The World is turning flat for PC monitor makers
The Star - Thursday, 20 November, 2002
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OLD fashioned cathode-ray tube computer monitors - bulky, hot, and sometimes hard on the eyes are headed the way of black-and-white TVs if the Computex trade show in Taiwan is a guide.

A seemingly endless array of flat-screen makers are hawking sleek designs to a public happy to pay roughly three times the price of a cathode-ray tube (CRT) monitor, leading to a scarcity of liquid crystal display (LCD) panels and higher prices.

"You'll find the CRT monitors will virtually disappear," predicted Andrew De Jong, director of Dreamworks IT, a small Australian PC distributor.

A Taiwan market research firm predicts flat LCD screens will make up nearly half of a forecast 141 million monitor sales in 2005, compared with less than 15% of 106 million monitors shipped globally last year.

Rising LCD sales and prices sent the stock of LCD makers soaring at the beginning of 2002, although the shares have since eased a bit and some analysts warn of a looming supply glut. Deutsche Bank has an "under­weight" rating on the sector.

The advantages of the flat monitors are clear: They take up less desktop space, generate less heat, use less power and their slim design is less visually obtrusive. In affluent Asian cities where space is scarce, flat screens are especially popular.

"We are selling space," said Aaron Chen, general manager of Taipei-based Video­Com Technologies Ltd, a maker of flat screen and CRT monitors, as he wooed buyers at Computex.

Sales of the flat screen monitors, once an expensive novelty, more than Doubled in 2001 to 15.4 million units as prices came down. Those numbers exclude flat screens in notebook computers.

In Japan, flat monitors account for more than half of PC displays sold, while the share is about 30% in the United States, said monitor maker TPV Technology Ltd.

In less affluent markets where price is a larger factor, the proportion of flat-screens is much lower.

A traditional 17in CRT monitor costs around US$160 (RM608) compared with US$700 (RM2,660) for the same-sized LCD screen or US$350 (RM1,330) for a 15in LCD, according to listings by online vendor CompUSA.com.

About 30% of PC systems shipped these days come with a flat screen, according to Taiwan-based Chi Mei Optoelectronics, the world's fourth largest maker of LCD panels. The makers of large LCD panels for monitors are all based in Asia, led by South Korea's Samsung and Korean-Dutch joint venture LG Philips LCD Co.

Taiwan's AU Optronics is on track to be third­largest this year, according to one industry forecast.

Among makers of finished flat monitors, Samsung led with an 18% share last year, followed by compatriot LG Electronics and Taiwan's Benq Corp with 8% each.

Shares jump too far?
Most Taiwanese firms in the volatile LCD sector racked up losses last year, but are expected to turn a profit this year.

Demand for flat monitors proved a bright spot during an awful 2001 for the PC industry, leading to a panel shortage.

Where LCD panels cost as lit­tle as US$190-US$200 (RM722­RM760) at wholesale in the third-quarter of last year, they now cost monitor makers close to US$300 (RM1,140), accord­ing to industry figures.

"The (sales) volume just all of a sudden doubled. We believe that by the second half of next year there will be excess (panels) again," said Jason Hsuan, TPV's chairman and president.

Industry players also predict a boost to supply from new technology that, from early next year, will enable LCD plants to cut more than twice as many panels from a sheet of "motherglass." Deutsche Bank warned in a May 30 research note that LCD panel maker share prices may have gone too far, as price-book ratios (share price to book value of assets per share) in the sector were around three times.

"Although (returns are) currently quite high, we believe that over-capacity next year will drive this down and assume that the long-term return on equity of the sector is around 10%, implying a fair price to book of 1-2 times," Deutsche said.

Oversupply seen
"Almost every company in the sector is now building new plants, and we believe that this will be sufficient to keep supply greater than demand once the new capacity comes on stream in 2003," Deutsche said. Taiwan's LCD makers are raising money to pay for the growth.

AU Optronics raised US$659.5mil (RM2.51bil) last month in an American Depository Share offering. Chi Mei plans an IPO this year, while Chungwha Picture Tube has said it will issue up to US$250mil (RM950mil) in convertible bonds overseas.

Well on their way to conquering the computer market, LCD screen makers are now eyeing the television market, although TVs require a more costly flat panel then computers.

"Companies like Sharp say they want to replace all TVs with LCD TVs. We are moving toward the same direction," said Jeff Hsu, vice-president of marketing at panel maker Chi Mei. - Reuters