Recovery forecasted for TFT LCD equipment sector in 2010

AUSTIN, USA: While 2008 marked a record year in TFT LCD equipment spending, the combination of the worldwide economic crisis and the downside of the Crystal Cycle are causing the equipment segment to suffer its largest drop ever in 2009, with revenues falling 50 percent Y/Y. But the equipment market is resilient, and DisplaySearch now forecasts 51 percent growth in 2010.

“The worst of the worst Crystal Cycle in the history of LCDs certainly has passed,” stated Charles Annis, DisplaySearch Vice President of Manufacturing Research. “Rapid panel price declines from the end of 2008 through the spring of 2009 helped push demand further than expected. Additional strong demand from China is now encouraging panel makers to move forward with capacity expansions in 2010.”

Fig. 1: TFT LCD Manufacturing Equipment MarketSource: DisplaySearch Q3’09 Quarterly FPD Supply/Demand and Capital Spending Report

For the second consecutive quarter, Q3’09 improved significantly by all metrics. Specifically, the DisplaySearch supply/demand index fell into the tight zone below 10 percent and average industry utilization rose to 88 percent.

In Q3’09 most TFT LCD makers were profitable, with some reaching profit margins as high as 15 percent. However, the LCD industry remains inherently cyclical and is expected to be burdened by over-capacity and lower prices during the seasonally weak quarters Q4’09-Q1’10 before recovering to healthy levels in the spring of 2010.

China is rapidly becoming the largest consumer of LCDs and has the potential to propel the LCD industry further. Although it currently only accounts for a 3.7 percent share of total TFT LCD capacity, this is expected to grow steadily to 7.4 percent in 2012 and even higher beyond, as multiple foreign and local Chinese panel makers are planning Gen 7 and 8 fabs.

“Q3’09 was good for most LCD materials suppliers and panel makers. But now the industry is moving into a ‘wait and see’ mode, cautiously planning long lead time capacity expansions, evaluating whether the global economy and LCD demand are back on a growth curve and if China will be able to meet continuously increasing expectations,” Annis added.