MANHASSET, N.Y. — Despite being part of an industry prone to up-and-down cycles, flat-panel display suppliers continue to raise the stakes in the market for flat-panel televisions.
In the first two weeks of 2006, major LCD and plasma display suppliers have either opened new fabs or announced plans for new or expanded plants to serve a booming market for large TV sizes. But while the long-term forecast is robust, some clouds loom on the horizon, as some suppliers try to keep capital spending under control amidst concern about amortizing costly next-generation display fabs.
If the flat-panel display industry needs a reminder, it only has to look back to the first half of 2005. South Korea-based LG.Philips LCD posted a first-quarter loss and one market research firm, DisplaySearch Inc. (Austin, Texas), projected a slowdown in capital spending for 2005 and 2006.
During the last half of 2005, however, LCD TV sales picked up, yielding robust year-end profits for LG.Philips LCD as well as its main rival, Samsung Electronics Co. Ltd.
But concerns linger. Earlier Friday, South Korea-based Samsung said it would cut capital spending for 2006
though it was unclear how its display business would be affected. At the same time, Samsung projected shipments of LCD TV panels would increase 76 percent year over year, while shipments of plasma TVs would increase 57 percent.
Samsung recently began mass production at Line 7-2, the company’s second Generation 7 LCD line, and is expanding capacity at its other Generation 7 line operated as a joint venture with Sony Corp.
For both LCD and plasma TVs to continue gaining acceptance, prices need to continue dropping. At the recent Consumer Electronics Show in Las Vegas, Samsung vice president of visual display marketing John Revie told EE Times in an interview he expected prices of plasma and LCD TV panels to erode no more than 20 percent, which he said reflected a slight slowing of the pervasive price erosion of 2005.
LG.Philips LCD reported an eight-fold profit jump in the fourth quarter of 2005 from a year ago. The company expects LCD TV shipments to increase; however, it also expects depreciation costs for its Generation 7 plant to increase, possibly affecting near-term net earnings.
In a Reuters report, CJ Investment and Securities analyst Lee Min-hee was quoted as saying near-term profits for LCD suppliers would fall due to a panel glut and falling prices.
But such concerns are not stopping other suppliers trying to muscle in on the LCD TV market, such as Sharp. On Jan. 11, the Japan-based company said it would spend $2.4 billion over the next fiscal year to increase the ramp-up of production at its Generation 8 plant in Kameyama, slated to open Oct. 2006. The expansion will quadruple Sharp‘s panel production capacity, enabling it to make 20 million 32-inch TV sets a year at its two factories, from 5 million today.
Some plasma display suppliers also dispel any notion of an industry slowdown. On Jan. 10, Matsushita Electric Industrial Co. announced it would invest $1.6 billion to build a fourth plasma display panel plant with joint venture partner Toray Industries Inc.
Located in Hyogo Prefecture, the new plant will have an annual capacity of 6 million 42-inch panels, making it the world's largest plasma display panel factory, according to both companies. It is slated to begin production May 2007.
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