 |
Samsung Electronics Hints at Reducing Production
By Kim Yoo-chul
Staff Reporter
A possible plan by Taiwan’s Chi Mei Optroelectronics to cut liquid crystal display (LCD) production might be the latest confirmation that demand in the global flat-screen market has failed to meet earlier expectations.
The outlook for Korean LCD panel suppliers will likely deteriorate further in the coming weeks as well because of slow end-demand caused by the U.S. economic troubles, slumping TV sales in China and even record oil prices, analysts say.
Prices of such panels used in products ranging from mobile phones and computer monitors to televisions are expected to fall further in the latter half of July, dragging down companies’ earnings in the traditionally strong second half.
Samsung Electronics and LG Display, the world’s No. 1 and No. 2 LCD panel suppliers, respectively, are now faced with excess stock because of difficulty finding buyers for the panels they expected to supply to small- and mid-sized TV makers, forcing them to sell the components at big discounts.
The price for a mainstream 19-inch LCD panel for a computer monitor is expected to drop another 7 percent to $107 per unit in the latter half of this month from two weeks ago, while the average price of a standard 32-inch LCD panel for large-lot buyers has declined 1.6 percent to $310 since the end of May and 6.6 percent from the January high of $332, according to market researcher DisplaySearch.
``While the bulls still anticipate the summer Olympics, plus holiday season, plus digital broadcasting, the U.S. will be the next catalysts to drive demand, we believe inflation will continue to discourage consumer spending,’’ BNP Paribas said in a report to clients.
``We foresee price declines for the rest of this year for TV panels, despite panel makers lowering their utilization rates,’’ the French-based brokerage said.
``Based on the current panel price trend, even with the support of the back to school demand and strong seasonality in the consumer electronics market, the unbalanced demand and supply means clearing out the accumulated inventory will take longer,’’ according to a report released by WitsView.
Analysts say escalating price competition in North America over large LCD TVs is also dragging down the global panel market, increasing the possibility that prices will be depressed until summer, when TV makers customarily start to procure panels for new models to be released in the year-end holiday season.
The massive earthquake in China on May 12 also took an additional toll on the already weaker-than-expected growth in sales of large LCD TV sales, there. The LCD panel industry fears that sales of large LCD TVs in China will drop 10 percent from earlier projections in terms of value.
``The impact of the national disaster has spread to LCD panels. A portion of the LCD panels produced by Korean and Taiwan manufacturers have nowhere to go, resulting in a market glut that is exerting downward pressure on prices,’’ said a local analyst.
Samsung May Cut Production
Echoing this cloudy outlook, Samsung Electronics is considering cutting the output of its LCD production, though no official decision has yet been made.
``We expect the downtrend to extend into August, however, the price decline will be less severe as the demand for LCD panels is still strong capitalizing on larger TVs,’’ a Samsung official told The Korea Times, Monday.
``We are watching the situation, and cutting a small portion of our LCD production is slightly possible,’’ the official said, without elaborating further.
Although none of the LCD panel suppliers have yet to firmly fix their possible production cut plans because of ``market share,’’ however, the fall may slow as possibilities have been raised to start cutting production by larger Korean and Taiwanese panel makers.
Kwon Young-soo, chief of LG Display, has recently suggested the possibility of cutting its panel output if market conditions worsen significantly.
``Output cuts are possible and may be used as an opportunity to clean up the facilities and improve yields,’’ Kwon told reporters weeks ago, adding the outlook for the market remains bleak.
``If TV demand is healthy, there will be a shortage of IT panels from mid-August or September,’’ Kwon said.
``If the TV market continues to remain poor, IT panel prices could stabilize in September after a sizable fall in July and August.’’
Taipei-based AU Optronics, which trails LG Display and Samsung in the global LCD panel market, is also monitoring its inventory and admits the possibility of cutting production if supply exceeds demand.
``Brands and system integrators are emphasizing inventory adjustments rather than boosting sales in the third quarter as planned, however, panel selling prices will still remain above the cost of making them,’’ DisplaySearch said.
Morgan Stanley said its price adjustment was in accordance with a bearish outlook on the industry. But the U.S. brokerage kept its overweight rating on the LCD-related stocks unchanged, citing an attractive valuation, as the stocks price to book value ratios have hit a five-year low.
``It is too early to talk about a `crisis’ in the global LCD market because those concerns were already predicted,’’ an official from LG Display said.
``With clients for IT applications slashing their orders in July, however, the steady demand for larger-sized monitors and TVs will lift the market in the long-term,’’ the official added.
yckim@koreatimes.co.kr
.jpg/dims/resize/262/optimize)
.jpg/dims/resize/262/optimize)
.JPG/dims/resize/268/optimize)
