alone, LCD monitor sales are projected to reach $2.7 billion, gaining 30% of the total desktop PC display market. Both LG.Philips and Samsung are angling for a bigger share of that market. LG.Philips in the first half of next year will open its fourth fab, a fifth-generation plant using 1 ?? 1.2-meter motherglass. Samsung is expected to follow soon after with its fifth-generation factory of similar meter-size motherglass.
Bruce Berkoff, executive vice president of LG.Philips, said the booming panel market for LCD monitors could lead to some shortages by the end of the year, resulting in improved pricing and higher profits.
"We're running at full capacity and can't make any more panels for monitors," Berkoff said. "If demand continues to grow at the current rate, it should exceed supply by year's end."