After a year in which LCD panel manufacturers struggled to reduce stocks resulting from oversupply, firms could face the opposing problem of a shortage of panels for LCD TV displays in the 2H 2007, LG…
After a year in which LCD panel manufacturers struggled to reduce stocks resulting from oversupply, firms could face the opposing problem of a shortage of panels for LCD TV displays in the 2H 2007, LG.Philips LCD executives said in a quarterly earnings call on 10 April 2007. Company officials did not provide additional details, but the company had 2 weeks of inventory 30 March 2007, about half the amount in mid-2006. The oversupply hit LG.Philips LCD particularly hard a year ago, forcing it to slow production at a new 7G LCD plant and postpone a new 8G facility. Plans for 8G production have not been revived. While LG.Philips LCD has started construction of the building to house 8G, that facility will likely be devoted to 5.5G production starting late 1Q 2008, company officials said. Demand for LCD TV panels began to increase in January 2007 and LG.Philips LCD will expand capacity at its 7G facility to 90,000 glass sheets from 70,000 by midyear and 110,000 in 3Q 2007, president-CFO Ron Wirahadiraksa said. It has room at the 7G plant to increase monthly production to 120,000-130,000 glass sheets before reaching maximum capacity, he said. To meet a surge in demand, especially for 32W panels, LG.Philips LCD may divert some LCD monitor capacity at its 6G or 7G plants to TVs, Mr. Wirahadiraksa said. LCD monitors account for about 20% of its 6G capacity, 10% of its 7G capacity, he said. LG.Philips LCD is a major supplier to LG Electronics, Philips, Syntax-Brillian, Westinghouse and others. “Industrywide there is going to be a shortage” of panels in the 2H 2007, Mr. Wirahadiraksa said. The shortage may slow the decline in LCD panel pricing, but LG.Philips LCD is forecasting a “mid-single digit” decline in the 2Q. The shortage will likely allow LCD plants to operate at full capacity in the 2H 2007, he said. LG.Philips LCD plants were at 96-97% of capacity in the 1Q, he said, compared to 64% in the 2Q 2006. TV panels accounted for about 45% of LG.Philips LCD“s 1Q 2007 production, followed by monitors (28%), notebook PCs (22%) and others (5%), Wirahadiraksa said. The tight supply also follows a deep cut in capital spending by LG.Philips LCD in 2007 to USD 1.08 billion from USD 2.8 billion in 2006. The company is forecasting 55-60% growth in panel shipments in 2007, up from an earlier forecast for 50% as its production capacity expands 35-40% versus a previous 30% projection, Mr. Wirahadiraksa said. The prices for 7G glass are also expected to decline 15-20% this year, Mr. Wirahadiraksa said. LG.Philips LCD sources substrate glass from Samsung-Corning, Asahi, Nippon Electric Glass and recently added Schott, company officials said. LG.Philips LCD is increasing module assembly capacity with the recent addition of a plant in Poland for LCD TV panels. The Polish facility has initial annual capacity for 3 million units, to grow to 11 million by 2011. The company is considering adding production in China, although plans have not been finalized, and is also looking at outsourcing some module production to China, company officials said. By July 2007, Philips is expected to cut its stake in LG.Philips LCD to less than 20% from 32.9%, Mr. Wirahadiraksa said. Many companies are said to be interested in buying a part of the Philips stake, including Sharp and Toshiba. LG.Philips made a USD 180 million 1Q 2007 net loss compared to a USD 51 million profit a year earlier despite an increase in sales to USD 2.89 billion from USD 2.62 billion. Revenue was down from USD 3.25 billion in the 4Q 2006. LG.Philips LCD shipped 2.2 million sq. meters of display area in the 1Q 2007, down 1% from 4Q 2006.