Mon, Jan 16, 2006 - Page 10 News List

LCD industry looks set to boom as demand kicks in

By Lisa Wang  /  STAFF REPORTER

Taiwanese liquid-crystal-display (LCD) panel manufacturers are looking forward to a profitable year as the much-anticipated demand for flat-screen televisions looks set to materialize, driven by falling prices and upcoming sports events.

However, in the longer term, only those companies with the most advanced and cost-efficient plants will be able to gain market dominance and stay profitable in the highly volatile LCD industry, analysts said.

The nation's five LCD makers posted massive losses totalling tens of billions of dollars, eclipsing those of their South Korean rivals, during the last trough which began in mid-2004 as sagging demand for LCD-TVs caused a supply glut and a nosedive in panel prices.

"The LCD-TV market is a make-or-break factor for the industry," said Eric Lin (林宜正), an analyst with Yuanta Core Pacific Securities (元大京華證券).

The industry will gain momentum this year on the back of a recovery last quarter as prices for slim-screen TVs decline to an affordable level of around US$1,000, he said.

Market researcher DisplaySearch also said better-than-expected holiday LCD-TV sales in the US and Europe, the major slim-screen TV markets, bodes well for the LCD panel industry.

"The Christmas sales exceeded our forecast. We have raised our forecast for a second time," said David Hsieh (謝勤益), president of DisplaySearch's local unit, in a phone interview last week.

DisplaySearch, which is based in Austin, Texas, would revise its projection for LCD-TV sales for this year moderately upward in the near future, Hsieh said.

DisplaySearch predicted that global LCD-TV sales would nearly double to 36 million units this year, compared to 19.6 million units for last year.

"It's a good sign for the (LCD) industry," Hsieh said.

Led by AU Optronics Corp (友達光電), Taiwanese flat-panel manufacturers accounted for 44 percent of global sales in the final quarter of last year, slightly outpacing South Korean firms at 43.6 percent, according to DisplaySearch estimates.

On top of that, demand will be sustained in the first quarter, a traditionally slow season, ahead of the FIFA World Cup in Germany, which kicks off on June 9, Hsieh said.

Hsieh's comments were echoed by both Ken Yu (余文耀), who tracks flat-panel-display industry at SinoPac Securities Corp (建華證券), and AU Optronics president Chen Hsuen-pin (陳炫彬).

"The first quarter looks better than we thought. Demand for TVs and notebook computers looks brisk and inventory is healthy," Yu said.

"The first quarter will not be as slow as it has been in the past," Chen said.

But the stronger-than-expected demand could not completely dispel fears of a supply glut. DisplaySearch forecast supply may exceed demand by 5.3 percent for the first three months of this year, shrinking from 10 percent estimated earlier.

The research house factored in announcements two weeks ago from Samsung Electronics Co and LG.Philips LCD Co that they had started mass production in their newest and most advanced factories a quarter ahead of schedule.

The worst-case scenario would be a slow second quarter with supply exceeding demand by 6.4 percent, according to DisplaySearch's latest forecast.

"In the worst quarter, we believe local companies will be able to make money on strong cost-saving capabilities," Yuanta Core's Lin said.

The first-tier players may make bigger profits in the first half of this year than their Korean competitors, who will be burdened by additional depreciation costs for their most advanced plants which are starting production in the first quarter, Lin said.

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