LCD monitor panel prices rising despite downturn: iSuppli
iSuppli Corp.’s LCD PriceTrak Service recently reported that prices for LCD monitor panels are rising, despite the weak economic situation and cuts in consumer spending. Isn’t this quite unusual, and on surface, really spectacular, given the recessionary conditions.
Thanks to my good friend, Jon Cassell, I was able to get into a conversation with Ms. Sweta Dash, director of LCD research at iSuppli. I started by trying to find out the reasons for LCD monitor panel prices to be doing reasonably well in these times.
China’s program driving demand
Sweta Dash said panel demand has been strong due to ‘China’s rural consumer stimulus program’, which increased sales of small-size TVs that uses monitor panels. Also, the panel demand was strong from branded manufacturers due to inventory adjustments.
She added: “Monitor brand manufacturers and retail channel orders mostly stem from the demand for inventory replenishment because they have kept their stockpiles at lower-than-normal levels since the end of 2008. Now, factory demand is strong as they need to buy panels for inventory adjustments.”
In that case, is China’s rural customer stimulus program the only major factor behind this rise in prices of LCD monitor panels?
According to Dash, the other factor is the inventory adjustment by brand manufacturers. TV sales in the US were also better than expected due to the very aggressive prices by brand manufacturers.
“Some retailers reported that they could not meet their demand due to low inventories level. Now, they are trying to adjust the inventory level. Besides better than expected demand for TV and monitor panel, severe cut in factory utilization rates (severe cut in panel production) also contributed to the tight supply for the monitor panel and small-size TV panel, which resulted in panel price increase,” she noted.
Is there any specific reason behind the retailers placing higher orders during recession? Or is it only due to the very low prices?
Dash clarified that it is mostly inventory adjustments. “In March, the inventory levels for monitors at the brand and channel levels were below three weeks level; and some were at two weeks level, which is considered low for this time of the year. Also, once the panel price starts increasing, buyers try to buy more in order to take advantage of the very low price.”
Situation regarding component shortages
There was also a note in iSuppli’ report regarding component shortages. I was keen to find out the exact situation with component shortages, and which specific ones!
Dash said that there is tight supply for PCBs and driver ICs. The lead time for PCBs is extending from two to three weeks to four to six weeks; and the lead time for certain driver ICs is extending to about six to eight weeks.
No recovery soon!
Interestingly, iSuppli cannot declare that monitor end-market demand is headed for a sustainable recovery at this point.
Dash added: “In the absence of a strong rebound in end-market demand, rush orders are not likely to be sustained in May with component shortages being resolved by then. And, the forecast for panel demand is most likely to remain conservative at that time. Also, panel prices are still below cost level. Therefore, in spite of the increasing panel demand, suppliers are still losing money. Further, panel suppliers are rushing to increase their utilization rates and production.”
Koreans doing better than Taiwanese
Evidently, the Korean suppliers seem to be doing better than the Taiwanese, as of now. What would be the key reasons for this?
According to Dash, the Korean suppliers were able to provide more competitive prices due to weaker Won rates.
She added: “Also, the Korean suppliers have higher generation fabs, and they have more in-house or regional component production, which gives them the cost structure compared to Taiwan suppliers. They also have more internal customers (for example, Samsung LCD’s internal customer is Samsung TV and monitor brand).
Year ahead for LCD monitor panels
Finally, how does the year ahead look like for LCD monitor panels?
Monitor panel demand may face some softness after the inventory adjustment in Q209. That is the reason why panel suppliers have to expand their production cautiously.
“Otherwise, it has the danger of pushing the market back to over supply. We still expect real end-user demand to recover in the second half of 2009 especially by Q4-09. If panel manufacturers act cautiously and expand rationally in the first half of 2009, they can see real demand recovery in the second half of 2009,” noted Dash.