In spite of the fact that shipment volume of higher-priced, larger-sized LCD televisions saw a large sequential increase in the second quarter, and some foreign panel suppliers raised prices, ASP (Average Selling Price) of the Taiwanese LCD TV industry slipped 5% sequentially in the second quarter. One reason for this fall was the fact that makers turned to less expensive Taiwanese LCD panel suppliers as they increased their output of 32-inch and larger panels. Some LCD television makers also engaged in aggressive price competition, which further contributed to the fall in ASP. Yet despite the fall in prices, the upturn in shipment volume brought about shipment value growth of 82% year-on-year, or 25% sequentially, to US$540 million in the second quarter.

In product mix, 15-, 20-, 26-/27-, and 32-inch televisions recorded rapid growth in shipment volume in the second quarter, with a combined share of 80% of total shipment volume. Most 20-inch and larger models posted large growth year-on-year and sequentially. Two exceptions were 30-inch models, which saw a 41% sequential decline due to the fact that panel suppliers were suspending production of 30-inch panels in July, and 23-inch models, which experienced only slight growth of 1% due to unclear market positioning.

Looking ahead to the second half of 2005, shipment volume of the Taiwanese LCD TV industry is expected to continue growing with the arrival of the traditional peak season in the end-market. Some issues in the two major markets - the United States and Europe - however, may affect the industry's shipment performance. In the United States, the FCC (Federal Communications Commission) has required that from July 1, at least half of all US-bound shipments of 25- to 35-inch televisions must be equipped with tuners for digital television, which will affect manufacturers still failing to convert their production to models capable of receiving digital television signals. Meanwhile, in Europe, some Taiwanese makers only have small shipment volume and have yet to set up production sites or find contracting partners there. Therefore, these makers will not be exempted from import tariffs, possibly affecting shipment performance.

Along with a decline in panel prices, ASP of Taiwanese LCD televisions is expected to continue falling in the second half of the year. Moreover, should yield rates of 5.5G and 6G lines producing 32-inch and larger models improve considerably, panel prices will fall and therefore ASP of LCD televisions will drop even more. Shipment value will hit

another record high, thanks to the continued increase in shipment volume and the movement towards larger-sized models.

The shipment volume share of 20-inch and smaller models will gradually slip in the second half of 2005, due to the difficulty of separating the target market from LCD monitors. Shipment volume of 30-inch and larger models, which are suitable for use in living rooms, will continue growing due to the replacement of traditional CRT (Cathode Ray Tube) televisions. Especially 32- and 37-inch models, which showed large growth in the first half of the year, and 42-inch models, will see their shipment volume gradually growing in the second half of the year as panel manufacturers increase their output of LCD panels needed for these models.

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