LCD panel prices on the increase; reducing TV makers“ profits

Even if Chinese TV maker Skyworth sold over two million TVs in the first half of 2009, a twofold growth on a year-on-year basis, the continuously increasing prices of LCD panels have reduced its profi…

Even if Chinese TV maker Skyworth sold over two million TVs in the first half of 2009, a twofold growth on a year-on-year basis, the continuously increasing prices of LCD panels have reduced its profit margins. This story gives an idea of the entire domestic TV manufacturing industry in China. This continuing rise in prices of LCD panel has created considerable problems for Chinese TV makers, who see sales up, but profits dropping. In the past year, prices of 32-inch LCD TVs have gone down to CNY 2,599 from CNY 5,999, but the prices of LCD panels have remained almost the same, according to Yang Wendong, president at Skyworth. To compensate this situation, some local companies such as Konka, Skyworth, and TCL are ready to increase prices of some new LCD models by 5% to 10% this month. Sun Wenbo, director at the marketing department of Konka, says that Chinese consumers, who have seen falling prices of LCD TVs as a routine, cannot accept these price increases, adding that those companies who take the lead will risk losing more market shares. In fact, recent figures show that prices of 32-inch LCD panels have jumped some 70% in the past five months, while 42-inch and 37-inch panels have seen prices rise to USD 350 and USD 265 from USD 320 and USD 250, respectively. However, this upward trend is expected to ease when LCD panel makers such as S-LCD and LGD start up their new production facilities. The jump in price of LCD panels has been caused mostly by the situation of the LCD TV market in China and optimistic expectations for a fast increase in demand there. A recent report from DisplaySearch increased its forecast for global LCD TV shipment from 120 million units to 127 million, taking China from 18.8 million to 23.6 million units. Taiwan-based Corning Inc., the world“s largest glass substrate supplier, raised its projected output in the second quarter for the second time in the first week of July 2009, saying its quarterly output had doubled compared to the first quarter and not increased 75% as previously forecast. The forecast, however, did not include Corning“s glass venture with Samsung Electronics Co., Samsung Corning Precision Glass Co., Ltd. The shortage of glass substrates could, in any case, still be a handicap to increased panel production and continuously push panel prices higher, a situation that, according to AU Optronics Corp. and Chi Mei Optoelectronics Corp. could continue into September.