Average LCD panel fab utilization fell to an all-time low of 50% in January 2009, according to DisplaySearch. February utilization was 62%, March increased to 69% and the second-quarter utilization is forecast to reach 79%.
"The TFT-LCD industry was hit by the disastrous combination of record capital spending in 2008, which significantly increased capacity just as the worldwide economic crisis caused demand growth to evaporate," said Charles Annis, DisplaySearch VP of manufacturing research. "Subsequently, the first-quarter TFT-LCD oversupply surged to 36% and fab utilization fell to a record low."
"Some LCD makers have delayed delivery of previously ordered equipment, are slowing down fab ramp-ups and have postponed planned capacity expansions," Annis added. "It's still going to be a while before the industry can work through all of its excess capacity. On the other hand, some positive trends, such as China's economic stimulus package creating new LCD TV demand, improving fab utilization rates, stabilizing module prices and increasing opportunities to sell process equipment in China, are all indications that the worst may be over and that industry fundamentals may incrementally improve through the rest of the year."
Despite the economic climate causing the industry to grow at a somewhat slower rate, TFT-LCD capacity is still expected to more than double from 109.9 million square meters in 2009 to 240.9 million square meters in 2014.
All PDP makers continue to shut down older, less productive fabs. At the same time, the top PDP producer, Panasonic, has already moved in equipment for its enormous 16-up 42-inch-equivalent state-of-the-art Amagasaki 3 factory. The company is waiting for the economy to show signs of improvement before starting mass production.
Total area demand for all AMOLED applications is forecast to grow from 7,600 square meters in the first quarter of 2009 to 119,800 square meters in the fourth quarter of 2011.
Korea and Taiwan account for the majority of TFT-LCD capacity and will maintain their dominance well into the future. China currently has less than 4% of total capacity, but it should grow to about 7% by the end of 2011. This is an upward revision versus previous forecasts and is based on recent analysis that plans for new fabs in China are more likely to come to fruition.
Oversupply of large-size TFT-LCD swelled to an extraordinary high of 36% in the first quarter of 2009. However, the slowdown in capacity expansion combined with lowered demand expectations should help bring the market closer to supply/demand equilibrium in second half of 2009.
The year of 2008 was the biggest year ever for spending on TFT-LCD equipment, but 2009 is expected to suffer the largest yearly percentage drop in the history of LCD manufacturing. The year of 2010 should increase to near 2007 spending levels, and there is a reasonable chance that 2011 and 2012 will return to spending levels of US$10-11 billion.
From 2007-2012, more money is forecast to be spent on 8G equipment than on any other glass size.
Large-size TFT-LCD profit margins (modeled averages for first-tier panel makers) were negative 39% in the first quarter of 2009 due to oversupply, lack of demand and low prices. Margins are forecast to generally improve throughout the forecast range. Korean margins are expected to be better than for other regions because most 5G fabs finished depreciation in 2008.