In the fourth quarter of 2008, although panel markers are aggressively cutting production to deal with the oversupply situation, major application product markets are being impacted by the economic downturn and their performance is expected to be below expectations. The production reductions of manufacturers are unable to produce the desired effect of controlling prices with production volume. Furthermore, the price declines of end-products as a result of panel price declines are not expected to be able to effectively stimulate market demand. Therefore, as end-market demand in the fourth quarter is expected to be limited, panel manufacturers will continue to cut production, and the scale of production reductions is expected to be larger than the third quarter.

Meanwhile in the short term, as the recent devaluation of the Korean Won is starting to show its effects, the competitiveness of the Taiwanese panel industry will be affected. This will have a negative effect on the Taiwanese industry's shipments in the fourth quarter of 2008 and the first quarter of 2009.

According to MIC Senior Industry Analyst Charles Chou, "in the third quarter of 2008, besides Innolux and Hannstar, Taiwanese manufacturers, including AUO, CMO and CPT, all reduced production in a reaction to panel inventory clearances and large-scale price declines. As a result, the shipment volume of the Taiwanese large area TFT-LCD panel industry reached only 50.12 million units, declining 8.3% compared to the previous quarter and declining 0.1% compared to the same period last year."

"As for the major application products, notebook PC and LCD TV panel shipment grew or maintained their level of the previous quarter due to healthy inventory levels in the supply chain and the peak-season effect which started in the third quarter", said Mr. Chou. "However, for LCD monitor panels there were still inventories awaiting clearance, while market performance did not meet expectations. As a result, LCD monitor panel shipment volume fell in the third quarter."

Shipment value of the Taiwanese large area TFT-LCD panel industry reached US$6.99 billion in the third quarter of 2008, down 16.7% sequentially and down 19.8% year-on-year. ASP (Average Selling Price) of the industry fell to US$139.5. Regarding the reasons for the shipment value decline, although panel makers were aggressive in terms of lowering production to deal with inventories and declining downstream demand, supply/demand imbalances and inventory clearances were still major issues in the third quarter. Panel prices fell continually in July, August, and September, impacting ASP and leading to significant declines in overall shipment value.

More information can be found in the following MIC report:  The Taiwanese Large Area TFT LCD Panel Industry, 4Q 2008

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