Standford Resources, a market researcher that follows display economics, said today in a report that relatively new manufacturing capacity for LCD glass and LCDs themselves in Asia will transform the shortage that exists today, resulting in a slight surplus by early 2000.
LCDs make up as much as one-third the cost of notebook computers and are a critical factor in determining whether prices for these computers rise or fall. Notebooks have been hit by stiff increases in the price of LCDs since the end of last year. The trend last year toward low-cost, sub-$1,000 notebooks was halted by the LCD shortage.
Ripple effects could occur elsewhere as well. LCDs are a key component in desktops featuring flat-panel monitors and also in handhelds, so a change in supply and price will affect these products, too.
|LCD prices rise then fall|
|Size||Q1 1999||Q4 1999|
|12"||26% (increase)||3-4% (decrease)|
|13"||11% (")||3-4% (")|
|15"||13% (")||3-4% (")|
Note: Q4 is projected price; percentages compared to same quarter in
Source: Stanford Resources
Mentley said that the recent price hikes are an anomaly for the LCD industry since historically there has been over-capacity. "The question has always been 'how much excess capacity is normal?' This question has never been answered [in the LCD industry,]" he said.
By the fourth quarter, he expects Taiwanese LCD manufacturers--who to date have been bit players--to start shipping screens in substantial volume as aggressive South Korean manufacturers also continue to boost volume.
South Korean manufacturers Samsung and LG Semicon are now the No.1 and No. 2 worldwide suppliers respectively, according to Mentley. Japanese companies such as Sharp and NEC were once the market leaders but have faded in recent years, he said.
"We understand that Samsung has something like 1,500 engineers [working on LCDs]. This is mind boggling," he said.
Forecasts call for total annualized input capacity for active-matrix LCD screens in the first quarter of 2000 will exceed 3 million square meters, up from only 2.5 million square meters in the second quarter of 1999.
But Mentley is quick to point out that a likely spike next year in demand for LCD desktop monitors--which have been relatively slow to catch on as replacements for traditional CRT screens--could crimp the recovery in supply. "As the monitor market grows there could be another supply crunch in the third or fourth quarter of 2000," he said.
Still, in the first half of next year pricing should improve. "It's been hard to bring down notebook pricing because of recent trends." At the very least, this will improve, he said.
Other forces may conspire to lower prices. Notebook manufacturers will be releasing models based on integrated chipsets from Intel that combine graphics and audio functions into existing chips, which reduces cost, according to the Microprocessor Report. Lower costs for other components such as hard drives should also lead to price declines.
Lower prices could lead to higher demand, thereby adding to the revenues of other manufacturers, other analysts pointed out.
"Mobile [demand] will be in full force," in 2000, said Charlie Glavin at Credit Suisse First Boston. "The flat panel shortage will ease up."
News.com's Michael Kanellos contributed to this report.