06 June 2005 00:01 [Source: ACN]
FEARS that the digital boom is over are exaggerated, say analysts and producers of electronic devices and electronic chemicals.
Prices of monitor panels and liquid crystal displays (LCDs) fell sharply in the second half of 2004, but the consensus is that they have stabilised and will rise in H2 of this year. Prices of supporting electronic chemicals are set to rise in tandem.
A source from Kuraray said costs of fuel and raw materials peaked in October last year, and added that H2 2004 also saw the negative impacts of a rising yen and falling prices of digital consumer electronic devices.
But he pointed out that Kuraray had managed to pass on the increased costs. It had expanded sales of its products, and reduced its operational costs. The company’s chemicals and resins division, whose main products include polyvinyl acetate (poval) resin products, achieved sales of Yen124.69bn (US$1.18bn) in the first three quarters to 31 December 2004, up from Yen 115.30bn in the corresponding period of the previous financial year. Operating profit for the three quarters was Yen20.60bn, as against Yen17.19bn in the same period of 2003-04.
The source said sales of poval film, which is used in LCDs, ‘increased substantially’ during the period, as did sales of methacrylic resin moulding materials used in LCD light-guide plates and TV front panels. He added that prices in the second half of 2005 should rise with increased demand for LCDs.
A Hitachi Chemical source had earlier told ACN that the company expected demand for its electronic chemicals to start increasing around October.
She said the company had been reducing its inventory because of the high cost of raw materials and the yen’s appreciation against the US dollar; this inventory adjustment would be completed by the end of H1.
A Toray Industries source said the company expected a recovery in the digital and related products segment in the second half of fiscal 2005, after demand and supply adjustments had been completed.
He said prices of electronic materials should rise with a growth of demand for digital products. Sales of electronic materials in fiscal 2004 had risen because of increased demand from manufacturers of electronic circuits in South Korea as well as makers of plasma display-related materials in Japan and South Korea. In particular, sales of colour filters used in thin-film transistor LCDs had gone up significantly.
The source cautioned, however, that increasing fuel and raw-material costs plus a further appreciation in the value of the yen could put a damper on profitability. He also aired concerns about the apparent stalled recovery of the US economy and the possible effects of stagnant consumer spending on the growth of Japan’s economy.
Two analysts from Hyundai Securities, Jeff Kim and Jay Kim, agreed that prices of monitor panels, which had plunged by 45-50% on average in H2 2004, had stabilised. They said the global thin-film transistor (TFT)-LCD industry should face a supply shortage of 1.3% in the Q4 2005, thanks to a steady growth in orders for monitor and LCD TV panels.
Said Jeff Kim: ‘We expect the price of 32-inch LCD panels to be around US$500 in Q3 2005, lowering the price of 32-inch LCD TVs to US$1500 and triggering a huge jump in consumer demand for LCD TVs.’
Both said they saw bottom lines in the LCD and related industries rising from Q2 05.
Over in Taiwan, a spokesman for Chi Mei Corp said the company’s electronic-chemicals business was hit by falling prices and declining margins in the second half of 2004 and the early part of 2005, but that the company had ‘turned the corner’ in March this year.
He declined to provide specific numbers, but said Chi Mei’s margins had improved with an increase in its product prices and better sales. The company, he said, had also implemented cost-reduction measures and had improved production efficiency.
IN A recent report, the Financial Times of London said that when Japan’s leading electronics groups reveal their results for the past year, ‘there will be plenty of opportunity to reflect on how short-lived the digital boom has been for most of them’.
The report said that while demand for flat-screen televisions, digital cameras, portable digital audio players, and DVD recorders had remained firm, plummeting product prices had wiped out profits in spite of growing sales. The sharp drop in prices, it added, had in turn undermined component suppliers; semiconductors, hard-disk drives, liquid crystal display panels and DVD drives had been hit.
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