Short-term glass substrate shortage problems a positive development to the panel industry

TAIPEI, TAIWAN: According to WitsView's analysts, the rapid utilization rate increases by panel makers has cleared away the previously accumulated glass substrate inventory in recent months. The current glass substrate output is now immediately consumed by eager buyers.

As the capacity increases from the furnaces can not keep up with the rising glass substrate input, a shortage has occurred. But it should be noted the shortage only encompasses certain panel makers and production lines. The G5 and G6 currently face a more serious glass substrate shortage, while the G7.5 and above are less affected, due to the more limited of both suppliers and buyers.

But despite the supply gap and pressure from clients, glass substrate makers have no plans in moving up their schedule in restarting additional furnaces. The primary reason lies in their different market focus against panel suppliers.

Given the strong sales of some regions, and the persisting panel prices growth, it has triggered a sharp panel order increase in the short-term. But the influx of panel orders does not 100 percent represent a full market recovery. One must also consider the global end market sales, inventory levels of the entire supply chain and actual consumer spending.

The glass substrate segment is a market dominated only by a few players. Thus, their respective market share is considered more stable, rendering them to pay more attention to the longer term panel growth over gaining short-term orders. Fortunately, with the traditional strong third quarter arriving, the concerns on the actual panel demand should ease. Thus, additional furnaces are expected to be restarted in the near future. After two to three months, the supply gap should improve, as the glass substrate capacity gradually increases in 3Q09.

Although the current glass substrate shortage has resulted in panel makers unable to accommodate all the orders, it is a positive development to the industry as a whole. The tight glass substrate supply will help control the total panel output, which will help maintain the panel demand momentum and upward panel price trend. Moreover, this also minimizes earlier inventory pull-ins, which are conducted amid fear of further panel price increases. This helps prevent possible inventory build-ups, which may subsequently affect the demand and supply during forthcoming quarters.

Amid the current tight supply, it has naturally helped stabilize the glass substrate and color filter prices. "For 2Q09, the former is expected to all by 2~3 percent, while the latter is set fall by 4~5 percent. As for 3Q09, their respective price declines are projected to further narrow," said Eric Chiou, WitsView's component analyst.