Annual sales in the US$37.7 billion flat-panel display industry will grow by an average of 19 percent until 2007 on demand for television screens, helping improve profit for suppliers such as Sharp Corp, some analysts said.
"Margins will be higher from 2003 through 2007," said Ross Young, president of Texas-based market researcher DisplaySearch at an industry conference in Taipei.
"The cost structures of manu-facturers will improve," he said.
Sharp, the world's biggest maker of flat-screen TVs, and rivals in South Korea and Taiwan are opening factories that make larger glass sheets from which the screens are cut, helping cut production costs, Young said.
Flat screens -- which will be used in about 2 percent of all TVs sold this year -- will account for about 16 percent of the market by 2007, Young said.
"This is one of the most attractive industries we've seen,"said Son Nguyen, vice president of Asia Pacific investment banking with Citigroup Global Markets.
"There's still a lot of debate on how large the TV market will be," Son said.
Some analysts remain concerned that overinvestment by the world's 15 flat-panel makers will cause a supply glut, thereby hurting profits.
Taiwan's five makers, which include AU Optronics Corp (友達光電), the world's No. 4 manufacturer, need to consolidate to help accelerate the exit of weaker rivals that have caused oversupply, Son said.
South Korea's Samsung Electronics Co and LG Philips LCD Co, the world's biggest flat-panel makers, need 1.6 years to generate the US$1.6 billion cash needed to build a new factory from their existing operations, Son said.
That compares with 6.7 years for the smallest Taiwan rivals, he said.
AU Optronics, which on March 28 paid ?1.48 billion (US$12 million) to buy a fifth of Fujitsu Ltd's flat-panel unit in Japan, said it's not in talks to buy Taiwanese rivals.
"There's no dire need for acquisitions," said Hsiung Hui (熊暉), AU Optronics' executive vice president, in an interview. "Capacity increases this year won't be able to meet demand."
Japanese and Taiwanese companies may seek closer ties to compete with their South Korean rivals, according to Tajima Zenzou, an official in the business planning division of Hitachi Displays Ltd.
Still, the market share of Japanese companies will probably continue to shrink as South Korea and Taiwan, which each have about 40 percent of the market, add new capacity at a faster rate, DisplaySearch said.
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