Japan Earthquake Delivers Price Stability for Large LCDs

In a strange turn of events, the Japan disaster has caused prices of large-sized liquid crystal display (LCD) panels for some applications to rise and for others to decline slightly, resulting in an unusual equilibrium in overall pricing during April and May, even though consumer demand for end products remains uncertain, according to new IHS iSuppli research.

Average pricing for large-sized LCD panels dipped a scant 0.5 percent in April, the smallest decrease during the previous nine months. The price in May is expected to drop by an even more miniscule 0.1 percent.

“All told, the large-sized LCD panel market appears to be mired in a period of general uncertainty following the Japan quake disaster two months ago, with conditions characterized by diverging pricing trends for products in the different applications,” said Sweta Dash, senior director for display research at IHS.

Notebook panel prices, for instance, are forecast to rise 0.2 percent in May after climbing 0.4 percent in April, while monitor panel prices will inch up sequentially by 0.14 percent. Average television panel prices, however, will fall 0.6 percent for the month.

Weak demand collides with Japan disaster impact
Consumer demand for LCD products such as TVs, monitors and notebooks remained weak in the first quarter, with tepid sales resulting in increased inventories. Just the same, name brands in the electronics world are starting to build up stockpiles to serve as insurance against possible supply chain disruptions caused by the quake. And if fallout from the disaster impacts the supply of key components used in notebooks, TVs and monitor sets or in flat panels, the result could be short supplies and possibly rising prices, with vendors likely having more product on their hands than they could sell, further inflating the inventory, IHS predicts.

TV panel pricing down
In May, TV panel suppliers are expected to ask for an increase in prices or at least seek to maintain current pricing levels, bolstered by Chinese manufacturers buying panels after the Labor Day holiday for inventory replenishment and exports, along with a rise in demand from other emerging markets. Buyers, however, will find it difficult to accept any price increases, given that demand for television panels in the United States and Europe failed to recover in April and because production has been impacted in Japan.

On the supply side, some amount of TV panel production has been impacted due to production cuts from a few Japanese fabs, such as the Gen 6 fab from Panasonic Corp. as well as the Gen 8 and 10 fabs from Sharp Corp. Many Taiwanese suppliers also have cut their fab utilization rates due to weak panel demand. Starting in May, however, some Japanese fabs are planning to bring back production, while other panel suppliers will be ramping up Gen 8 fab capacity.

In the face of generally weak demand, TV panel prices fell 0.9 percent in April. The majority of television panel sizes declined by less than $5, with panels sized 32-inch and larger showing price decreases in the $1 to $2 range.

For the 32-inch panels featuring full high-definition 1080p resolution, a gap of about $35 to $40 exists between products featuring the cold cathode fluorescent lamp (CCFL) technology used for LCD televisions, and panels featuring the newer light-emitting diode (LED) technology used for more advanced LED-backlit LCD TV sets.

Monitor and notebook panel prices up slightly
Among monitor panels, prices will rise 0.14 percent in May on top of a 0.4 percent increase in April, although weak demand continues to rule the end market. The tug of war also continues between opposing players: While most monitor panel suppliers are quoting price increases of $2 to $3, buyers are unwilling to buy more product and risk accumulating too much inventory.

Nonetheless, certain monitor sizes are reporting a $1 increase in pricing because of strong demand. For these sizes—including the 18.5-inch wide LED, the 20-inch wide LED and the 21.5-inch wide LED—the majority of panel buyers are willing to accept the price hike.

Like monitors, notebook panels reported a price increase of 0.2 percent in April with a further expected uptick of another 0.2 percent in May. Branded vendors, fearing possible supply shortages of key components, continue to buy up panels in order to meet their production plans, at the same time pulling into the second quarter production originally intended for the third quarter.

In the sub-categories of netbooks and tablets, panel pricing in both areas is seeing a slight increase as well. Panel suppliers are gradually shifting their capacity from netbook to tablet panels, in the process reducing supply for 10.x-inch and 11.6-inch twisted nematic (TN) panels. Several small vendors also are using 16:9 TN-mode netbook panels to produce lower-cost tablets. Tablet panel pricing is $60 to $70, depending on the panel technology being used.

IHS iSuppli