Panel makers witness financial turnaround; component makers recuperate

Thanks to substantial panel price rebound and cumulative material cost decrease over the past few quarters, panel makers have been witnessing a financial turnaround recently. In order to foster a healthy relationship in the supply chain, panel makers will be less aggressive in their price negotiation with component makers.

From the standpoint of the current tight supply of glass substrates, as furnaces resume, the supply of glass substrate will gradually recover, thus reducing the repercussion of the shortage month by month. Even so, at this stage, the importance of glass substrate delivery transcends price negotiation. Witsview projects that glass substrate prices will decline by approximately 2% across all generation fabs.

Without leverage from glass substrate prices, the cost decrease of in-house color filter is maintained within the 3~4% range. Merchant market have been hit by losses, having undergone two quarters of demand freeze and plummeting prices, even top-tier Japanese makers could not escape the fate. With demand recovery underway, and panel clients on track for financial recovery, color filter makers have become less willing to lower prices, in hopes of slipping back into the black in the shortest time possible.

For polarizer makers, 3Q09 is a time for recuperation. On the price front, prices are only expected to slide by 3%. In order to further optimize the cost structure of polarizers, single compensation polarizers, which were only adopted in the entry-level TVs such as 32W in the past, have gradually been adopted for the 40W and above models due to the 10% cost advantage. In the foreseeable future, these cost-effective single compensation polarizers will gradually replace the double compensation ones, and become mainstream in the TV market.

As downstream driver IC package & testing vendors could no longer withstand the recent severe losses, they have announced an increase of the processing cost of packaging, as well as some raw material cost. The overall increase is around 10~30%. To Driver IC makers, it may be difficult to reflect the cost increase directly onto the product quotations. As a result, price cut its related components will be around 2~3%.

3Q09 backlight module price trends are in line with that of the other components, with price drop reduced to 2~5%. Backlight module price decrease can be attributed to two main factors: decrease of module-related material cost and narrowing of backlight makers’ profit margin. The former, amid recent rally of international petroleum and metal prices, related metal and plastic parts are faced with the pressure of price increase, which subsequently led to the pressure of rising production cost. As for the latter, profit margin for backlight modules has already been thin, oftentimes verging on break-even, and since the present market is not one of cutthroat price war, BLU makers will be more rational in their price quotations.


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