It is well known within the display industry that shipments of LCDs are rising, with big increases in area shipments driven by sales of LCD-TVs. Sales in turn, have been driven by huge price declines of 30-40% per year over the last two years. But few have been able to eek out a profit in this sales and manufacturing boom. In fact, LG.Philips LCD has suffered the most, loosing lots of money along the way. But things are looking up at LPL as they just reported net profits of 228 billion won (US$247M) for Q2′07.

Chris Chinnock
Senior Analyst and Editor
for Insight Media

Here are some of the facts they released.

• •Q2′07 sales increased 23% vs. Q1′07 sales
• •Q2′07 sales increased 45% vs. Q2′06 sales
• •Revenues from TFT-LCD panels for TVs, monitors, notebook PCs and other applications accounted for 47%, 27%, 21% and 5%, respectively
• •Q2′07 operating profits were 150 billion won vs. an operating loss of 208 billion won in Q1′07
• •LPL suffered an operating loss in Q2′06 of 372 billion won
• •Bottom line results for Q2′07 showed a 228 billion won profit
• •Bottom line results for Q1′07 showed a loss of 169 billion won
• •In 2006, it lost 322 billion won overall
• •In Q2′07 LPL shipped 2.8M sq. meters of display glass, a 26% increase over Q1′07
• •The ASP/meter declined only 1% to $1,274 vs. Q1′07
• •The end-of quarter ASP/meter pricing increased 5% to $1,314 vs. Q1′07

Young Soo Kwon, CEO of LG.Philips LCD, said, "Our second quarter’s performance was better than expected, which underscored a faster than anticipated turnaround. This was driven in large part by the successful implementation of the company’s strategies aimed at reducing costs, sustaining a disciplined capital expenditures (capex) strategy, maintaining healthy inventory levels and developing plans for capacity expansion, especially at the P7 plant. Overall, we benefited from the market’s more rational production and pricing levels."

Shipments of monitor, notebook and TV panels increased, with pricing for TV panels moderating in Q2′07. This result is representative of the entire industry.

LPL was able to reduce its costs per square meter by 12% in Q2′07 and thinks it can reach its goal of a 30% reduction by the end of the year. It canceled plans to invest in a 5.5G plant and is now focused on maximizing production at later Gen plants and studying investment in a 8G plant with a target ramp up date in the first half of 2009.

This is the start of the earning releases for the Q2 period. AUO has released its sales, which are up ahead of expectations, but not its profits, which are likely to look good too. Others will report shortly.

In Q3′07, LPL expects TV LCD shipments to increase "by a high-twenties percentage with an average ASP decline of a low-single digit percentage and a quarter ending ASP decline of a mid-single digit percentage."

So, while pricing is up now, it will decline again, but not at the torrid pace of the past few years. This is excellent news for the profitability part of the equation.

But (there is always a "but"), there are other factors at play that LCD and TV makers need to be mindful of.

As our investment specialist Jamie Townsend has noted, investors aren’t flocking to the LCD space - not yet anyway. "Last year, the problems were plunging prices, bloated inventories and excess capacity. This year, the concern is a new set of problems consisting of potential product shortages, double ordering and slowing demand driven by a slowing rate of price declines."

The rapid growth phase on the digital TV industry is probably behind us now and we are entering a more mature part of the cycle. This becomes a different type of game - one that the players will need to adapt to in order to survive.

Where does all this lead us? That’s awfully hard to predict, but if you want more insight into this, you can read Jamie’s full analysis in the July issue of Projection Monthly with Flat Panel Coverage. This 136-page edition also includes large screen news, trend analysis and commentary on InfoComm, SID, Projection Summit and more.

ORDER JULY PM NOW