By David Hsieh – Vice President, Greater China Market, DisplaySearch
Many TFT LCD companies we have spoken to recently indicate that they are facing a 10-15% – and in some cases more than 20% – gap between their demand for glass substrates and what their glass suppliers will support. Many TFT LCD suppliers intended to increase capacity utilization due to strong demand and increasing panel prices, but failed to do so because they cannot get enough glass substrate. Suppliers report that all substrate sizes from Gen 6 to Gen 8 have more or less the same amount of shortage. Smaller panel makers are having greater difficulties because glass makers are more supportive of large customers.
The main reason for this situation is the dramatic stop of glass melting tanks in Q4’08. Several glass makers shut down half of their capacity due to the drop in demand and the collapse of panel makers’ capacity utilization. Melting tanks are easy to shut down but take more than two months to re-ignite and ramp up. In addition, glass makers are taking a cautious approach to restoring capacity due to the slow pace of economic recovery, even while TFT LCD production has increased rapidly. The DisplaySearch Q1’09 Quarterly LCD Glass Substrate Report forecasts that glass substrate will remain tight throughout 2009.
TFT LCD panel prices have been rebounding since February, due to the need to refill channel inventories, strong TV demand from China and LCD module component shortages caused by cutbacks in the supply chain. However, there is some concern about the market in 2H’09 as supply increases amid doubts as to whether demand can continue. In May, many of our contacts expressed concerns about the possibility of oversupply and price drops again in Q3’09. Several people commented that the 2008 crash was in July and worried that 2009 will repeat history.
The glass shortage is likely to erase these concerns. The shortage is more serious than most assumed a couple of months ago, and has provided a reason for panel makers to raise prices. With glass makers not bringing back capacity rapidly enough to ease the shortage, many now believe that panel makers can continue to raise prices throughout the year.
In the history of TFT LCD crystal cycles, we have seen many periods of component shortage, which influences the cycle and panel prices. Such shortages have not lasted for long due to the flexibility of component production. Will glass substrates be the exception? Even if demand declines in Q3’09, will glass shortages continue to limit panel supply and push panel prices up?
