FPD production value down 10.1% in Q2: IEK-ITIS

This article was published by the Taiwan Headlines on August 30, 2006. It reports that the production value of Taiwan's flat panel display (FPD) industry reached NT$270.9 billion (US$8.26 billion) in the second quarter of 2006. This represents a decline of 10.16 percent from the previous quarter.

According to the Industrial Economics and Knowledge Center (IEK) of Taiwan's Industrial Technology Information Service and Promotion Project (ITIS), the aforementioned second-quarter production value included NT$193.3 billion (US$5.89 billion) generated from FPD products and NT$77.6 billion (US$2.37 billion) from key parts and components. The ITIS is a government-sponsored initiative for collecting and analyzing industry information.

According to the IEK, the third-quarter production value is likely to reach NT$287.3 billion (US$8.76 billion), up 6 percent from the second quarter. This value is likely to include NT$203.5 billion (US$6.2 billion) from panels and NT$83.8 billion (US$2.55 billion) from key parts.

In the second quarter, all large-sized thin film transistor-liquid crystal display (TFT-LCD) panels, super twisted nematic (STN)/TN and organic light-emit diode (OLED) panels dropped in production value. Small- and medium-sized TFT-LCD panels were an exception.

According to the IEK, the slow performance of the local FPD line in the second quarter could be attributed to seasonal factors and an unfavorable business climate.

For example, the World Cup soccer tournament failed to effectively fuel global demand for LCD TVs. As panel makers raised inventory levels and lowered their panel prices, they suffered operating losses in the second quarter. To counter this problem, major panel suppliers are now trying to lower their equipment-utilization rates and to delay their new-generation panel plant construction. Hopefully, this will ease the oversupply pressure.

Meanwhile, for FPD key parts, the glass substrate prices stayed stable in the second quarter, thanks to long-term supply agreements between suppliers and panel makers. In fact, the production value of such key parts grew by 7.4 percent in the second quarter.

Due to decreased demand by downstream panel makers, most major makers of color filters suffered red operations in the second quarter. As a result, the sector's production value in this quarter dropped by 18 percent from the previous quarter. According to the IEK, many local color filter makers have begun actively tapping sales in the China market. Indeed, the increasing demand from makers of small- and medium-sized panels is expected to improve their revenue and shipment performances in the second half of 2006.

Meanwhile, polarizer makers were forced to cut prices in the second quarter, as a result of strong pressure from downstream panel makers. This led to a 9.8-percent decline in the sector's overall production value in this quarter. According to the IEK, rising oil prices are expected to add more pressure on the price hike for key polarizer materials such as PET and PVA films.

The backlight-module sector also suffered decreased demand from panel makers in the second quarter of 2006. Their shipment dropped significantly, and their overall production value decreased by 11.6 percent.

According to the IEK, Taiwan's FPD production value is likely to grow quarter-by-quarter, thanks to the booming information-application panel market during the back-to-school period. In addition, demands for small- and medium-sized panels for cellphones, portable DVD players and in-car multimedia entertainment systems are also likely to remain strong in the second half of 2006.

Finally, according to the IEK, major panel makers have been actively trying to modify their third-generation (3G) and lower panel plants for the production of low temperature poly-silicon (LTPS) panel products. Thanks to higher unit prices, such move is expected to further upgrade the overall small- and medium-sized panel production value.