The shortage of liquid crystal displays (LCDs) will likely begin to ease
late this year or early next year, breaking the price grip on portable
computers and allowing costs to finally fall closer to inexpensive
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|
Q1 1999 ||
26% (increase) ||
11% (") ||
13% (") ||
Note: Q4 is projected price; percentages compared to same quarter in
Source: Stanford Resources
Prices for LCDs in the first quarter shot up as much as 26 percent compared to last year (see chart), but this should change by the fourth quarter, said David Mentley, vice president at Stanford Resources. By then,
prices are expected to ease off temporarily and may drop as much as 3
or 4 percent, he said.
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
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.