MANHASSET, N.Y. Market researchers expect demand for flat-panel displays to continue growing, but the unanswered question is whether a display industry capital spending spree to expand fab capacity will yield profits during the second half of 2005.
For consumers and OEMs, the good news is that the current crystal cycle is in their favor, with ongoing production capacity increases producing abundant panel supplies and, in turn, helping to lower prices on desktop monitors, notebooks and the increasingly important flat-panel TV market.
But the lower prices are not likely to help display panel vendors, many of whom have seen profits falls as they try to amortize fabs costing hundreds of millions of dollars.
The scenario holds true particularly in the ultra-competitive liquid-crystal display (LCD) market, where suppliers such as Sharp, AU Optronics, LG.Philips LCD, continue trying to leapfrog one another with fabs able to handle larger glass sizes for large flat-panel TVs.
Market researchers DisplaySearch Inc. (Austin, Texas) noted in a recent report that shipments of LCD TVs rose 125 percent year-to-year in the first quarter of 2005 to 3.15 million units, driven by price reductions that exceeded 20 percent for sizes 20 inches and larger.
But that growth has not been enough to line the pockets of LCD suppliers, who along with some industry observers concede the flat-panel TV market is growing slower than expected.
One of those is Jun Sook, executive vice president of Samsung Electronics Co. Ltd. (Seoul), who in a recent conference said the LCD suppliers' capital spending spree was necessary to stay ahead of competitors as well as maintain market share.
"If you don't expand, you fall behind," said Sook, who believes the LCD TV market is starting to finally gain momentum. Samsung, along with LG.Philips LCD, have for several years exchanged places as the two leading LCD panel suppliers and together capture roughly a third of the market.
In a recent market presentation, DisplaySearch President Ross Young said profitability would return gradually, with margins on monitors for first-tier suppliers recovering in the second half. Margins on TV panels will likely take longer to improve because of excess spending and consumer price sensitivity, Young said.