LCD Manufacturers Slowing Down Capacity Growth, or Preparing for Post Holiday Slowdown?

We have closely followed the overcapacity situation in LCD panels, and have maintained that the way to solve the problem is to produce only as many panels as are needed. The quest for market share has more frequently made the problem worse. Some argue that the new plants are to produce larger monitors, but we have said that it can also be used to produce larger quantities of the smaller monitors. As DigiTimes reports:

Since LG Philips' (LPL) 5G plant is running at full capacity and sales for 42- and 47-inch TV panels are below expectations, the company decided to volume produce 19-inch monitor panels at its 7.5G plant, the sources added. The company is also set to volume produce 19-inch widescreen LCD monitor panels at its 7.5G plant in January 2007, said the sources.

The move is surprising, as it is not efficient to produce 17-inch and 19-inch LCD monitor panels in such advanced facilities; next-generation plants are more suited for TV panel production, the sources pointed out.

The sources added that the move will accelerate price drops for LCD monitor panels.

The panel makers seem to get it at times, though the record is spotty. DigiTimes reports LCD panel makers to cut capacity 10% in December:

LCD panel makers such as AU Optronics (AUO), Chunghwa Picture Tubes will slow their production by 10% in December, according to sources. Chi Mei Optoelectronics will not decrease output of its LCD monitor panels but will reduce its LCD TV panel output, the sources added.

It’s a start. However, it likely has as much to do with an anticipated seasonal slowdown after the holidays than with any real discipline on the part of manufacturers.