Tight Components LCD panels require a lot of components: PCBs, driver ICs, CCFLs, LEDs, optical sheets, liquid crystal, glass, color filter, etc. And the supply for components are tight right now. Some LCD manufacturers are reporting that they have not been able to deliver on orders they have received 1 1/2 months ago. In turn there is a LCD panel shortage that is driving up prices. This is good news for LCD manufacturers for the short term: LCD panel prices have dipped below cash cost levels and recent increases must allow LCD manufacturers to make a profit for sustained growth. In the long term LCD suppliers will need to gradually increase their utilization rates to match demand and that is what seems to be happening right now. If LCD manufacturers wait too long to match supply to growing demand, LCD panel prices will continue to increase and will eventually lead to price increases in end products such as netbooks, notebook PCs, LCD monitors and LCD TVs. If that happens, the more-than-ever price-sensitive consumer will pull back. The LCD supplier might enjoy a month or two of increased revenues and profits but the dropping demand at the retail end due to price increases will eventually make its impact felt through the supply chain.
Rising Prices According to DisplaySearch’s PriceWise report all major LCD monitor panel prices posted an increase in early May. The report states that LCD monitor panels are in shortage because of a LCD TV focus by LCD suppliers. There is also growing demand for hybrid LCD monitors that also act as TVs with a built-in tuner. These models hit a low price entry point for 1080p capability. The LCD component shortage does not help either in meeting demand for these panels. LCD TV panel prices also increased quite a bit in early May with 32″ (1366 x 768) and 42″ (1920 x 1080) increasing US$8 each. Rising prices usually is an indicator that shows there is a supply/demand imbalance; there is pressure on supply to catch up.
Strong Second Quarter LCD suppliers such as LG Display (NYSE: LPL), AU Optronics (NYSE: AUO) and Chi Mei Optoelectronics (TPE:3009) should experience significant growth in its LCD panel shipments if April results are any indication.