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Thursday, September 07, 2006

LCD Beat

By William Trent, CFA of Stock Market Beat

The average quotes for 17-inch LCD monitor panels rose US$12 in the first half of September to US$125, a 10.6% increase from the second half of August and the largest increase during the past two years, according to WitsView Technology.

Does this mean that it’s finally time for us to throw in the towel on our bearish outlook for the industry? Well, not quite.

To start with, the price gains were largest for the desktop monitor segment, which has now become practically a niche product. Within that segment, the 17″ (too large for notebook but on the very small side for desktops today) posted the biggest increase. Chances are, the demand is stronger than supply merely because they just aren’t supplying all that many.

Notebook prices were basically flat, while large-screen TV panel prices fell 10%.
Meanwhile, the competitive marketplace is leading Sony (SNE) to outsource more of its capacity.

Although Sony has its own LCD TV panel source and is developing LCD TV chips, the Japanese company still outsources part of its low-end 32-inch LCD TVs to Hong Kong-listed TPV, with panels from AU Optronics (AUO) and chips from Trident Technologies to reduce cost and increase price competitiveness, the sources indicated.

Sony is now applying the move to its 40-inch models. With the TVs outsourced to TPV, Sony is able to further push its 40-inch LCD TV sales since it can price the TVs at an aggressive level.
Hmm… cheaper to buy than to make your own, even when you already have capacity? Something tells us things haven’t quite hit bottom.

As we said before, in light of the uncertainty over consumer spending this holiday season, we don’t mind sitting on the fence a while longer.

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