What a difference a day made,
Twenty-four little hours
Brought the sun and the flowers
Where there used to be rain.
- Maria Grever & Stanley Adams

Just yesterday it seems, although it was actually last quarter, the LCD panel industry suffered from overcapacity and inventory glut. One of our industry’s best analysts was talking about a paradigm shift in the industry, in which continually increasing capacity and decreasing prices had fueled increasing demand for years. But it was supplier-push demand, and that model was falling apart. Now, the customer would be king and expansion would be demand-driven.

Ken Werner
Senior Analyst and Editor
of HDTV Retailer and
Mobile Display Report

That was a very reasonable thing to say last July, and some sanity does seem to have permeated the industry. But here we are in early October and panel manufacturers are more likely to be complaining about tight supply than about inventory gluts, although the good news is certainly spread unevenly. Samsung, Sharp, CMO and AUO are happy, while LG.Philips LCD and the second-tier Taiwan manufacturers are still hurting.

One result of the improving - from the panel maker’s point of view - supply situation, is that panel prices have reversed their downward tumble, and selling even 17- and 19-inch monitor panels are reaching the cusp of profitability. Hyundai Securities has predicted that the rebound in panel prices will continue through the end of the year at least. Hyundai analyst Kim Dong-Won was predicting 17-inch monitor panel prices would rise to $130 to $135 in September, up 10% from 1H.

The ASP for 32-inch LCD-TV panels stabilized in the second half of August at US$360, according to DisplaySearch. And DigiTimes reported inventory levels for AUO, CMO and Chunghwa Picture Tubes (CPT) decreased to four weeks because of tighter supplies in August.

Interestingly, though, pressure from 40-inch LCD-TV panels kept prices of 37- and 42-inch TV panels sliding downward in the second half of August. ASPs for the 37-inch and 42-inch panels fell to US$560 (down $10 from the first half of the month) and US$730 (down $20), DisplaySearch said.

The good news did not spread to LG.Philips LCD (LPL), which will not see improving sales in 3Q, the Asian Wall Street Journal (AWSJ) reported in mid-September. LPL VP Kwon Bok said to AWSJ reporters, "Now, we are suffering problems due to inventory adjustments, but expect a turnaround in the fourth quarter." The inventory pressure brought about a loss of $338M in 2Q.

LPL’s chief rivals, Samsung Electronics and Sharp, are making massive investments in Gen 8 lines capable of processing 50-inch panels, but LPL is in no rush to emulate them, considering what Kwon called a negligible demand for large-format panels. Instead, LPL’s next investment will be $578M for a new Gen 5.5 LCD line.

But in this business, you’re behind the competition and the market if you don’t invest in next-gen plants well before the demand materializes. It’s high-stakes poker for sure, but if you’re in the game at this level, that’s the way it has to be played. LPL’s timidity, first in committing to OLED displays and now in committing to next-gen LCD fabs, will look like brilliant foresight only if worst-cast scenarios play out. If the market for large-screen panels continues to grow - as all of LPL’s major competitors think it will - LPL may find itself sliding behind AUO to become the worlds Number 3 panel maker.

A fuller, richer and more detailed version of this article appears in the current issue of Projection Monthly.