The world will experience an oversupply of thin film transistor-liquid crystal display (TFT-LCD) panels next year, because of two developments: the sluggish global economy, and new capacity added by panel makers. This is the assessment of the Topology Research Institute (TRi), Taiwan`s biggest private-sector market intelligence firm.

Slow growth in the global economy, TRi explains, has led to stagnant sales of consumer electronic products and thus to ballooning inventories for downstream manufacturers, which has forced them to slash panel orders. The natural result of this situation, for panel suppliers, is increased stock.

The oversupply situation will be made even worse by the start-up of four new 8.5-generation and two 6-generation TFT-LCD production lines next year. TRi, therefore, is predicting a 7.5% excess in supply in 2009.

Panel prices, reports TRi analyst Lee Chiu-wei, are expected to fall by an average of 25% next year because of the oversupply situation.

TRi notes that the major application markets for large-sized panels are LCD TVs, monitors, and notebook PCs. While the growth in demand for monitor panels will slow down as desktop PCs are replaced by notebooks, demand from the TV and notebook PC sectors will remain strong-not strong enough, however, to provide much growth momentum for overall sales of large-sized panels.

The growth in demand for large-sized panels has been slowing down in recent years, TRi reports, dropping from 52.3% in 2007 to 32.3% this year and a projected 16.6% in 2009.

TRi predicts that the supply of panels in 2009, in terms of area, will be around 92.07 million square meters while demand will be 85.68 million square meters, leaving an oversupply of about 6.4 million square meters-enough for around 22 million 32-inch TV panels.

The research firm says that when large-sized panels were last in oversupply, in 2006, it took seven months for panel prices to fall from peak to trough and the average decline was 22%. Prices might not fall so rapidly, TRi comments, if panel makers can reduce their production fast enough; if they fail to do so, however, the price plummet could be greater than 25%.

In the first quarter of this year, TRi reports, most first-grade panel makers were able to maintain operating profit margins at the 22% level thanks to strong demand, but the margin could fall into the single digits in the coming months. During the last oversupply situation in 2006, however, the figure for most panel suppliers in Taiwan was zero.




(by Quincy Liang)