LCD Panel Market Readjusts

Large-size panel sales were surprisingly strong in the second quarter, according to an iSuppli report.

Anne L. Fischer

When consumer demand is up for large-size televisions, it would seem logical that profits for all components would be up as well. However, according to the electronics industry market analysis company iSuppli Corp. of El Segundo, Calif., the price of the televisions dropped so dramatically in the first quarter of 2007 that profit margins for panel makers were flat. But the picture has brightened in the second quarter.

“At last panel makers are starting to make money,” said Sweta Dash, director of LCD and projection research for iSuppli. She attributes this to tighter supplies and strong sales, which allowed television panel makers to increase prices. Panel manufacturers also have increased optimism as they anticipate the capacity increases through 10th-generation LCD fabs, which are expected to produce very large TV panels more cost effectively than in the past. The increase in panel prices during the second quarter is a change from the first quarter of the year, when panel makers were selling below cost.

Large-size LCD panels are those with diagonal dimensions of 10 in. or more. iSuppli forecasts that global revenue will rise 22.2 percent in 2007, up from $54 billion in 2006 to $66 billion in 2007. After the first quarter, iSuppli predicted that shipments would be about 350.1 million units this year, but the company has adjusted that upward to 353.8 million units, which is a gain of 25.2 percent from 2006.

Figure 1. The worldwide large-size LCD panel unit shipment forecast shows steady growth through 2011. Source: iSuppli Corp., July 2007.

Dash said she expects the strong conditions to persist in the third quarter because demand is up in the three major markets for LCD panels: televisions, desktop monitors and notebook PCs. A fourth market is electronic retail signage, which is still relatively small but expected to increase steadily. Panel makers have been able to maintain consistent supplies overall; this, coupled with rising demand, is allowing them to increase prices in all markets.

Dash predicts that the market for large LCD panels will expand to 597.6 million units by 2011, which is an increase of 2 percent over iSuppli’s previous forecast. She expects revenue to reach $102 billion in 2011, which will be the first year in which the global market will have exceeded $100 billion.

Figure 2. The revenue from sales of large-size LCD panels also is expected to increase over the next four years. Source: iSuppli Corp., July 2007.

With panel prices on the rise, it seems that television prices also would be up, but that is not the case, according to Dash. The panel price is generally less than 30 to 50 percent of the price the consumer pays for the television, so when the panel price goes up, television makers cut costs elsewhere or take a hit in their profit margins, Dash explained. Intense competition at the retail level encourages television manufacturers to keep prices steady or even to decrease them. iSuppli expects that 77.5 million large-size panels for LCD TVs will ship in 2007, and by 2008, shipments will break the 100 million threshold for the first time.

Reasons given for the rise in sales of LCD TVs include lower prices at the retail level, improved performance and the 2008 summer Olympic games. By 2009, LCDs will be the dominant television display technology worldwide, accounting for 52 percent of the market, and by 2011, LCDs will hold a 65 percent market share, according to Dash. By 2011, shipments of LCD TV panels will rise to more than 180 million units sold.

The other markets for LCD panels are going strong as well. The market for desktop PC monitor panels is expected to be up 14 percent from 2006, and iSuppli predicts that monitor shipments will remain strong through 2011. Notebook LCD panels are expected to reach 99.6 million units in 2007 and jump to 161.5 in 2011. This growth will be driven by lower prices, increased wireless capabilities and the shift to larger displays — especially wide-format.