FPD Production Value Declines 12.2% in Q1 on the island

The production value of Taiwan`s flat panel display (FPD) industry declined by 12.2% to about NT$325.5 billion (US$9.75 billion at US$1: NT$33.4) in the first quarter, according to statistics released by Industrial Economics & Knowledge Center (IEK) of ITIS (Industrial Technology Information Service & Promotion Project), a government-sponsored initiative for collecting, analyzing industry data. Of such total, assembled FPDs made up NT$231.13 billion (US$6.92 billion, down 12.7%) and parts and components contributed NT$94.37 billion (US$2.83 billion, an decrease of 10.8%).

The large-sized (over-10-inch) thin film transistor-liquid crystal display (TFT-LCD), small and medium-sized TFT-LCD, and TN/super twisted nematic (STN) LCDs together made up the FPD production value by contributing NT$193.22 billion (US$5.79 billion), NT$19.81 billion (US$593.11 million), and NT$16.7 billion (US$500 million), respectively; while the parts production value includes color filters at NT$23.07 billion (US$690.72 million), polarizers NT$14.32 billion (US$428.74 million), glass substrates NT$24.78 billion (US$741.92 million), and backlight modules NT$32.2 billion (US$964.07 million).

Thanks to makers` effective strategies to control capacities and clear inventories, the prices of large-sized TFT-LCD panels gradually stabilized, which is expected to further assure panel suppliers` profitability, IEK-ITIS said. Panel prices, however, still hover around cost levels due mainly to the off-season effects of the first quarter (compared with the peak season in the fourth quarter of 2006) and the reduced workdays in February due to the Chinese New Year break. So, the first quarter`s production value of large-sized TFT-LCD panels declined by 14.3% from that during the fourth quarter of 2006.

For small and medium-sized TFT-LCD panels, the first quarter`s production value climbed 9.4% from the previous quarter due to strong demand from portable-device application markets, increasing popularity of the higher-level TFT-LCD panels (compared with TN/STN LCD counterparts), and the increasing number of TFT-LCD panel makers utilizing 4.5G-and-under panel plants to produce such products.

The market share of organic light-emitting-diode (OLED) in cellphone sub-panel market has been declining, including a 15.5% quarterly decrease in the first quarter, because the application technology of active-matrix (AM) OLED has not matured enough while the cost of passive-matrix (PM) OLED is higher than TN/STN counterparts. In addition, local OLED makers lack the support from branded cellphone companies.

For TN/STN panels, the increasing popularity of TFT-LCD panels in cellphone displays has given less room to survive for TN/STN products and the sector suffered a 14.5% production value decrease in the first three months from the previous quarter. In addition, IEK-ITIS said, the expected positive performance by Wintek Corp., a major TN/STN maker, after having acquired local TFT-LCD panel maker HannStar Display Corp.`s 3G TFT-LCD line has not emerged.

Key Parts Sector

For key parts related to FPDs, IEK-ITIS pointed out that the glass substrate production value enjoyed a slight growth in the first quarter thanks to the relatively-stable prices, though panel suppliers` inventory-reduction strategies (to lower equipment-utilization rate) more or less affected the demand.

Due to decreased demand by downstream panel makers amid the off-season, most major makers of color filters in Taiwan suffered bleak performances in the first quarter, with the production value in the period decreasing 18.9% from previous quarter. The internal competition for the operation right of Allied Material Technology Corp. has had some impact on the color filter maker`s production.

The first-quarter production value of polarizers declined 11.2% from previous quarter, but the total shipment volume did drop visibly. IEK-ITIS said that panel suppliers` production-cutting plans and declining polarizer prices caused the production value to drop.

The backlight-module segment also suffered decreased demand from panel makers and their shipment dropped in the first quarter, for an overall production value decrease of 13.3% from previous quarter.

Q2 Forecasts

IEK-ITIS estimated that the island`s FPD production value would grow quarter-by-quarter this year, due to the stabilizing or upturn in panel prices of information technology (IT) TFT-LCD panel products as well as the slowing price drops in TV panels.

In the first quarter, IEK-ITIS said, many panel suppliers resorted to reducing capacities so as to control inventories and solidify panel prices. Starting in April, the IT-panel prices have normalized or even risen.

The knowledge center forecasted that in the second quarter the total production value of Taiwan`s FPD industry would reach NT$366.5 billion (US$10.97 billion), up 12.6% from the first quarter, including NT$263.13 billion (US$7.88 billion, up 13.8% from previous quarter) generated by FPD panel and NT$103.37 billion (US$3.09 billion) by parts (up 9.5%).

Of second-quarter`s FPD panel production value, large-sized TFT-LCDs are expected to contribute NT$223.2 billion (US$6.68 billion); small- and medium-sized TFT-LCDs NT$23.57 billion (US$705.69 million); TN/STN panel NT$14.86 billion (US$444.91 million); and OLEM panel about NT$1.3 billion (US$39.92 million).

Of the FPD parts production value, color filters are expected to contribute about NT$24.45 billion (US$732.04 million) in the second quarter; polarizers about NT$16 billion (US$479.04 million); glass substrates NT$26.02 billion (US$779.04 million); while backlight modules about NT$36.9 billion (US$805.4 million).

In the second quarter, according to IEK-ITIS, most of the inventory clearance by panel suppliers are expected to end, while the demand from downstream makers is expected to form a damming effect that will prevent IT panel-prices from dropping, hence stabilizing TV-panel prices.

Such trends are expected to help panel makers improve their financial picture, driving the second-quarter production value of large-sized TFT-LCD panels up 15.5% from previous quarter.

IEK-ITIS also forecasted that the small- and medium-sized TFT-LCD production value would increase 19% in the second quarter from the first three months due to the rapid expansion of various application markets that might dry up supplies in the second quarter. An industry development worthy of further observation is that Innolux Display Corp., a large-sized TFT-LCD newcomer, recently acquired Jemitek Electronics, a specialized small- and medium-sized LCM designer, and aims to further explore the cellphone-panel market.

The knowledge center also predicted that the OLED production value in the second
quarter would post a slight growth of 4.0% due to the coming of the high season; while TN/STN panel production value would continue to drop 11% from previous quarter.

For different sectors of the FPD parts industry, IEK-ITIS said that the color filter production value is expected to grow quarterly by 6% in the second quarter due to the coming high season and upturn in prices for TFT-LCD panels. The polarizer production value is expected to grow by 11.7% quarterly thanks to the increasing demand from panel makers who would turn out more such key parts for the second-half high season. The center also predicted that the backlight module production value would increase 14.6% in the second quarter.

(by Quincy Liang)