Digital Home Thoughts: LG.Philips Slowing Down LCD Production

"LCD maker LG. Phillips issued a downbeat updated second quarter 2006 forecast on Monday (June 12) and said it is reducing production to address inventory concerns and is looking "to better balance short term supply with demand."...The company, a joint venture between Philips and LG Electronics, said second quarter EBITDA margin is now expected to be around 10 percent, a decrease from the previous guidance of about 20 percent. LG. Philips also said it expects the average selling price per square meter of glass at the end of the second quarter to decline by a mid-teen percentage quarter-end on quarter-end, compared to the mid-to-high single digit decrease it suggested previously. "Several factors affected the global LCD industry during the second quarter. First, the industry experienced larger than expected price declines across all product categories. In addition, while mid-to-long term demand for flat screen panels remains strong, we saw weaker seasonal demand during the second quarter..." commented Ron Wirahadiraksa, President and Chief Financial Officer of LG.Philips LCD."



Prices for LCD displays are dropping like a rock. Meanwhile, though demand is strong, it's difficult to predict. This leaves the big players like LG.Philips scrambling to forecast production, as they watch profits quickly get eaten up by smaller, more nimble competitors. I think we're going to see a real shakedown of the flat panel TV business in the next 12-18 months, with a few 2nd and 3rd tier suppliers taking over a huge segment of the business.