MarketWatch Commentary

The upturn is due to very aggressive inventory management early on, early lowering of utilization levels by panel makers, and now the positive impacts of stimulus packages by Japan and China providing subsidies for consumer electronics purchases.  Japan's package went into effect in mid-May while China recently extended theirs from the initial targeted areas (rural) to now include urban areas and coastal provinces.  According to Citi Investment Research, with these two countries combined representing nearly a quarter of LCD TV demand, the stimulus packages "could have significant impact."

An important source of the positive data is Corning Inc. (a bellweather for the sector), who's chairman and CEO, Wendell Weeks was recently quoted by DigiTimes 6/1/2009, "Our recent checks indicate the LCD supply chain is in full recovery mode.  The LCD supply chain continues to replenish; glass supply and demand is very tight right now [...].  As a result, we are raising our second-quarter glass volume expectations [by 25%]."

Where are these panels going?  Well, certainly many are headed for the LCD TV markets identified above, but the better news is that according to iSuppli data, as reported by DigiTimes 5/27/2009, "flat panel TVs in the US and Canada amounted to 7.8 million units in the first quarter of 2009, up 17.3% from 6.6 million during the same period in 2008." 

According to iSuppli analysts, because of the preference for flat panel TVs, but with the cost constraints on consumers, the smaller panels (32-inch and smaller) have been in shorter supply.  In turn, the supply shortage has presented a pricing increase opportunity that is also helping the supply chain rebound from severe conditions - including price slashing.  While the PC-panel market remains lower than normal, the increase in TV demand is able to offset the sector weakness.