Demand for flat-screens causes snag

AU Optronics Corp (友達光電), Taiwan's biggest maker of flat-panel displays, said surging sales of flat-screen televisions has caused a shortage of parts. That may hinder plans by computer makers like Dell Inc to begin producing the TVs.

Component suppliers such as glassmaker Corning Inc and Novatek Microelectronics Corp (聯詠科技) said they have more orders than they can fill in the US$37.7 billion market for flat screens used in mobile phones, notebook computers and TVs. Shortages of some parts may last six months, AU Optronics Executive Vice President Lu Po-yen (盧博彥) said in an interview.

Rising display prices may benefit companies like Corning and screenmakers such as Samsung Electronics Co that produce their own components, while narrowing profit margins for Taipei-based BenQ Corp (明基電通), Lite-On Technology Corp (光寶科技) and other display assemblers.

Competition for parts may worsen as computer makers such as Dell and Hewlett-Packard Co start making flat TVs.

"What's driving the tightness is demand for TVs," said Pedro Tai, who counts shares in Taiwanese flat-panel makers among the equivalent of US$200 million he helps invest for ABN Amro Asset Management Taiwan. "The more upstream you are, the better off you are. The assemblers' value-added is lower."

As consumers replace bulky cathode-ray-tube televisions, the global market for flat TVs will reach 37 million units, or a fifth of total TV shipments, worth US$19.7 billion, by 2007, according to DisplaySearch. Dell, the world's second-biggest personal computer maker, said it plans this month to start selling flat TVs to gain a share of the market, currently led by Japan's Sharp Corp.

Corning Inc, the world's biggest maker of glass for liquid crystal displays, or LCDs, said demand for parts jumped unexpectedly.

"Most loyal customers, and especially those with supply agreements," will get enough supplies, Jim Terry, spokesman of the Corning, New York-based company, said in an e-mailed response to questions. He declined to say how long shortages would last.

Novatek, which makes about 12 percent of the world's chips that control LCDs, said it can't meet demand.

"There are a lot of rush orders," said David Chen, spokesman for Novatek. "People expect demand to be tight through the fourth quarter."

Novatek will post record sales for September and October, Chen said, who added the company's fourth-quarter net income will increase from the third quarter. He didn't elaborate.

Acer Inc, the world's No. 7 maker of personal computers, said it plans to raise notebook PC prices for the first time in six years because of shortages of LCDs.

Prices for notebook-sized screens have been increasing by about US$5 per month for the past four months, Acer said. Shortages of the panels will continue through the first quarter next year, the company said.

South Korea's Samsung Electronics and LG Philips LCD Co, the world's largest flat-panel screen makers, may have an advantage over screen assemblers because they depend less on outside suppliers, said Yoshio Tamura, an analyst at DisplaySearch.

"The Korean companies are benefiting because of their internal production," he said.

LG Philips hired Morgan Stanley and UBS Warburg earlier this year to manage a US$1 billion initial share sale to fund expansion.

Samsung Electronics plans to invest about US$5.8 billion this year on electronics plants.