Production Value of FPD Sector in Taiwan Surges 35.9% in Q2

The flat panel display (FPD) sector in Taiwan achieved a production value of NT$310.7 billion (US$9.56 billion at US$1: NT$32.5) in the second quarter of 2009, a 35.9% quarter-on-quarter (QoQ) increase but a -37.1% year-on-year (YoY) decline, according to the IEK-ITIS (Industry & Technology Intelligence Services), a government-sponsored industry researcher in Taiwan.

FPDs contributed to NT$216.56 billion (US$6.66 billion) of the total production value, a 38% QoQ increase, with FPD parts and components making up NT$94.15 billion (US$2.9 billion), a QoQ increase of 31.5%.

Large-sized (over 10 inches) thin film transistor-liquid crystal displays (TFT-LCDs) contributed NT$171.56 billion (US$5.28 billion) to the overall production value, while small- and medium-sized TFT-LCDs NT$36.57 billion (US$1.13 billion), and TN/super twisted nematic (STN)-LCDs NT$6.53 billion (US$200.9 million).

Color filters and parts accounted for NT$24.38 billion (US$750.2 million), polarizers for NT$10.48 billion (US$322.46 million), glass substrates NT$30.46 billion (US$937.2 million), and backlight modules NT$28.83 billion (US$887.1 million).

Rising Demand

The IEK-ITIS attributes the obvious QoQ contributions of large-sized TFT-LCD panels to the rising demand from downstream makers and rebounding panel prices buoyed by downstream system makers refilling low inventory level. Panel suppliers have been achieving higher revenue growths due to rising capacity utilization and panel prices.

The makers of small- and medium-sized TFT-LCDs achieved 29.8% QoQ growth in output, while the makers of organic light-emit diode (OLED) items have been seeing slowing declines in the second quarter as demand gradually recovers. Limited room for growth for PMOLED (passive matrix OLED) products and increasing competition from Korean counterparts and small- and medium-sized TFT-LCDs, local OLED makers' output saw a 2% QoQ drop despite a 0.9% YoY rise.

The overall turnover in the TN/STN panel sector in Taiwan dropped 13.5% QoQ and 46.5% YoY in the second quarter. The IEK-ITIS attributes such obvious decline to the shrinking application markets due to being significantly replaced by TFT-LCDs, as well as most local TN/STN makers' transition into capacitive touch-panel business.

Key Parts

The production value of the FPD key-parts sector reported a 31.5% QoQ growth but a 25.4% YoY decline, both being lower than that for panels.

The production value achieved by color filter makers surged 48.8% QoQ in the second quarter, despite a 33.8% YoY drop due mainly to increasing volume of large-sized panels produced, to meet the huge demand driven by China's LCD TV sales resulting from official subsidies for home-appliance sales. The shipments of such key component are expected to continue to grow until the end of the third quarter alongside large-sized panels. The average selling prices (ASP) of color-filters, however, is expected to dip modestly due to rising local-content rate, with the sector's revenue to steadily rise due to increasing shipments.

The value of glass-substrate production in the second quarter climbed 18.0% compared with that in the first three months but dipped 8.3% YoY (the lowest among key parts) due to rush orders from downstream panel suppliers. As most glass makers restarted furnaces in the second quarter, which requires some time to reach operating temperature, the supply of such key part have been strained, especially those for 5G and 6G panels.

The increasing demand from downstream panel suppliers fueled growth of the backlight modules sector, whose production value in Taiwan grew 40.3% QoQ in the second quarter. The profitability and shipments for Taiwan's makers of LED backlights are expected to climb steadily, buoyed by 60%-plus penetration in the notebook-PC segment this year.

Significant Events

Many on-going, noteworthy events globally are impacting the FPD sector, IEK-ITIS says.

As the global FPD market continues to simmer, LG Display (formerly LG.Philips LCD Co., Ltd.) of South Korea recently announced its plan to invest 3.27 trillion Korean won (KRW), or about US$2.6 billion to build its second 8.5G panel production line. The new facility (P8E) will come online in the second half of 2010 with initial monthly capacity of 60,000 substrates.

Industry insiders are carefully watching such new-generation panel capacity changes globally, because oversupply may become an issue by 2010, with Sharp running one each 8.5G and 10G plant, LG Display's two 8.5G plants, and AU Optronics Corp. in Taiwan's 8.5G plant.

Toshiba Matsushita Display Technology Co., Ltd. (TMD) of Japan and partners in China and HK are going to set up a mid-sized joint venture-Heyuan Greentech Electronic Technology Co., Ltd.-to be located in Guangdong Province of China, which will begin producing and selling amorphous silicon (a-si) TFT-LCD panels in the first half of 2010. Such moves by companies in Japan, China and HK might trigger similar projects by others, industry insiders say.

Fueled by the Taiwan government's aggressive promotion of the development of the e-paper display sector on the island, various ministries, including the Ministry of Economic Affairs (MOEA) and the Ministry of Education (MOE) etc., have proposed projects to popularize e-displays in the nation and make Taiwan a world-leading production base of e-paper and e-readers.

With the recently reported recovery in global trade, the world's largest glass supplier-Corning Inc. of the U.S.-has re-ignited several glass furnaces worldwide, saying that the strained supply of glass substrates would gradually ease in the third quarter.

Taiwan's Coretronic Corp., a major provider of innovative projection and display solutions as well as backlight modules, tied up with TCL, the largest color-TV brand in China, in the second quarter. In addition, several backlight makers in Taiwan have been partnering with local panel suppliers since the second half of 2008 to acquire steady orders. Such major moves in Taiwan's backlight module sector deserve further observations.

Q3 Forecasts

The IEK-ITIS points out that panel suppliers' halt in production depleted panel inventory at downstream system makers, who then placed rush orders to refill stock in the second quarter to turn the traditional low season into a high growth period. Such strong, recovering demand have driven most panel makers' equipment utilizations back to 80% to 90%, or even resulting in backlogged orders. Stout demand led to panel-price rebounds to effectively enhance panel suppliers' second-quarter operation results.

The third quarter, the traditional high season, will see the production value of the local FPD sector continue to recover to about NT$339.2 billion (US$10.4 billion), with some uncertainties likely to impact such value-especially the ample supply of key parts as glass substrates, according to the IEK-ITIS.

In the third quarter, the TFT-LCD panel makers' utilization rates and panel prices are expected to climb to achieve NT$181.85 billion (US$5.6 billion) in production value of large-sized TFT-LCD panels. Small/medium-sized TFT-LCD panels are estimated to contribute NT$44.24 billion (US$1.36 billion) in quarterly production value, but increasing excessive capacity at 5G panel plants, due to shifting to produce smaller products, are expected to intensify competition.

The OLED sector is expected to contribute NT$1.85 billion (US$56.9 million) to the overall FPD production in the third quarter due to the high-season effect. The TN/STN LCD sector's production value is expected to grow to reach NT$6.8 billion (US$209.2 million), driven by rushed stock-refilling orders.

Production Values of Taiwan's FPD Industry (2007-2009) Unit: NT$100 million
	Q3'08	Q4'08	Q1'09	Q2'09	QoQ	YoY	Q3'09(e)	2007	2008	2009(e)	YoY
TFT-LCD (>10")	2,426.0	1,326.9	1,193.0	1,715.6	43.8%	-39.1%	1,818.5	10,870	9,505.3	7,984.5	-16.0%
TFT-LCD (<10")	416.0	370	281.8	365.7	29.8%	10.4%	442.4	1,271.2	1,546.4	1,402.9	-9.3%
TN/STN LCD	138.3	110.9	75.5	65.3	-13.5%	-46.5%	68.0	637.4	503.2	419.6	-16.6%
OLEDs	21.9	19.9	18.3	18.0	-2.0%	0.9%	18.5	63.4	75.9	83.7	10.2%
Others*	1.5	1.2	1.0	1.1	10.0%	-15.4%	1.2	6.7	5.4	6.2	14.8%
Sub-Total	3,003.7	1,829.1	1,569.6	2,165.6	38.0%	-34.1%	2,348.6	12,848.7	11,636.1	9,896.9	-14.9%
Color Filters	315.3	182.9	163.8	243.8	48.8%	-33.8%	285.3	1,323.4	1,246.5	1,022.1	-18.0%
Polarizers	150.4	87.3	88.6	104.8	18.3%	-42.1%	110.3	691.8	596.2	605.4	1.5%
Substrates	322.2	286.8	258.1	304.6	18.0%	-8.3%	335.0	1,155.4	1,280.2	1,369.8	7.0%
Backlight Units	375.2	256.3	205.5	288.3	40.3%	-24.2%	312.5	1,501.0	1,390.8	1,176.5	-15.%
Sub-Total	1,163.1	813.3	716.0	941.5	31.5%	-25.4%	1,043.1	4,671.6	4,513.6	4,173.8	-7.5%
Overall	4,166.8	2,642.4	2,285.6	3,107.1	35.9%	-31.7%	3,391.8	17,520.3	16,149.8	14,070.8	-12.9%
*: Including plasma display panel (PDPs), micro-display, vacuum fluorescent displays (VFD) etc. Source; IEK-ITIS, August 2009.