LG.Philips LCD cut production and will review its planned spending on new factories and equipment due to falling prices for LCD panels.
"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, which has increased our inventory to about four weeks, a higher level than anticipated," LG.Philips said in a statement.
The troubles echoed statements made last month by a Taiwanese executive from AU Optronics, another major LCD panel producer, regarding production slowdowns. Should other companies in the LCD panel industry opt to slash production, prices for LCD panels, the screen part of a laptop, flat desktop display, LCD TV and other products, could stabilise. That would lead to higher prices and fewer visions of Christmas bargains dancing in the heads of many consumers.
The LCD TV was supposed to be one of the hit IT products of the year this year, but its popularity depends largely on how much end-user prices can be reduced. Analysts claim consumers tend to find $US2000 the top end of the price range they're willing to pay for large sized LCD TVs.
LG.Philips reduced its financial outlook for the second quarter based on the drop in LCD panel prices.
The South Korean company said its forecast for LCD TV shipment growth at the end of the second quarter, which runs from April through June, is expected to be 50 per cent less than previously expected. The price it can charge for LCD panels is expected to decline by a mid-teen percentage from the previous quarter, compared to its prior forecast of a single digit decrease.
The company also said its LCD shipments and margins would be lower than originally forecast.