LCD manufacturers have been busy building new production lines capable of handling large glass substrates. As a result, production capacity is increasing. And lately, inventory levels have been increasing as well. Panels sitting in a warehouse don’t make any money for the manufacturer, but these companies need to run the plants at capacity to get the full benefits of higher efficiencies. And so they are led to sell their products for lower prices, in order to maintain cash flow.
Recently, the executive vice president of AU Optronics — one of Taiwan’s leading LCD producers — called for companies to scale back production in order to reduce inventories. It appears that competitors are lukewarm to the suggestion, and some have stated that they will not cut production.
The end result will be an oversupply of LCD panels, at least for the short term. If summer sales are slow, then watch for some attractive price cuts on LCD models that plasma and rear-projection models may have to match. The holiday buying season next fall could help balance supply and demand, which could mean more stable prices. If that happens, this summer could be a good time to buy.