Shares of Applied Materials Inc, Tokyo Electron Ltd and other makers of equipment for the liquid-crystal display industry may rise next year because of increased spending on flat-panel production, a market researcher said.
"They should all benefit from this big surge in equipment spending that we're seeing," Ross Young, president of Austin, Texas-based DisplaySearch, said in an interview from Seoul where he was attending a two-day industry conference.
"It's an excellent time, the best part of the cycle for LCD makers," Young said.
As consumers trade in traditional monitors and televisions for slimmer LCD screens, flat-panel makers have accelerated spending on factories able to produce larger and higher numbers of screens.
Capital spending on LCD production lines will rise 27 percent next year to a record US$8.3 billion, DisplaySearch says.
Shares of 122 semiconductor-equipment makers tracked by Bloomberg News, including Applied Materials, have jumped 85 percent this year.
The gain outpaces the 43 percent rise by the NASDAQ Composite Index, which gets 42 percent of its value from computer-related companies.
LCD flat-panel revenues are expected to rise 91 percent in the final quarter of this year compared to the same period last year and rise a further 97 percent into the next quarter due to record unit shipments and higher prices, the report said.
"[Last quarter] wasn't bad either, with revenues up 47 percent year-on-year,?" DisplaySearch said.
In the third quarter shipments will rise 64 percent on last year to reach 26.7 million units, beating manufacturer forecasts by over half a million units, the report said.
Combined, sales of flat displays made of liquid crystals or plasma are expected to grow by a fifth each year through 2005 and will rise to US$72 billion in 2007 from US$40 billion this year, according to DisplaySearch forecasts presented at the industry conference, jointly hosted by South Korea's Displaybank Co.
South Korea's LG Philips LCD Co is the world's largest producer of LCD panels this year, accounting for 21.5 percent of total shipments. LG Philips is followed by Samsung Electronics Co and AU Optronics Corp (友達光電) of Taiwan.
The outlook has prompted South Korea's Samsung Electronics and other producers to boost spending on production lines, which will push supply ahead of demand starting next year.
"Perhaps in the fourth quarter of next year, we'll see much bigger oversupply," Young said. "We think in 2005, we're going to see a very significant surplus and that will cause further price reductions."
The surplus doesn't worry LG Philips yet.
"Oversupply hasn't been appearing," said David Choi, vice president of product management at LG Philips, who spoke at the conference.
"Despite new suppliers, demand-supply will be balanced," Choi said.
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