LCD tags to fall despite strong demand

James Carbone -- Purchasing, 11/17/2005

Buyers can expect a price reduction in liquid crystal display (LCD) panels in 2006 as more capacity comes online and the market becomes flooded with LCD panels despite healthy demand. Price erosion has already begun for some panel sizes and price drops will continue for the first three quarters of 2006, according to Sweta Dash, an analyst for researcher iSuppli.

Suppliers such as Samsung, Sony, Quanta, and LG are building new fabs, many of which will be used to make large panels for LCD televisions. Older fabs will shift production to panels for computer monitors and notebook computer panels.

A lot of capacity has already been added. "If we look at capacity expansion plans from the first half to the second half, it has almost doubled," says Dash.

She says the market is now oversupplied and that will continue into the first half of 2006. As a result, prices will drop. The largest amount of price erosion will come from large higher priced panels used in LCD televisions. Price drops will be less for panels used in notebook computers.

Dash says the price of a 15-in. panel for notebooks will drop from $144 in the third quarter to $131 in the second quarter of 2006. A 40-in. panel for LCD televisions will drop from an average of $1,066 in the third quarter to $988 in the fourth.

While prices will fall, the global LCD market will still post healthy growth. The market will rise from $39.1 billion in 2005 to $46.7 billion in 2006. By 2009, the market will grow to nearly $65 billion.

While it will be a buyer's market for much of 2006, it won't last. "Some people say the market will be flooded throughout 2006," says Dash. "We think it will be oversupplied in the first half, but by the end of the year, it will be a different market."

She says it will become a tighter market towards the end of next year because some manufacturers will cut back production because prices are low. That will result in reduced supply and cause prices to rise toward the end of the year.

In addition, rising demand could put a crimp in the LCD supply chain as demand increases for polarizers, glass, and color filters used in LCD manufacturing. Prices for those materials could rise as well.

If prices fall too low, there could be some consolidation because many suppliers are not making much profit on LCD panels. Suppliers are looking for ways to reduce the cost of manufacturing LCDs.

Samsung has developed a color filterless 32-in. LCD panel which the company says boosts performance and decreases cost.

Joe Virginia, vice president of marketing for Samsung in San Jose, Calif., says the panel needs fewer materials and fewer process steps than a traditional LCD that uses a color filter.

He says a regular LCD panel uses a cold cathode fluorescent (CCFL) backlight as a light source. There are 16 CCFLs in an LCD. Light produced by the CCFLs has to pass through a polarizer, a liquid crystal layer and a red, green and blue (RGB) color filter that is fabricated in the upper portion of the panel, says Virginia. The filterless LCD uses a light emitting diode (LED) not just as a backlight, but as the red green blue filter.

"Eliminating the filter reduces process steps," says Virginia. "We get process, equipment and materials savings."

While cost is reduced, performance is enhanced. Virginia says an LCD typically has 72% color purity based on the National Television Standards Committee (NTSC) measurement. The color, filterless LCD provides 110% color purity measured against the NTSC standard. Another advantage is that it has 62% less power consumption than a regular LCD.