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FLAT-PANEL REPORT:Glass Shortage To Boost LCD Prices

Post Time:Jun 11,2009Classify:Industry NewsView:489

TAIPEI (Dow Jones)--A global shortage of glass, a key component used to make flat-screen displays, has given liquid crystal display makers in Asia the ammunition to further hike prices.

Prices of liquid crystal displays used in televisions and computers have been steadily increasing in the past few weeks and companies say the price increases may now last through the third quarter thanks to the shortage of glass.

That should help LCD makers return to profitability as early as the second half of this year after posting massive losses in the first quarter.

Executives at AU Optronics Corp. (AUO), Taiwan's biggest LCD maker by revenue, and second-ranked Chi Mei Optoelectronics Corp. (3009.TW) said Wednesday an industrywide shortage of glass has and will push up LCD prices gradually.

"The shortage of glass is severe," L.J. Chen, president and chief executive of AU Optronics said.

New York-listed Corning Inc. (GLW), the world's largest glass producer, said last month demand for glass used to make flat screens is stronger than expected and supply is still falling short of demand.

Analysts say AU Optronics and Chi Mei are facing a more severe shortage for glass compared to their Korean peers, Samsung Electronics Co. (005930.SE) and LG Display Co. (LPL), because they had placed smaller orders due to their more conservative demand outlook.

Hanna Chang, an analyst at Taiwan International Securities Corp., expects AU Optronics and Chi Mei's panel prices to rise by 10% to 20% by the end of the year. She expects both companies to return to profitability in the third quarter. In the first quarter, AU Optronics posted its second straight quarterly net loss of NT$20.22 billion, and Chi Mei reported a net loss of NT$19.57 billion.

But Chang cautioned that margins will continue to be under pressure.

"I don't think they will raise prices too much as price hikes may hurt consumer demand," Chang said.

Much of this year's demand has been driven by growth out of China. Earlier this year, China unveiled a stimulus package to subsidize the purchase of home appliances and consumer electronics, hoping to spur consumers to open their wallets.

Chinese television makers agreed to buy US$4.4 billion worth of flat panels from Taiwan producers, Taiwan External Trade Development Council Chairman Wang Chih-kang said Sunday after visits to the flat-panel makers by a trade delegation from China.

AU Optronics' Chen said it will take three to six months for glass producers to restore their supplies back to normal levels.

Chen-Lung Kuo, a vice president at Chi Mei's global business unit, warned that the glass shortage will be more pronounced in the third quarter than in the April-June period.

This may hurt Chi Mei's capacity utilization, said Kuo, without giving a figure. In late April, Chi Mei forecast its second quarter utilization rate to be between 80% and 85%, rising from 55%-60% in the first quarter.

AU Optronics' Chen said the company is discussing with its glass suppliers how to overcome this component shortage. Chen said the company is short of around 20%-30% of glass supply. Shortages are mainly seen in glass used to make computer monitors and television screens measuring 30-inches to 40-inches.

Chen reiterated AU Optronics' forecast for a 50% rise in shipments of large flat panels in the second quarter from the first quarter. The company shipped more than 13.15 million LCD panels measuring 10 inches and above in the first quarter, down from 22.02 million units a year earlier.

                  Table of Average LCD Panel Prices
                   Jun 5    May 20   May 5   Apr 20
LCD TV
42-inch  wide      $325     $320     $320      $320
37-inch  wide      $245     $240     $240      $240
32-inch  wide      $195     $175     $170      $165
Monitor
19-inch wide        $74      $70      $68       $66
17-inch             $66      $68      $66       $60
Notebook
15.4-inch wide      $56      $54      $53       $52
14.1-inch wide      $54      $52      $51       $50

Source: WitsViewAuthor: shangyi

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