LCD Panel Cooldown May be Bottoming
Apparently things have gotten so bad in the LCD panel world that executives are jumping ship to join sweatshops.
Prices continue to plummet for LCD panels, according to a DigiTimes article:
The ASP (average selling price) for 32-inch LCD TV panels, which had fallen below US$400, is now approaching the production cost of first-tier makers and the prices are unlikely to rebound this year, sources at Taiwan-based panel makers said.
AUO and LG.Philips LCD (LPL) are also dumping 37-inch LCD TV panels in the market in an attempt to clear inventory, the sources added.
Although some 37-inch LCD TV panels have fallen below US$600, TFT LCD panel makers can still make profits from the 37-inch segment, said the sources. However, price competition in the industry will continue next quarter, the sources noted, adding that the ASP for 37-inch TV panels will see another sharp drop at the beginning of the third quarter.
Nevertheless, the ASP for 37-inch TV panels will stabilize once it reaches US$520-550 at the end of July or beginning of the August, said the sources.
In other words, when the panel makers can no longer make profits on them. We love that one. The article continues:
Compared to monitor panels, LCD TV panels have been more profitable. Therefore, when the ASPs for 32- and 37-inch LCD panels get closer for the first-tier makers, it becomes more and more difficult for the makers to maintain profitability, the sources indicated.
The silver lining, if there is one, is that lack of profitability will finally force manufacturers to reign in their overly aggressive expansion plans. Chunghwa Picture Tubes has become the latest to consider reducing production of large-size panels, according to the Chinese-language Economic Daily News. Meanwhile, it looks like notebook sales may be beginning to recover.
Still, don’t let the good news go to your head. Just as Flat Panel TV’s failed to score World Cup Goals, the much anticipated holiday spending boon could also fail to materialize.
Soccer may be the most popular sport in the world, but it hasn’t exactly spurred the masses to lay out loads of cash for large, flat-panel TVs to watch the game on its grandest stage.
Despite predictions to the contrary, the 2006 FIFA World Cup has not boosted sales the way some had anticipated, according to market research firm iSuppli.
There is always something about to happen that will make things better. First it was the Super Bowl. Then the Olympics. Then the World Cup. Then the holiday sales. Now we aren’t the only ones calling that into question. Industry analysis firm Displaybank is predicting a recovery in September once inventories are worked off.
LCD panel prices are likely to rebound in September after LCD panel makers reduce their inventory levels by scaling back production, according to research firm Displaybank.
The inventory of large-size LCD panels has increased dramatically since the fourth quarter of 2005 due to an oversupply and extra production capacity coupled with a plunge in panel prices. The panel industry, in order to hinder further price drops and stabilize the market, is reviewing its expansion plans and adjusting production, according to the the research firm.
Problem with this is, a couple of weeks ago the story was about a rebound in September that didn’t stem from inventory workdowns. Not only that, but the panel makers themselves aren’t so sure:
Although market research firm Displaybank recently said panel prices may rebound before September, panel makers said it remains to be seen whether panel prices will rebound.
Displaybank recently forecast that panel prices will bottom out between August and September, as panel makers will begin full-scale cuts of production from July while demand for TVs and IT products will seasonally pick up in the second half of the year. The expectations are on the assumption that production reductions will be maintained at least for three months, noted the research firm.
However, panel makers indicated that it will be difficult to realize the forecast since Samsung Electronics had said it will not cut its LCD production. With only makers including LG.Philips LCD, AU Optronics (AUO), Chi Mei Optoelectronics (CMO) and several second-tier panel makers in Taiwan cutting production, it will not be enough to help panel prices to rebound.
And that is before considering Matsushita (Panasonic’s) doubling of plasma capacity.
Furthermore, when Merrill Lynch reduced their rating on Photon Dynamics (PHTN) as a result of the LCD slowdown, the market took enough off of the shares to suggest that the news still isn’t fully priced into the stocks.
So it doesn’t look like the bottom quite yet. But it looks closer.
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[…] Where have we heard that before? Perhaps we are thinking of June 28, 2006 when DigiTimes reported: Nevertheless, the ASP for 37-inch TV panels will stabilize once it reaches US$520-550 at the end of July or beginning of the August, said the sources. […]