At the 2nd Annual Displaybank New York Conference, held early this month at the classic Roosevelt Hotel, Displaybank President and CEO Peter Kwon updated the numbers that support what is by now a familiar argument: that TFT-LCD panels would be in desperately short supply starting in Q4′09 without both new-plant and capacity-expansion investment beyond current commitments.

Ken Werner
Senior Analyst and Editor

But Kwon forecasts this needed investment will be forthcoming. New plants are likely to include Gen 10 fabs from LG Display and Samsung, in addition to the virtually certain plant from Sharp. And new Gen 8 fabs from AUO and CMO are likely, in addition to the virtually certain one from LG Display. New Gen 6 displays from Innolux and VA-NEC are also likely, with lower-probability investments possible from other vendors.

If all of these plant additions and capacity expansions are added up, Kwon concludes that supply and demand will be roughly in balance (defined as supply exceeding demand by between 0% and 10%) from now until Q4′12, when persistent shortages will again reappear.

This expansion will provide significant opportunities for makers of display manufacturing equipment. CAPEX is expected to grow from US$11.9B in 2007 to US$15.6B this year, and peak at US$20.9B in 2009, even more than the previous big peak in 2005.

Barely mentioned in Kwon’s analysis was the possible effect of the teetering U.S. economy on panel sales, so Insight Media’s Chris Chinnock asked the question. Kwon said there was no signal yet from the U.S. market that the estimated 2008 sales of 40M FPTVs would have to be reduced. Displaybank will be looking at fresh data in three to six months, but so far there is no indication of a softening market, he said.

But on Tuesday, The Nikkei Business Daily quoted Sharp president Mikio Katayama as saying, "We changed the strategy [to an emphasis on smaller screen sizes] because of a plunge in North American sales of large-screen TVs." The Nikkei said a decline in demand for TVs with screen sizes of 40 inches or more is leading companies such as Sharp to emphasize models with screens between 26 and 40 inches.

In July, Sharp finished refurbishing production facilities in Mexico to produce LCD modules with screen sizes between 40 and 50 inches for the North American market. But with the uncertainties of the economic slowdown, Sharp now plans to sell 20% of the Mexican modules to other TV makers.

Sony had also planned to make 40-inch-and-over TVs the linchpins of its North American market strategy, but now, it too may emphasize models with 26- to 37-inch screens, The Nikkei said.

But that’s not the last word. There’s a long-running debate among U.S. TV marketers as to whether the TV business has a counter-cyclical component to it or not. When times are bad or gas prices high (or both, as now seems to be the case), the counter-cyclists argue that people will see a good TV set as a cheaper recreational alternative to big vacations or driving anywhere (including the local multiplex). If that’s true, the dynamic should also benefit Netflix and digital movie downloaders. We shall see.

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