R E L A T E D C O N T E N T

Investors funding consumer LCD bonanza

Hope of huge market for flat TVs drives LCD monitor price drop

Simon Burns, vnunet.com 28 Oct 2005

Prices of flat panel computer monitors will continue to fall as manufacturers jostle for position at the start of an anticipated LCD TV race during the next year, industry sources in Taiwan say. Taiwanese companies account for almost half the world's production of the large LCD panels used in these products.

"We expect LCD panel prices to continue going down in the near future," said an investor relations spokesman for Chunghwa Picture Tubes, of Taiwan, among the world's top ten makers of large LCDs. Anabelle Hsu, an LCD industry research analyst at Taiwan's Market Intelligence Center confirmed that competition resulting from oversupply of large LCD panels would push consumer prices down -- especially for LCD monitors, where the LCD panel represents 80 percent of the total cost.

The key force driving the oversupply and falling prices actually lies outside the LCD monitor market, according to Eric Chang, an LCD analyst with MasterLink Securities in Taipei. "They believe these large flat panel LCDs can replace traditional TVs," he said. Although LCD TVs tend to be bigger than LCD monitors, manufacturing techniques are closesly related, so the same expertise and production facilities can be applied to both.

With the prospects of a global demand for LCD TVs that will dwarf the LCD monitor market, investors continue to pour money into LCD makers, even though the flat panel TV market has grown more slowly than expected so far. As a result these LCD makers can continue to expand production capacity, despite relatively small profits, leading to a continual state of oversupply which is driving down prices. MIC's Hsu sees LCD profits remaining low for the forseeable future, particularly at smaller companies -- mergers between Taiwan's smaller players are widely expected during 2006.

In recent years, larger Taiwanese companies have also tended to clamp down on prices simply to starve smaller competitors of funds for expansion -- a strategy borne of past suicidal price competition in electronics and semiconductor manufacturing.

Chunghwa Picture Tubes' spokesman noted various factors that were expected to drive high demand for flat screen TVs, including greater attractiveness compared to bulky traditional TV tubes, and decreasing living space for urban residents. A changeover from analog to digital TV broadcasts, notably in the US, is also giving consumers a reason to buy new equipment, and an opportunity to change over to flat screen TV at the same time.

Taiwanese LCD manufacturers are battling with Korea giants like Samsung and LG, says a recent MIC report, and pushing ahead of them with 46 percent of the global market, in unit terms, compared to Korea's 41 percent (Japan holds about 8 percent). Taiwan's large LCD production has doubled over the past year, a rate of increase that will continue into 2006. In the much smaller LCD TV market, which MIC predicts to total about 18.7 million units this year, Taiwan and Japan hold roughly equal shares, with Korea lagging slightly. The LCD TV market will jump to 30 million units in 2006, MIC says.

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