Drastic changes seen for TFT LCD components, materials market

LONDON — The market for TFT LCD materials and components is likely to see dramatic changes over the next year, as well as declining revenues for the first time, according to researchers at DisplaySearch (Austin, TX). Revenues are expected to come in at $49 billion for 2009, eight percent down on the previous year.

DisplaySearch notes that during the second half of 2008, TFT LCD makers reduced capacity utilization and shipments, which led to a reduction in the demand for materials and components. Meanwhile, panel makers are holding inventories at very low levels, which keeps materials and components makers fab utilization lower than TFT LCD makers.

This lower utilization has pushed component prices down sharply, and it is expected to continue through 2009.

Among the categories tracked, the most serious declines between 2009 and 2008 were in materials such as photo spacers, PCB and other LCD module components, as well as the backlight unit.

The sectors that escaped declines include sputtering targets, liquid crystals and inverters.

The market research group adds the PCB industry will face serious over-supply this year, driving PCB prices down rapidly. Panel makers' aggressive activities in restructuring the LCD module are creating pressure for LCD module component makers in both demand and price, DisplaySearch warns.

Panel makers are also revamping the backlight unit structure and optical film stacks in order to reduce LCD module cost and to address the growing consciousness for green panels. Thus, DisplaySearch says, many backlight components have been influenced by the backlight price erosion, such as prism sheet, micro lens film, diffuser film, reflector films and CCFL.

The most significant trends the researchers have identified includes the rapid pace at which vertical integration of panel makers is happening, the most recent example being Samsung's involvement in LED manufacturing; and the worrying rate at which pressures on profit margins throughout the supply chain is leading smaller materials and components makers to exit the market.

This latter trend, DisplaySearch warns, will introduce component shortages when panel makers are again gearing up capacity utilization.

According to Yoshio Tamura, Vice President of DisplaySearch and the leader of the FPD component and cost research team : "2009 is definitely the most challenging year for the TFT LCD component and materials industry. The pressure is coming not only from the price erosion, but also from the drastic structural and technical changes in the industry.

"Some components have been enjoying comparatively better profits in the FPD supply chain, but this will possibly change in 2009."

However, Tamura adds that the situation is likely to improve after these drastic changes as the sector gains momentum with the resurgence of panel demand.

"Meanwhile, these new structural changes and technical advances will also help to stabilize component makers' profitability in the long term. We expect the component market will be showing positive growth again in 2010," said Tamura.