September 21, 2005

Flat Panel Glut Good for Christmas Shoppers

AMSTERDAM (Reuters) -- Consumers may still enjoy sharply lower prices of flat panel monitors and LCD TVs during the Christmas peak selling season, because oversupply of panels is bigger than expected, a survey found on Wednesday.

The oversupply in the fourth quarter is expected to total 6.2 percent, said U.S. research group iSuppli, raising its estimate from an earlier 4.2 percent.

The forecast contrasts with what panel makers have said.

Liquid Crystal Display (LCD) producers, such as South Korea's Samsung Electronics and LG.Philips LCD which together have around 40 percent of the world market, have said they expect stable prices later this year.

Flat panel makers need stronger prices to recover from the sharp drop in quarterly earnings as a result of price falls.

Second quarter panel prices rose 2 percent after three quarters of decline, according to market surveys, and LG.Philips LCD has said it expected single digit price increases by the end of the third quarter.

But iSuppli said already in the third quarter production would outrun demand by 5 percent. "This glut is expected to cause pricing for LCD-TVs and desktop PC monitor panels to decline in the coming months," it said.

The oversupply will continue at similar levels until the fourth quarter of 2006, iSuppli predicts.

Exacerbating the effect was slower-than-expected production of flat TVs and computer monitors, and sluggish sales. Shipments of LCD monitor panels outstrip sales of actual monitors, and inventories of 19-inch panels are beginning to accumulate.

The uncertain economy also adds to the pain.

Many of the panels sold in the first half were shipped to B-brand TV and monitor set makers, which were purchasing in anticipation of strong holiday demand in the fourth quarter.

"However, rising energy prices, lower consumer confidence and slower economic growth may slow the increase in demand," iSuppli said.

To make matters worse, an expected transition of demand to larger-sized TFT-LCD panels is progressing more slowly than expected.

Swelling stockpiles are causing some panel manufactures to reduce their utilization rates in the third quarter.

The big panel makers are investing billions of dollars a year in expanding production and moving to more efficient ways to manufacture flat panels.