23 August 2004 00:01 [Source: ICB Americas]
News from the expanding liquid crystal display (LCD) and related materials market is almost uniformly good, but recently there have been voices of dissent warning against oversupply.
Earlier this month, Austin, Tex.-based consulting group DisplaySearch reported that in June, thin-film-transistor LCD prices dropped for the first time in 18 months. The consultancy projects price declines for July and August as well. DisplaySearch sites oversupply as the culprit to the fall in share prices for a variety of Asian companies.
Sharp Corp., Chi Mei Optoelectron-ics of Taiwan and Korea’s LG-Philips all saw the price of their shares drop. Meanwhile, Huizhou, China-based manufacturer TCL Group is planning price cuts. The company says it intends to use the cuts to take the lead in the large-sized display market and to reach the global top three over the next three years.
However, observers of the electronic chemicals field have noted that these are situations where “everyone feels that they will be the one that hits the jackpot—and get out before it’s over.”
Also in August, Hitachi Ltd., Matsushita Electric Industrial Company and Toshiba Corp. revealed plans that they are considering an investment of ¥100 billion to ¥200 billion to establish a joint venture to manufacture large LCD panels for flat-screen TVs, company sources say.
“This is still a supply-driven deflation cycle as LCD panel makers are still over-expanding,” notes Banc of America Securities analyst Mark Gulley.
In July, Sumitomo Chemical Com-pany began construction of a factory for polarizing films and light guides used in LCDs to meet growing demand. Located in Wuxi, China, the factory is scheduled to begin operations in 2005. Sumitomo intends to double its projected 2005 global sales of electronic materials to ¥250 billion in 2006. Meanwhile, Samsung Electronics Company said it would soon increase the monthly production of LCD screens. In June, DisplaySearch called Samsung the number one player in the LCD market, as the company surpassed LG-Philips.
LCD glass manufacturer Corning Inc. expects that LCD glass growth will increasingly be driven by LCD television penetration. Corning projects that by 2006, LCD TVs will be 16 percent of the total television market. Corning is reported to have recently signed supply agreements with Chi Mei and Quanta Displays of Taiwan, two big LCD panel manufacturers. Each deal is rumored to be worth about $700 million.
According to Chi Mei, strong demand growth for LCD monitors and devices has been a large contributor to rising demand for methyl methacrylate and polycarbonate resin in Asia, both of which are used to make diffusers for backlight units for large-sized LCDs.
In May, Merck KGaA announced it would invest €30 million ($37 million) to increase capacity at its liquid crystal mixture plants near Tokyo and Seoul, as well as construct a new mixing plant in Taiwan. Merck has also spent €250 million on a manufacturing plant in Darmstadt, Germany, to triple its liquid crystal capacity. These investments are needed to keep up with burgeoning demand, says the company. Merck expects that market to grow by 50 percent per year through 2008.
The worldwide market for processing equipment for thin-film-transistor LCDs will reach $4.8 billion this year, growing to $5.8 billion in 2005, says The Information Network, a New Tripoli, Pa.-based market research firm. Demand for the panels in televisions and notebook and desktop monitors is expected to grow from $24 billion last year to more than $35 billion this year, with glass substrate unit shipments expected to top 10.7 million units this year, compared to the 7.2 million units shipped in 2003.
Despite relatively high prices (approximately $450 for a 17-inch LCD TV to roughly $900 for a 20-inch model), LCD and plasma TV sales are expected to double to 10.4 million units sold globally, or 6 percent of TV sales this year, according to El Segundo, Calif.-based consultancy iSuppli Corp. LCD makers are projected to spend about $10 billion on new plants this year. According to iSuppli, seven new factories will open this year (all of which will be in Asia), including two that will primarily make big screens for TVs. The consultancy reports that at least five more plants are expected for 2005. Plant construction costs are about $2 billion to $3 billion per unit.
“The display market,” specifically LCDs, says Sven Löfquist, president and CEO of Täby, Sweden-based Micronic Laser Systems, will by 2009 “reach half the size of the semiconductor market. Successful [semiconductor] companies will actively extend their market into this strong growth area.”
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