The Wall Street Journal-20080116-More Screens Create Shortage
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More Screens Create Shortage
The rush to add displays to once-screenless gadgets, such as universal remotes and data-storage hubs, is raising concerns about whether the screen manufacturers can keep up with demand.
Anecdotal evidence suggests the emergence of screens on more devices, especially smaller ones, is straining supplies already tightened by last year's surge in demand for high-definition televisions and the push to make them larger.
For example, one hot gift this past holiday season was digital picture frames, an electronic version of the more familiar frames that hold pictures printed on paper. As manufacturers sought to fill the supply, there was a shortage of under-10-inch screens.
Screen manufacturing is pockmarked with spot shortages that typically straighten themselves out as demand for a particular product slows, but executives in the display business contend the growth in new classes of devices needing screens is making it harder for the problem to work itself out.
The growing concerns could help to make winners out of smaller start-ups that are working on new displays such as E Ink Corp., which makes flexible displays like the one used in Amazon.com Inc.'s Kindle electronic reader. Meanwhile, Samsung Electronics Co. and other manufacturers of liquid-crystal displays, the dominant type of screen, are forced to spend billions of dollars on new plants to keep up with LCD demand.
"We've seen a big trend happening with display sizes getting larger and smaller across the board," said Scott Birnbaum, who heads the LCD business for Samsung, among the world's largest suppliers of such screens. "It's a challenge just to keep up with the demand from the display standpoint. There's a big shortage in some of these marketplaces, and we still see that demand is outstripping our supply."
At Corning Inc., another large supplier of LCDs, officials expressed a similar outlook.
"We're experiencing tight supply and expect it to continue through 2008," Corning spokeswoman Beth Dann said. "We expect it to be a sold- out situation." It is unclear when things will ease up, she added.
iSuppli Corp., which tracks manufacturers' supply levels, predicts 2008 will be a tight year for supplies of LCD screens. The data group predicts an oversupply of about 2%, which means there is little wiggle room should there be more spot shortages, taking into account the usual allowance for accuracy in their predictions.
"In the small and medium sizes, the market has been very closely balanced, and getting tighter as the year has gone on," said Paul Semenza, iSuppli's vice president of displays. "The particular area that has been tight has been 7-inch panels for picture frames and other consumer products."
iSuppli projects revenue from sales of screens more than 10 inches in size will reach $444 million in 2008, driven by TV sales, and representing annual growth of about 15%. Revenue from screens under 10 inches will reach $1.6 billion in 2008, also about a 15% increase from last year, according to iSuppli data.
To meet the demand, manufacturers are investing more in building new plants. Samsung said it would need to spend an additional $2.2 billion to increase capacity in 2008. In the TV-panel area, the company plans to make the investment to boost panels in the 46-inch to 52-inch segment.
One area already facing shortages is television manufacturers. Between October and December, there was an acute shortage of the LCD screens used in televisions.
The situation created headaches for manufacturers. It forced Japan's Funai Electric Co. to turn to rival Sharp Corp. for a more stable supply. The company also has cut its operating-profit forecast for the year to 79% because of a rapid shrinkage of the U.S. cathode-ray tube TV market and failure to secure enough LCD panels for its flat TVs.
According to iSuppli's Mr. Semenza, the situation is unlikely to clear up over the next couple years, and will likely expand beyond TV screens to smaller LCD screens commonly used in cellphones and other mobile gadgets. Supplies will be tight in the second quarter, especially in the 19-inch to 37-inch screen sizes, plus notebooks, and Mr. Semenza sees spot shortages in the under-7-inch category as well.
The situation in 2009 doesn't look much better. iSuppli expects a 5% oversupply at the beginning of the year, but that will decline in the second half of the year to flat by the third quarter, because of continued growth in notebooks and other personal computers.
"The real crunch point will be 5- to 10-inch displays," Mr. Semenza said. "That was kind of a dead zone; it was too expensive for mobile devices and also memory was too expensive, designs were too bulky. But that's changed."
