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Friday, September 22, 2006

LCD Beat

By William Trent, CFA of Stock Market Beat

According to CNNMoney, Sharp is planning to accelerate production of LCD panels at its newest facility. As our regular readers are sure to realize, we think this is a bad idea. The industry already has too much capacity, and while demand is strong it was expected to be stronger. Each month there is a new justification (Super Bowl, Olympics, World Cup, World Series, Holidays, etc.) as to why things will soon pick up. Each time, (pick your demand catalyst) was not as strong as expected.

In fact, it seems there are two things driving current demand: people throwing them in so they can finally unload their house and people taking on more risky credit.

Now, Yahoo’s warning should have sent the message loud and clear that consumer spending is slowing. And with it, we expect the holiday season will mark yet another disappointment for perennially optimistic LCD makers.

The eighth-generation glass substrates used at the Sharp factory, its second in Kameyama, can yield six 52-inch panels compared with just two panels from the sixth-generation glass used at the first Kameyama plant, boosting efficiency.

“We have been talking with people in the distribution channel all over the world in the past few months,” Sharp Corporate Senior Executive Director Mikio Katayama told reporters. “Their interest in 52-inch TVs turned out stronger than we had expected.”

Sure. Buyer’s soon won’t even go to the open house if it’s only a 42-incher being thrown in.
The author may hold a position in the securities discussed.

A current list of the author's holdings is available here.

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