Green Trend, Chinese Demand to Drive TFT-LCD Industry Growth in 2009: TRi

Much of this year's growth in the global thin film transistor-liquid crystal display (TFT-LCD) panel market is being driven by LCD TV and notebook PC applications, according to the Topology Research Institute (TRi), the largest private market-research company in Taiwan.

TRi explains that demand for LCD TVs has been strengthening in emerging economies, where the penetration of such products is still lower than that of cathode-ray tube (CRT) TVs. Purchasing has been particularly robust in China, where consumers have been benefiting from economic stimulus programs since late last year.

Demand from the notebook PC application market is also rising, thanks to new demand stimulated by LED-backlight models that offer longer battery life. TRi predicts that the penetration of LED-backlight notebook PCs will reach 60% this year.

Thus the "green" trend and demand from China, says Lee Chiu-wei of TRi's opto-electronics research unit, are the main driving forces for the TFT-LCD panel industry this year.

TRi's analysis of large-sized (over-10-inch) TFT-LCD panel shipments from January indicates that China's demand for such panels is gradually increasing, due partly to the Chinese government's subsidy programs for home appliances. Such economic stimulus projects have effectively wiped out the gloom that enshrouded markets throughout the fourth quarter of 2008 and the first quarter of this year.

Lee believes that global panel makers' capacity utilization will reach about 80% this year.

Green Trend

At all the major optoelectronics trade shows in the first half of this year, a major focus of attention was high-picture-quality TV panels with a thickness under one centimeter (cm). Such ultra-thin panels have stimulated new demand and cut down on production costs, and are more environment-friendly as well.

The "green" display panel has long been a major goal for global panel suppliers, who have been actively trying to cut down on materials and components and aggressively developing newer and more ecologically friendly technologies such as e-paper displays and organic light-emit diode (OLED) panels. Panel suppliers have also been constantly upgrading their production efficiency, and more and more of them now adopt dry-type production techniques instead of wet-type ones so as to cut energy consumption and reduce pollutants generated during the manufacturing process.

Panels with LED backlight are trendy products thanks to the low power consumption they achieve by using LEDs as backlight sources and the enhanced illumination effect they gain by employing more optical films to boost lighting efficiency. In general, the power consumption of LED backlighting is only 35% that of conventional cold cathode fluorescent lamps (CCFL).

The Chinese Market

TRi estimated that China's demand for large-sized TFT-LCD panels would increase at an annual rate of 15% over next few years. The greatest beneficiaries of this growth will be Taiwanese panel suppliers; for example, the Chi Mei Optoelectronics Corp. (CMO), the island's second-largest TFT-LCD maker, is expected to ship about eight million TV panels to China this year, filling 38% of the overall demand there.

According to TRi's Lee, Chinese government's subsidy programs for home appliances helped boost the shipments of Taiwanese panel suppliers, especially during their worst period: the fourth quarter of 2008 and the first quarter of 2009. China still has an excess demand of five to eight million TV panels at the present time, the analyst says, providing lucrative business opportunities for local panel suppliers.

While Taiwanese panel suppliers already enjoy close relations with the Chinese market, Lee suggests local panel suppliers should set up closer partnerships with major brands in China by building new-generation (8.5G or beyond) panel plants across the Taiwan Strait; this would help alleviate the increase in transportation costs caused by the ever-larger size of panels, and localized production and shipment would provide stronger competitiveness.

The main competitors to Taiwanese panel makers will be Chinese suppliers, who have been aggressively expanding in recent years as makers of small and medium-sized panels have been continuously moving into central or western China to cut costs while manufacturers of large-sized panels have begun deploying in coastal provinces.

Chinese companies have announced plans for the construction of at least nine large-sized panel production lines, including three 4.5G and six 6G-and-beyond lines. The first 6G panel production line in China operated by a native Chinese company, Beijing BOE Optoelectronics Technology, is expected to kick off mass production as early as in 2010, and other lines are expected to start rolling out products in 2011.

The second half of 2009 will be a turning point for most panel suppliers, Lee points out, with panel demand continuing to rise and panel prices rebounding. Panel prices rose substantially in the second quarter and are expected to continue climbing in the third quarter. With this happy development, Lee says, panel makers are expected to return to profitability in the third quarter and make up some of the losses they suffered in the previous three quarters.

Global TFT-LCD Production Capacity Utilization (2008-2009)
	Q1'08	Q2'08	Q3'08	Q4'08	Q1'09(e)	Q2'09(f)	Q3'09(f)	Q4'09(f)
Global	100%	100%	87%	60%	71%	81%	92%	79%
S. Korea	100%	100%	90%	80%	88%	98%	100%	93%
Taiwan	100%	100%	85%	40%	58%	72%	85%	69%
Source: TRi, June 2009.