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Earthquake in Taiwan May Further Tighten TFT LCD Supply-Demand

By David Hsieh - Vice President, Greater China Market, DisplaySearch

On December 19 at 9:03 pm (13:03 UTC), a magnitude 6.4 earthquake struck off the east coast of Taiwan. The earthquake lasted for less than three minutes, but the effect on the ground was huge and terrifying: the biggest earthquake in Taiwan in three years. Fortunately, there were not many casualties, and only damage to construction sites.

However, the strength of the earthquake, especially concentrated in a short time, did cause interruptions to TFT LCD production lines with their highly sensitive equipment operating 24 hours a day. In the middle and southern parts of Taiwan-where several AUO, CMO and HannStar fabs are located-the earthquake interrupted production for one day. Many work-in-process panels fell and broke, so they will be scrapped. The transportation systems and cassettes in clean rooms were shaken violently, and some were damaged, which will affect the throughput of the production lines. Although there is no known damage to the major in-line equipment, several production lines had to be stopped and the calibration checked.

As engineers complete their assessments, fabs resumed production gradually starting Monday (December 21), and are expected to recover completely within a few days. We estimate that roughly 1.0-1.2% of TFT LCD supply will be lost, and Taiwan accounts for 38-40% of global capacity.

As we forecast in the Monthly Large Area LCD & PDP Pricing Report, the TFT LCD market is expected to be tight in Q1’10, and panel prices are expected to rise. In the second half of December, panel makers have been successfully increasing LCD monitor panel prices as disclosed in PriceWise. The decreased supply from the earthquake, although not very serious, will possibly increase concerns among downstream panel buyers and encourage them to ask for more allocation to build inventories.

Prior to the earthquake, the glass substrate supply was tight because panel makers raised utilization faster than the glass makers. The impact of the earthquake, especially emotional, could be a further tightening of the supply/demand balance. We see the possibility that panel prices over the next couple of months might increase more and faster than we forecasted.