SARS Impact Negligible
Although the second quarter of 2003 underwent the spread of SARS, the brunt of the impact hit the Chinese domestic market. However, CRT monitors comprise the majority of Chinese monitor sales; combined with the limited impact on notebook PCs, which are sold mainly in the corporate market, demand for large LCD panel applications was not subjected to the negative impact of SARS. Worldwide notebook PC shipment volume is hence expected to rise 2.2% sequentially, while global LCD monitor and LCD TV shipments are forecasted to grow 8.4% and 48% respectively during the same period, indicative of continued strong demand.
Panel Prices to Decline in 3Q 2003
With sustained LCD monitor and notebook PC demand, as well as a gentle rise in prices, the industry will avoid the dramatic swings in price that emerged over the course of 2002. However, ramped up fifth generation line capacity will allow for a greater reduction in costs, which are expected to provide room for a significant 17" panel price drop.
15" panel price fluctuations are determined by LCD monitor demand, and if demand is below expectations in the third quarter of 2003 15" panel prices will decline. However, markers are in urgent need of capital, and price drops are not conducive to soliciting funds. Even if enough capital is raised to build a new generation panel plant, makers will be unwilling to cut prices if such moves will fail to squeeze out competitors. Unless demand falls below expectations, major 15" panel price shifts are unlikely.
Larger Size Panel Output Gaining Momentum
Japanese suppliers have faced intense price competition from Taiwanese and Korean makers, and have responded by gradually shifting toward the development of more specialized, niche panels to preserve profit margins. At present Japanese makers primarily supply panels for notebook PC and LCD TV applications.
However, an aggressive push into LCD TV panels by Japanese makers would have been checked to some degree by the age of their existing lines, which puts Japanese players at a disadvantage to Taiwanese and Korean makers in terms of cost. Sharp has thus announced the construction of a 1500*1800 substrate six generation line, and Sony has stated plants to build a new LCD panel line expressly dedicated to production for LCD TV applications.
Korean makers benefit from solid support from fifth generation plants; hence, in addition to the production of mainstream sizes for notebook PCs and monitors, Korean makers have invested deeply into large sizes used with LCD TVs. Korean 21.x" shipments are vastly higher than Taiwanese and Japanese output.
Although Greater Chinese makers currently comprise the largest share of worldwide panel output, the relatively few number of lines these makers possess limit the bulk of production to the mainstream 14.1", 15", and 17" sizes. Panels produced by Greater Chinese makers are mainly used for applications with the greatest demand: notebook PCs and LCD monitors.
LCD TVs are expected to by the next driving force behind TFT LCD panels, encouraging Japanese and Korean makers to invest heavily in LCD TV panel R&D and production. Japanese players will thus need to eventually face competition from Korean and Taiwanese suppliers in this sector as well.
As a more intense battle in LCD TV panels looms, Japanese makers maintain a clear competitive advantage given strong TV brands and channel resources. Additionally, considering the more exacting requirements for brightness, response time, and viewing angle, a firm hold on key technology is another crucial competitive advantage. Japanese players' ownership LCD panel technology patents places them in a particularly advantageous position in LCD TV panel competition.
Korean makers are building new generation LCD panel lines faster than on other suppliers, and Korean makers have also been particularly successful in building up home appliance brands. At the same time they have aggressively moved up into key component production, investing considerably in LCD TV panel R&D.
Taiwanese makers, however, maintain a very low degree of vertical integration, and have not built up an LCD TV brand. Thus, in order to succeed in competition over LCD TV panels, close collaboration with customers will be key. Japanese makers have announced the construction of two LCD panel lines, which is likely to be insufficient to supply the Japanese LCD TV industry. Taiwanese makers thus stand to win panel contracts from Japanese makers.