Sat, Nov 01, 2003 - Page 10 News List

Report causes alarm in LCD market

FORTUNE-TELLING A report citing a high-ranking Samsung official said demand for LCDs next year would disappoint and the sector could suffer from oversupply


The share prices of local flat-panel makers declined yesterday following an oversupply alarm signaled by liquid crystal display (LCD) giant Samsung Electronics Corp. But analysts rejected the warning, saying that the global LCD industry was unlikely to suffer a glut next year.

"The likelihood of oversupply will be slim. We're optimistic about the supply-demand situation from now through next year," said Eric Twu (涂紀華), an analyst at SinoPac Securities Corp (建華證券).

Citing a high-ranking official at Samsung, the world's No. 2 flat-screen maker, a Chinese-language newspaper reported yesterday that the current shortage of LCD panels will reverse next year, probably sometime during the third quarter, due to the increase in capacity and uncertainties over demand for flat-screen televisions.

Samsung Electronics, also the world's largest microchip maker, is shifting its business strategy from microchips to handsets and LCD panels. The company said it aims to grab as much as 40 percent of the world's market for LCDs used in televisions from 2005.

Shares of five Taiwanese LCD panel makers dropped on the news yesterday. AU Optronics Corp (友達光電) and Chi Mei Optoelectronics Corp (奇美電子) saw their shares decline by 4.58 percent and 3.16 percent to close at NT$45.80 and NT$42.90 respectively.

Chi Mei, the nation's second largest panel maker, yesterday revised upward its profit forecast almost nine-fold to NT$6.38 billion this year, from the NT$772 million it estimated previously. Larger rival AU on Monday also adjusted upwards its profit projection for the second time this year to NT$14.1 billion, from NT$10.5 billion estimated in August.

Twu said the newspaper report contradicted his understanding of the market. Citing statistics he received from Samsung, the industry's oversupply ratio calculated by the South Korean manufacturer indicated a healthier situation next year.

Global LCD panel shipments are estimated to reach 120.9 million units next year, while the demand for such panels will be 120.5 million units, according to Samsung's estimate.

"The supply and demand for the flat panels will largely reach balance in 2004," Twu said.

Martha Chen (陳紅), an LCD panel industry analyst with Primasia Securities Co, said the global capacity of flat-panel makers would mostly match demand. Samsung's second fifth-generation production line, and a sixth-generation plant of Japan's Sharp Corp, are expected to begin operation next year, Chen said.

Taiwanese panel manufacturers are not expected to expand capacity much next year, Twu said.

Hannstar Display Corp (瀚宇彩晶) will open one 5G fab next year. Taiwanese LCD panel makers now have four advanced 5G fabs in operation -- AU owns two, and Chi Mei and Quanta Display Inc (廣輝電子) have one each.

AU chairman Lee Kun-yao (李焜耀) said this week that "the sector's two-year cycle does not work anymore because new applications for LCD panels are developing."

Lee predicts that the supply and demand for LCDs will remain stable next year except for some temporary, or seasonal, fluctuations.

Primasia's Chen said the flat-panel industry will not develop the same volatile situation as that in the dynamic random access memory chip sector.

"The onetime volatile sector will become stable gradually. The industrial cycle will still be in place, but the changes will not be drastic," she added.

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