Monitor shipments jump 800 percent

The bad news for consumers is that high demand for desktop LCD means that fewer displays are around to put in notebooks, which could eventually mean higher laptop prices.

DisplaySearch found that shipments of LCD monitors in the first quarter of 1999 jumped 86 percent over the previous quarter and 806 percent over the same period a year ago to 850,000 units.

"LCD monitors bundled with desktop PCs in Japan are the principal cause of the large growth," said Ross Young, president of DisplaySearch. In Japan, these designs now account for 55 percent of the total desktop market in units, and 71 percent in revenue, according to Young's research. In comparison, only 1.7 percent of the PCs in the U.S market are sold bundled with LCD monitors, he said, but the figure will inevitably grow.

Space-efficient designs are driven by necessity in Japan, but the chic contours of these PCs have also become more affordable. In the past, Young said, many of these customers purchased notebooks as space-saving desktop PC replacements. Now, they are turning to the desktop-LCD bundles, and Japan's notebook market is starting to suffer. Soon, the U.S. market may follow.

Desktop popularity, however, is crimping the number of displays that can be churned out for notebooks. Factory space remains limited, forcing manufacturers to allocate between markets.

"The large Japanese companies who make panels such as NEC, Sharp, Fujitsu, and others are [increasing their allotment] of panels to the most profitable segments," according to Young. "It appears that the notebook market will bear the brunt" of increased demand in the desktop market.

DisplaySearch is revising its 1999 shipment estimates for the notebook LCD market downward by 300,000 units as a result, although in terms of revenues, the market is expected to reach $4.3 billion by the end of the year.

A more limited supply of LCD displays has translated into rising costs for PC makers. These costs are crucial because they comprise as much as one-third of the overall cost of computers such as notebook PCs.

Will LCDs take off in United States next?
A number of PC makers are offering consumer PCs bundled with LCD displays, with Sony being the latest, along with IBM. Compaq has become the fifth largest seller of LCD displays, mostly on the basis of sales into the corporate market.

"Interest in the total package of a PC [with a] flat panel versus a CRT monitor," is growing in the U.S., said Steve Miggels, principal of Insync Design, an industrial design firm that helps companies come up with product packaging. Unfortunately, "PC manufacturers won't get volume on those because everyone is using flat panels," and supply is limited, he added.

"LCD's look good on your desk, but prices in the U.S. continue to go up--a 10 to 15 percent increase since March," Young said.

Typical prices for PC and LCD bundles range from around $2,000 to $2,500 in the U.S., which is about double the average price consumers are paying for their computers at retail stores, according to recent market research from PC Data.

Some U.S. manufacturers are taking the tack of introducing these systems, but in Japan first, where they are most popular. Gateway recently introduced its slim "Profile PC", which also includes a processor from AMD.