Japan Earthquake shakes LCD Glass

Year 2008 saw the demand for LCD TV decrease and hence the demand for LCD panels decreased. The economic downturn and its duration became unpredictable. LCD panel makers lost financially and scaled back their production capacity and in some cased the plant utility went down as low as 50%. The second quarter of 2009 showed promise for the recovery and the panel makers like Samsung, Sharp, AUO, LG display, CPT and CMI started increasing the utilization rate as high as 90%. AUO saw an increased utilization rate of their 8.5G line that handles 2200 x 2500 mm glass substrates used to make 46" and 52" panels. Sharp planned for increasing their production. Samsung and Sony planned to increase their production capacity to meet the demand for large size panels. The LCD TV demand increased due to the demand from China partly due to the 13% subsidy offered by the Chines Govt to the farmers. There were reports about short supply of LCD and rising panel prices. LCD TV manufacturers cutting the orders for ICs due to short supply of LCDs was reported in June 2009. Amidst all these comes a report that there is a shortage of glass supply and the supply will ease by September. The holiday season is approaching. For manufacturing LCDs the basic starting material is glass. This is a special glass and is called LCD glass. The market for LCD glass is dominated by Corning glass and the market share of Corning is well over 50%. Their competitors are Asahi Glass and Nippon Electric Glass, to name a few. Corning has a glass plant, wholly owned by Corning, in Shizuoka, Japan. Corning has agreement to supply LCD glass to Sharp for their 8 gen line/plant. The glass plant produces size of 21600 mm x 2460 mm glass substrates that can be used for manufacturing LCD panels of diagonal sizes > 40".
 
Shizuoka plant of Corning is disrupted because of the recent earthquake in Japan. The manufacturing operation is suspended. In Q2-09 Corning raised its glass demand from 2 Billion Sq.ft to 2.3 Billion Sq.ft, Here comes a natural disaster that is out of control for any company. Corning estimates as high as 10% down in volume in Q3-09. As the starting material for LCD TV is LCD glass the whole supply/demand balance will be greatly affected. It was recently forecast that there may be over supply of LCD panels by the end of 2009 because the panel manufacturers, in an anxiety to exploit the demand of LCD panels, may over produce. This situation is not likely to happen. There may be shortage of LCD TV for the holiday season. The glass making plant once shut down will take even a month for bringing back to streamline operation due the long time cycles needed for the furnaces to stabilize their temperatures. This is the time for the competitors of Corning to increase their production capacity. Asahi glass and Nippon Electric Glass may augment their capacity but it will also take substantial amount of time. LCD panel manufacturers were cautious from the beginning of 2009 not to pile up the inventory and hence there is unlikely to be any significant inventory build-up to meet the demand for the holiday season. The situation is further augmented by the recent increase in demand from China.