Samsung LCD CAPEX Decrease 40% in 2009

Samsung plans to invest KRW 2.2 trillion in LCDs in 2009. Facilities maintainence will take KRW 1 trillion and the ther KRW 1.2 trillion will be for expanding its L8-2 G8 TFT LCD fab located in Tangjeong, South Chungcheong Province. Compared to the KRW 3.7 trillion that Samsung invested in LCDs in 2008, the company will be investing 40% less in 2009. Samsung is expecting the global LCD market to turn around in 2H’09 and will require getting to Phase 2 of its L8-2 LCD fab.

LG Display (LPL) will also decrease its LCD CAPEX by 50% in 2009 to KRW 2 – 2.5 trillion, quite a bit less compared to KRW 4.5 trillion that LPL invested in 2008. LPL’s CEO Kwon Young-soo stated that the LCD industry has already hit rock bottom and that LCD panel prices will start recovering in the coming months.

Although exact numbers are known only known internally to Samsung, LCD fab utilization is assumed to have averaged around 85% in Q4’08. That utilization rate is much higher than the 50% that most Taiwan-based LCD manufacturers experienced in Q4’08. Sony and Sharp announced that their joint venture to establish a LCD fabrication plant will be delayed until March 2010.

12 Months: It takes about 12 months from groundbreaking to volume production of LCD panels at larger LCD fabrication plants. If you expect 2010 to be a weak year you don’t invest that much in adding capacity in 2009. Based on all the investments that were made in 2008 it seems the industry is expecting a strong 2009. That’s not going to happen and most LCD fabs will be under-utilized for most of 2009. Samsung and LPL will likely run their fabs at 80% or higher while Taiwan-based LCD manufacturers such as AU Optronics (AUO) and Chi Mei Optoelectronics (CMO) will be running their LCD fabs at much lower rates.

I expect major LCD supply shortages in 2H’10, especially for LCD TV applications. Why? Demand for LCD goods should start to recover in 2H’09 and should be back in full force in 2H’10. Among the three large-area applications (LCD monitor, LCD TV, notebook PC) the most important is LCD TV because of its large size. Demand for LCD TVs should be very strong in 2H’10 but will be materially different: consumers will be purchasing much larger LCD TV. Just a guess: 60″ LCD TVs will be at $1999, 55″ at $1499, 47″ at $999 and 42″ at $499 in 2H’10. But there won’t be enough LCD fabs to supply all the demand. Again, why? If LCD manufacturers don’t invest in adding brand new LCD plants in 2009 to produce large LCD TV panels, it will be too late to meet demand in 2010.

Source: The Korea Times

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