Major liquid-crystal-display (LCD) panel makers are expected to swing to profitability in the second half of this year as the highly-volatile industry is on track for a modest recovery from its latest decline, market research firm DisplaySearch said yesterday.
"We think this recovery will be "L" shaped rather than the previous "U," or "V" shaped recoveries due to excessive investment and price-sensitivity in the TV market," said Ross Young, president of DisplaySearch, in a speech to an annual LCD seminar in Taipei.
This recovery will only result in flat revenue levels for thin-film-transistor (TFT)-LCD panel makers this year, rather than the 40 percent-plus growth in 2003 and last year, Young said.
Amid the lukewarm upturn, first-tier LCD panel makers led by South Korea's Samsung Electronics Co will return to profitability in the second half of this year due to improved margin, Young predicted.
Second-tier players will face a tougher outlook. Smaller players may not be able to turn a profit until late 2007, he said.
Oversupply still looms because of the gradual recovery in non-stop capacity expansion, Young said. Panel supply may surpass demand by 20 percent by the end of this year after a short-term lull, according to DisplaySearch.
Unlike previous troughs, thin-film-transistor (TFT)-LCD panel makers did not dramatically trim their capital spending as expected, Young said.
"We believe everyone's investing will extend the downturn," he said.
Taiwanese companies alone will increase capital spending by 14 percent to NT$28.6 billion at least for this year, compared with roughly NT$25 billion last year, according to a tally by Nomura Securities Co's Taipei branch.
Overcapacity could mean a short-lived price rebound. Young predicted that recent price hikes of 17-inch TFT-LCD screens would be unable to be sustained after new players from China, including SVA-NEC LCD Co (上海廣電), enter the market.
Young said Chinese start-ups are offering more than 10 percent discounts now to snare new customers, which will add price pressure in the third quarter.
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