LCD screen surplus forces changes
The unexpected capacity, combined with the Asian currency crisis, is causing price erosion and cancellations of manufacturers' expansion plans.
Prices of LCD display components have dropped by an average of 30 percent in the second half of 1997 alone, according to analysts. The price of a 12.1-inch display, which is commonly used in notebooks, has fallen from around $750 at the start of the year to about $450 now.
Declining component prices are beginning to result in slightly lower notebook prices, according to Ross Young, president of market research firm DisplaySearch. But good news for consumers has come at a steep price for foreign manufacturers.
The decline can be attributed to a number of factors. Slower-than-anticipated notebook demand, which is the primary market for LCD displays, has been a factor in declining LCD prices, according to Young. At same time, panel manufacturers have been able to increase the number of panels they can make with an equivalent amount of glass, increasing the supply of panels available and further adding to the drop in prices.
"What happened was that the third quarter was very down for notebook sales and even more so for [active-matrix] displays. There is a significant amount of notebook inventories" that was caused by people waiting for a new generation of mobile processor technology from Intel, according to Young. "As a result, panel prices have really begun to fall...There is both a decline in demand and a growth in supply," he said.
In response, LG Semiconductor, Samsung, Hyundai Electronics, and a host of other companies are scaling back plans for expansion. Korean LCD manufacturers, in particular, were making or planning massive investments in new LCD manufacturing plants. Their plans changed dramatically in the last few weeks, however, because of significant declines in the valuation of several Asian currencies.
Hyundai, for one, was expected to take delivery of manufacturing equipment next quarter but has delayed its order by at least a year, says Young. LG Semiconductor and Samsung will still bring new plants online next year, but will not bring the plants to full capacity in the second half of 1998, as originally planned.
In July, market research firm DisplaySearch predicted that LCDs would be in a tight supply until early 1999, affecting the availability of laptops. The Asian currency crisis and an unexpected slowdown in notebook demand has caused a revision in outlook, though.
Young says there will be 50 percent less manufacturing capacity in 1999 than previously forecast--which will still represent an oversupply of displays, but should result in less dramatic price drops.