February 9, 2007 – Significant overcapacity problems for flat-panels contributed to a double-digit decline in sales of manufacturing equipment for TFT-LCDs in 2006 — and the situation will only get worse this year, according to data from The Information Network.
The worldwide market for array processing equipment for thin-film transistor liquid-crystal displays (TFT-LCD) dropped 11% in 2006 to roughly $4.64 billion, and will sink another 14.5% in 2007, as many manufacturers cut back on tool purchases to offset bloated capacity. The LCD litho equipment sector will drop about 15% in 2007 to $1.04 billion after a 12% decline in 2006, as rapidly rising average selling prices are more than offset by strong competition between Nikon and Canon, according to Robert Castellano, president of the market research firm. He projects a much better environment for the overall LCD equipment sector in 2008, with a 28.8% rebound, followed by 8% growth in 2009.
Attempts to minimize the marketplace damage, including cutting back utilization rates to as low as 80% (from 95% in late 2006) don’t seem to be working, noted Castellano. Manufacturers are still getting hammered by plunging prices — a 37-in. TV panel now costs roughly 30% less (<$500) than it did six months ago, he said.
As a next step, panel makers also are reportedly cutting back planned expenditures, including Samsung and LG.Philips, as well as Taiwan panel producers AU Optronics Corp., Chi Mei Optoelectronics, and Chungwa Picture Tubes Ltd.
Consolidation is another strategy being eyed to control capacity, noted Castellano, pointing to AU Optronics’ merger with Quanta Display and rumors that Philips is shopping its 33% stake in LG.Philips LCD, as well as possible mergers among second-tier panel suppliers (e.g. CPT and HannStar) to not just manage inventories but also compete against the bigger players.