LCD Outlook: Not So Good

The outlook for the LCD industry is not so good; actually, it looks quite bad. Demand for LCD goods come primarily from three markets: the US, Western Europe and China. US retail sales are weak. Walmart reported a 1.8% decline for the second quarter 13-week period for US comparable store sales. More bad news: China July retail sales dropped 0.6% M/M a bit below its five-year average. Overall, retail weakness is an issue and will probably continue to be through the fourth quarter. Mike Duke, Walmart’s President and CEO (Source: Walmart):

The slow economic recovery will continue to affect our customers, and we expect they will remain cautious about spending.

Intel doesn’t think demand for consumer PCs will be strong in the third quarter and reduced its forecast. Intel expects sales of US$11 billion (+/-$200 million), down from $11.2-$12 billion due to weaker-than-expected demand for consumer PCs in mature markets. (Source: MarketWatch)

AU Optronics (AUO), Chunghwa Picture Tubes (CPT), Chimei Innolux (CMI), and Sharp are all expected to reduce their utilizations rates. CPT’s president Sheng-chang Lin confirmed the company has adjusted its utilization rates based on market demand but did not offer any details. CPT’s Gen. 6 lines are most likely to experience reduced utilizations rates while the company’s Gen. 4.5 fabs will probably run at full utilization for quite some time. Lin mentioned weak demand for monitor and notebook panels but strong demand for small/medium panels.

CMI will reduce utilization rates at its Gen. 7.5 or Gen. 6 fabs specifically for IT-related panels while AUO will reduce its utilization rates by 7-10% in the third quarter. (Source: Digitimes)

Sharp will reduce LCD panel production by 20-30% at its new Gen. 10 Sakai factory starting this month. Sharp will also reduce its panel supplies to Sony. The Kameyama plant located in the Mie Prefecture will remain at full utilization.

Last month, LG Display’s (LGD) CEO Young-soo Kwon stated that reduced production may be considered due to weak TV demand. (Source: Reuters) But remember LGD is running as fast as it can but is having trouble supplying 9.7-inch IPS panels to Apple for the popular iPad. Samsung is in the game with technology gained through Hydis while there is a rumor that CMI, with technology from Hitachi, might enter as a third supplier.

With LCD TV panel inventory building up, weak demand for monitor and notebook LCD panels, LCD manufacturers lowering utilizations rates, retail sales weakening and major component suppliers reducing forecasts the outlook for the LCD industry doesn’t look very good at this point. There is one bright spot: small/medium LCDs.