After a midyear lull, the LCD market is experiencing spot shortages of small
screens and improving demand and tightening supplies for larger displays.
But despite stronger sales in some sectors, a long-term LCD supply glut could
occur if market demand doesn't rebound sharply enough to offset capacity from
additional Generation 5 fabs coming online next year, analysts said.
The LCD market still does favor buyers, with prices for large panels (defined as
more than 10 inches) used in notebook and desktop computers at historic lows and
still dropping, albeit more slowly.
The average-weighted price of large-area thin-film-transistor LCDs (TFT-LCDs)
fell 3.5% in November, to $209 from $216, the smallest decline since July,
according to DisplaySearch Inc., Austin, Texas. Those prices will fall below
$200 through the first half of 2003, but level off and possibly rise as demand
continues to improve, according to Ross Young, a DisplaySearch analyst.
Vinita Jakhanwal, an analyst at iSuppli/Stanford Resources, San Jose, agreed
that the supply of large LCD panels has tightened. Jakhanwal said that panel
demand, which accounts for orders placed and sales forecasts, is exceeding the
number of panels produced by 2.9% in the current quarter, while supply exceeded
demand by 10% in the previous quarter.
"Manufacturers in Taiwan scaled down production in response to slower demand
earlier," she said. "And Samsung scaled down the ramp-up of their Gen5 fab in
Samsung Electronics Co. Ltd. did not return calls seeking comment.
One group not feeling the effects of tightening display supplies are vendors of
NEC-Mitsubishi Electronics Display of America Inc., Itasca, Ill., said LCD
delivery problems several weeks ago were caused by the shutdown of ports on the
west coast of the United States, not to a delay by suppliers.
"We had some hiccups getting products into the country, so we used air freight
in place of ships," said Chris Connery, NEC-Mitsubishi's director of marketing.
"Our lead times are back to a normal six weeks, and we're having a strong
Among distributors of LCDs, Reptron Electronics Inc. noted that it hasn't seen
evidence of tightening supplies or a sales pickup.
"Until there's a return of business investment, demand will remain soft," said
Paul Plante, president and chief operating officer of the Tampa, Fla., company.
"All indications are that there's plenty of glass to go around -- quite frankly,
However, players in the small-LCD sector don't necessarily agree, as the weak
market conditions of early 2002 have disappeared.
"Demand is outstripping supply for small displays," said Joel Pollack, vice
president of the business display unit at Sharp Microlectronics of the Americas,
Pollack said that prices for small LCDs have begun to stabilize after dropping
much of the year.
The trend is more pronounced at Optrex America Inc., Plymouth, Mich., which
manufactures passive-matrix color LCDs.
"Prices on high-quality, color passive-matrix LCDs have been flat in the U.S.
this quarter, and creeping up in the Far East," said Dale Maunu, the company's
associate director. "Lead times that were eight to 14 weeks have stretched out
to 25 weeks."
Maunu said the shortages are caused by booming demand for color cellular phone
"There no longer are monochrome LCDs in Japanese mobile phones, and in the past
six months Korea, Taiwan, and China have increased their use of color displays,"
Maunu believes the situation will be alleviated when major LCD manufacturers
convert their older-generation factories to produce small displays at Gen5 fabs.
In addition to the Gen5 capacity brought online by Samsung, Korean archrival
LG.Philips LCD Co. opened a Gen5 fab in late May and will add capacity next
year, according to Jakhanwal. She also expects Taiwan suppliers AU Optronics and
Quanta Display to bring Gen5 fabs up by mid-2003, though she added that the
openings could be delayed if demand is not strong enough.
DisplaySearch's Young expects 2003 equipment spending for TFT-LCDs to reach $6.9
billion, up from $5.3 billion in 2002. In 2004, capital investments will rise to
$7.8 billion, Young projected, as suppliers invest in larger substrates for the
LCD color-TV market.
Suppliers and distributors worry that the higher capital spending will cause a
capacity glut. "Even if no additional capacity comes on, there's too much
product for the demand now," said Reptron's Plante.