According to WitsView and reported by DigiTimes, first-tier LCD manufacturers are pressuring LCD component suppliers to reduce prices. First-tier LCD suppliers would include Samsung, LG Display (LPL), AU Optronics (AUO), Sharp and Chi Mei Optoelectronics (CMO). It is not unusual for LCD manufacturers to negotiate with LCD component suppliers for better prices–the process intensifies when LCD manufacturers are not making profits. In Q4’08 LCD suppliers have announced large losses and will take the opportunity to squeeze component suppliers.
There are many LCD components including the glass substrate, color filter (CF), polarizer, driver IC, backlight unit (BLU), etc. Glass substrates are of interest to many because of Corning, which is the dominant supplier of LCD glass with roughly 60% market share in terms of capacity and shipments. WitsView is reporting that glass substrate prices are expected to decrease 5-7% Q/Q in Q1’08.
Glass substrates are not equal. As LCD fabrication plants become larger the glass substrates that are processed become larger. The larger the LCD glass the more expensive it is because it is actually of higher quality. It is of higher quality because the level of quality needs to be applied across a larger area and to do that the glass suppliers need to improve the overall quality. Quality metrics include smoothness or flatness, durability, purity, etc. Prices tend to be highest for the largest LCD glass substrates–they tend to decrease the fastest as well: it is not uncommon for the largest LCD glass substrates to decline 5-7% Q/Q. It is a different story for mainstream LCD glass substrates–sizes geared for G5 and G6 LCD fabs. These sizes tend to experience slower declines in prices.
The color filter (CF) is another major component that is fairly expensive to procure and bit less to manufacture in-house. Although the article states, “Low utilization rates have prompted panel makers to source more from in-house color filter supplies…” most G6 and larger LCD fabs have in-house CF production capability. It might be that LCD manufacturers are utilizing in-house CF production capability to supply their own G5 and smaller CF demand. If this is true merchant CF suppliers will need to reduce their prices aggressively to thwart this trend.
The backlight unit (BLU) is the most expensive part of the LCD and has been the target for cost reduction for quite some time. The BLU itself is made of several components such as a light source (CCFL or LED), optical sheets (BEF-Brightness Enhancement Film, Diffusers), a light guide plate, etc. WitsView is reporting a 35% Y/Y price decline in 2008 for LED BLUs geared for notebook PCs. Further declines will be required to narrow the price disparity between a LED BLU and a CCFL BLU. WitsView expects a 10% Q/Q decline in prices for notebook PC BLUs in Q1’08.