It is just me or does there seem to be some unusually positive expectations for LG Display? It might be just me, but I think the financial community needs to curtail its expectations just a bit. For instance, John Soh, an analyst at Goodmorning Shinhan Securities, stated that “LCD TVs and notebook computers are becoming widespread globally, leading the trend. LG Display should see its best results ever this year.” That is a grand statement. I think 2008 will be at best a difficult year for most LCD manufacturers because of an uncertain US economy that will no doubt have negative reverberations throughout the rest of the world. Trust me, I would like to see results that show a strong global LCD economy and data-backed indicators that point to a strong 2008. But I don’t think that will happen. We are already seeing a weaker than expected Q1 for LCD TVs.
If LG Display indeed posts the best quarter ever in CYQ1’08, that would mean that the supply chain is overloaded with LCD panels. An overloaded supply chain would in turn indicate that there are unhealthy levels of inventory building up around the integration (Taiwan), distribution (US and other regions) and retail channels (especially US). You don’t want to see the best ever quarter in the first quarter since demand is weak through the second quarter of each year, at least that is the case regarding demand from the US. For LCD TVs, roughly 33% of the market is in the US with another 33% in Western Europe. The best quarters are usually in the third and fourth quarters of each calendar year, especially when there is a shortage of LCD panels.
There is a supply chain lag from LCD TV panel manufacture to sales at retailers. This lag continues to shrink but can take up to 6 months. If we see record sales in Q1, and if the US economy continues to limp along, we are in for a real nasty surprise around June when inventory builds up to a point that will dry up demand for LCD panels.
[tags]LCD Manufacturer, Display Manufacturer, LG Display, LPL[/tags]