All TFT LCD makers are now suffering from a deep downturn. According to the latest Quarterly TFT LCD Cost Forecast Reports with Annual and Quarterly Projections, panel prices are approaching cash costs, and some panel makers are already selling products for less than cash cost. Meanwhile, prices continue to fall. DisplaySearch estimates that in Q3’08 global capacity utilization was merely 84.5%, the lowest in 12 quarters. Suppliers based in Taiwan — like AUO, CMO and CPT — have indicated that their capacity utilization will be only 60-70% in Q4’08.
The TFT LCD industry is a survival contest right now. As the CEO of a leading panel maker said; “It is a test where everyone’s going underwater, so it is time to see who can hold their breath the longest.”
The low utilization rate has pushed panel makers in Taiwan to consider fab closures to cut down the overhead and facility operation costs. Rumors indicate that two Gen 5, two Gen 3.5, and three Gen 4 fabs in Taiwan will shut down for the next couple of months. This is the first time in the history of LCD manufacturing that array fabs have been completely shut down due to weak demand, certainly on this scale. When the fabs would be restarted, and how long it will take to ramp back up to full capacity after being shut down for 2-4 months, is unclear.
In order to compete with Korean opponents, consolidation among Taiwanese to reach a larger scale would be one possibility, and has been mentioned in every down cycle. But the capacity remains after a merger. And who should acquire whom is a big question.
