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Hefty capital spending triggers LCD panel oversupply
El Segundo, Calif. — Large-sized LCD panel manufacturers are boosting their spending on capacity expansions by more than 40 percent in 2010, triggering an oversupply of LCD panels , according to iSuppli Corp.
For the Top 13 large-sized LCD panel makers, capital expenditures in 2010 are forecasted to reach $16.9 billion, up 43.2 percent from $11.8 billion in 2009, reports iSuppli. This follows a decline of 29.3 percent during the recession year of 2009.
iSuppli defines large-sized LCD panels as those having a diagonal dimension of 10-inches and larger.
“The boom in capital expenditures — all designed to expand LCD panel production capacity — come in the wake of expected strong demand among consumers for larger-sized LCD-TVs and other specialized technology carried by flat-panel televisions, including 3-D and LED backlighting,” said Sweta Dash, senior director for LCD research at iSuppli, in a statement. “However, the increase has put LCD panel production in overdrive, contributing to an excess in panel supply.”
iSuppli’s report, “LED Adoption Rate to Drive Large-LCD Panel Growth in 2010,” indicates the oversupply began in the second quarter, although the market was expected to enter a tight supply situation in the third quarter as television brands increased ordering to prepare for the holiday season. But because of high inventories in China in the second quarter, panel purchases in the third quarter are likely to be lower than previously predicted, according to the market research firm.
While the overall large-sized panel market is in a state of oversupply, there is a shortage of products that use LED backlights, Dash said.
Dash also said the capacity expansion will lead to price reductions and drive demand especially for larger-sized TV panels.
The LCD panel manufacturers with the projected highest capital expenditures for 2010 include the South Korean giants of LG Display, in first place with approximately $4.6 billion, and Samsung Electronics Co. Ltd., in second with $4.3 billion. Virtually tied in third place are Taiwan’s AU Optronics Corp. and Chimei Innolux Corp. (CMI), each with about $3.1 billion in capital spending.
Dash said for LCD panel suppliers, a higher level of capital spending is needed in order for them to grow or maintain market share.
LG Display commanded the biggest portion of large-sized LCD panel unit shipments in the first quarter, at 24.9 percent. The company now is expanding its capacity at its advanced 8.5 generation LCD fabs. Samsung, with 22.4 percent share of unit shipments, also is adding more 8.5 generation capacity.
In terms of large-sized LCD panel revenue, however, the two Korean giants trade places, with Samsung ranked at the top and LG Display in second, says iSuppli.
iSuppli projects that global production by area for large-sized LCD panels will rise significantly as more capacity comes online in 2010. Production by area for large-sized LCD panels will rise 7 percent sequentially during the fourth quarter of 2010, leading to a 44 percent annual expansion for the entire year, according to iSuppli. Growth is expected to continue for the next year, with production by area increasing 16 percent in 2011.
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