- As SARS has swept through China, Hong Kong, Singapore, Canada, and Taiwan, fallout from the epidemic has become the chief negative variable affecting the global economy during the second quarter. Particularly in China, the world's factory floor, not only has spread of the disease throughout the north and south stifled domestic demand, but Taiwanese monitor makers have been exposed to a good degree of risk given the large extent of manufacturing undertaken in China. In light of the drop in demand in China, Taiwanese LCD monitor shipment forecasts made during April for the second quarter of 2003 have been adjusted downward by 1%, amounting to a 5.4% increase in volume from the first quarter to reach 7.4 million units; shipment value is expected to total US$2.1 billion. Taiwanese CDT monitor volume for the second quarter has been revised downward 3% to 810 million units, a 11.7% decline from the first quarter; shipment value is expected to reach US$830 million.
LCD Monitor
Although 80% of Taiwanese LCD monitor manufacturing is undertaken in China, strict controls at production sites have prevented the SARS-related cessation of production lines. Additionally, given the current shortage of 15" and 17" panels, inventory stock-ups will not be a source of shipment growth.
The second quarter traditionally witnesses a valley of PC sales, which accordingly dampens global LCD monitor demand. However, growing replacement of CDT monitors by LCD monitors will provide some thrust behind global LCD monitor shipment volume. Although SARS generates certain negative factors, the impact is generally localized to China and a few surrounding Asian countries, with very little impact on the North American and West European markets where LCD monitor demand is strong. As for more hard hit markets in China, Singapore, and Taiwan, worldwide LCD monitor shipments to these areas are low. Share of Taiwanese shipments to China account for only 8% of total production; second quarter forecasts have thus been revised from 6.4% to 5.4% sequential growth, yielding 7.4 million units.
CDT Monitor
As is the case with LCD monitors, SARS has not had an impact on CDT monitor supply. However, most shipments are bound for China and Central and South America, and it is anticipated that the Chinese market will be dramatically effected, especially the clone market. Additionally, PC vendors are increasing the bundle rate of LCD monitors, which is expected to hasten a 15% to 20% decline in the Chinese CDT monitor market. Considering that 17% of Taiwanese shipments are bound for China, second quarter volume is forecasted to reach approximately 8.1 million, a 17.5% drop year-on-year and a 11.7% fall from the first quarter.
2H 2003 Outlook
Although the industry will be moving into the peak retail season in the second half of 2003, the scope and scale of the effect of SARS on demand in China is a significant variable. The migration of the Taiwanese CDT monitor industry to China has been occurring for quite a while, and some makers only have lines for pilot runs remaining in Taiwan, which would magnify the effects of SARS on manufacturing given the limited availabilty of lines outside China. In the interest of centralizing resources, a minority of Taiwanese players have amassed production capacity in areas other than China; such makers will be much less affected by the epidemic.
The impact on the LCD monitor industry, however, is negligible: the key problem is obtaining panels. Short panel supply in the first and second quarters of 2003 has hindered Taiwanese maker performance. Improvements in yield rates in Korean fifth generation plants will do much toward relieving the shortage and providing a boost behind Taiwanese LCD monitor shipments in the second half of 2003. Otherwise, Taiwanese players will be hard pressed to fill orders on schedule.