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iSuppli Predicts LCD Panel Glut

7/27/2010 10:58:49 AM Eastern

El Segundo, Calif. - Large-sized LCD panel manufacturers in
2010 are set to boost spending on capacity expansions by more than 40 percent,
triggering an oversupply of LCD panels, according to an iSuppli report.

For the top 13 large-sized LCD panel makers, capital
expenditures in 2010 are forecasted to reach $16.9 billion, up a hefty 43.2
percent from $11.8 billion in 2009. This follows a decline of 29.3 percent
during the recession year of 2009.

iSuppli defines large-sized LCD panels as those having a
diagonal dimension of 10 inches and larger.

 

iSuppli Figure: Annual Capital Expenditures
Among the Top 13 Large-Sized LCD Panel Suppliers, 2005-2010 (In Billions of
U.S. Dollars)
             
  2005 2006 2007 2008 2009 2010
Billions of U.S. Dollars 17.7 15.1 11.1 16.7 11.8 16.9
             
Source:
iSuppli Corp. July 2010
         

 

"The boom in capital expenditures -- all designed to expand
LCD panel production capacity -- come in the wake of expected strong demand
among consumers for larger-sized LCD TVs and other specialized technology
carried by flat-panel televisions, including 3D and LED backlighting," said Sweta
Dash, LCD research senior director at iSuppli. "However, the increase has put
LCD panel production in overdrive, contributing to an excess in panel supply."

The oversupply situation began in the second quarter. The
market had been expected to enter state of tight supply in the third quarter as
television brands increased ordering to prepare for the holiday season.
However, because of high inventories in China in the second quarter, panel
purchases in the third quarter are likely to be lower than previously
predicted.

While the overall large-sized panel market is in a state of
oversupply, there is a shortage of products that use LED backlights, Dash
noted.

The strategy of capacity expansion from panel suppliers will
lead to price reductions because of oversupply, and also will help to trigger
market demand, especially for larger-sized TV panels, Dash added.

The LCD panel manufacturers with the projected highest
capital expenditures for 2010 include the South Korean giants of LG Display, in
first place with approximately $4.6 billion, and Samsung Electronics, in second
with $4.3 billion. Virtually tied in third place are Taiwan's AU Optronics and Chimei
Innolux, each with about $3.1 billion in capital spending.

For LCD panel suppliers, a higher level of capital spending
is needed in order for them to grow or maintain valuable market share.

LG Display commanded the biggest portion of large-sized LCD
panel unit shipments in the first quarter, at 24.9 percent. The company now is
expanding its capacity at its advanced 8.5 generation LCD fabs.

Samsung, with 22.4 percent share of unit shipments, also is
plowing capital outlay into adding more 8.5 generation capacity.

In terms of large-sized LCD panel revenue, however, the two
Korean giants trade places, with Samsung ranked at the top and LG Display in
second.

Global production by area for large-sized LCD panels is
projected to rise significantly as more capacity comes online in 2010.
Production by area for large-sized LCD panels will rise 7 percent sequentially
during the fourth quarter of 2010, leading to a 44 percent annual expansion for
the entire year. Growth then will continue unabated for the next year, with
production by area increasing 16 percent in 2011.

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