Prices for 32-inch LCD-TV panels may approach US$400 in 3Q, DigiTimes reported today, quoting industry sources. That is close to the production cost for first-tier manufacturers.

Ken Werner
Senior Analyst and Editor
of MDTV Retailer

Of course, panel makers can be expected to squeeze their component suppliers - even more than they are already - to reduce their own cost. But, like grass on parched land, profits my be thin and hard to find on the 32-inch prairie in 3Q.

The average selling price (ASP) for 32-inch panels fell 2.2% to $450 in the first half of May, says price-tracking WitsView Technology, and the sources quoted by DigiTimes noted that prices have dropped more than $100 so far this year.

The fact that prices are falling is not surprising, as more advanced fabs come on line and manufacturers use their productivity to depress prices and stimulate demand. What is surprising is the speed of the decline; most panel makers had expected quotes to stay over the $400 level until 4Q.

Now, here’s where things get entertaining - unless you’re a company trying to make money manufacturing 32-inch panels. The combined shipment goal of manufacturers in 2006 is 20M panels (see table), but DisplaySearch predicts that global shipments will reach only 17M units in 2006.

(Source: Companies, compiled by DigiTimes, May 2006.)

Assuming all these numbers turn out to be correct, companies will eventually adjust manufacturing output when inventory levels start to rise substantially, but the downward pressure on prices will remain.

However, what’s bad for panel makers is often good for TV set makers and consumers, at least in the short run. Remarkably, some second-tier LCD-TV makers can put a set on the shelf at Costco (and similar warehouse retailers) that sells for about twice the cost of the panel. That implies some 32-inch LCD-TV sets will sell for $800 or less this coming holiday season.

First-tier set makers working through more conventional retail channels are likely to price their sets closer to three times the cost of the panel, but even that implies a set price of only about $1200.

Happy Holidays.