LCD panels are in oversupply

El Segundo, Calif. — Shipments of large-sized liquid-crystal-display (LCD) panels significantly exceeded end-market sales of televisions, monitors and notebook PCs in the first half, spurring a major buildup of LCD inventory and finished products, according to market research firm iSuppli Corp.

A total of 46.8 million LCD-TV panels shipped in the first quarter of 2010 but LCD-TV set shipments equaled only 37.6 million units, which equates to an overage of 24.5 percent, according to iSuppli’s analysis. In the second quarter, large-sized LCD-TV panel shipments grew to 52.9 million units, but actual set shipments amounted to only 38.7 million units. This gap of 36.4 percent is higher than anything seen in 2009, resulting in an uncertain outlook for the second half of 2010, said iSuppli.

Inventory levels at both suppliers and buyers are expected to remain an issue in September, along with increased pressure to lower panel pricing, said iSuppli. However, the market research firm expects that severe cuts in panel production in August and September will help to mitigate the oversupply situation by the end of September.


“Coming amid fears of a slowing economy and the possibility of a double-dip recession, the inventory increases in the LCD TV retail channel are raising concerns throughout the display supply chain from panel suppliers to contract manufacturers and brands, to retailers,” said Sweta Dash, senior director for LCD research at iSuppli, in a statement.

“The oversupply situation was exacerbated by a significant cut in orders in July from LCD panel buyers. While the large-sized LCD panel market was already in oversupply for most of the second quarter of 2010, the order cuts in July pushed the market further into oversupply as inventories expanded to even higher levels. The oversupply has persisted during the first two months of the third quarter as buyers cut orders in July and August,” added Dash.

She said inventory levels for both suppliers and buyers have caused a ripple effect on pricing as large-sized LCD panel pricing dropped again in July, taking some panels down to the manufacturing cost level.

iSuppli’s analysis shows that prices dropped another 4.4 percent in August because of the continuous inventory adjustment, with a further decline expected in September. These developments have resulted in a series of production cuts by some panel suppliers in order to bring panel supply and demand back to balance.

Although pricing for the LCD-TV sets themselves surged upward in July in the United States, prices are likely to have declined in August and most likely will decline again in September, as brands and retailers have to become aggressive with their promotions in the upcoming months in order to fuel demand, said iSuppli.

Meanwhile, LCD-TV brands are cutting production targets and inventory levels in the third quarter, putting more pressure on panel suppliers to further reduce prices in order to move the inventory.

iSuppli said some television panel pricing is near the cost level, and panel suppliers are unable to cut production too much due to higher depreciation costs at newer generation fabs. Notebook and monitor panel pricing is also close to cost.

iSuppli’s upcoming report, “LCD Health Watch report entitled: Large LCD Fabs Facing Further Cuts in Production,” will provide additional information about the supply situation.