Putting the Brakes on LCD TV Production

LCD panel inventories are piling up around the world, creating headaches for LCD panel manufacturers. One of the largest — LG.Philips LCD — just blinked after reporting a second quarter loss of $392 million (compared to a $31 million profit for the same quarter a year ago). With four week’s of inventory sitting in warehouses, the company has announced that it is “temporizing” production.

Perhaps more significant is the fact that the company is altering its expansion plans. It is going to reduce investment in new plants, cutting expenditures by about 25%, which amounts to about $1.2 billion. Work on a new Gen 8 fab is going to be slowed down, and instead, a new Gen 5.5 fab will be built at the same facility.

All the plans for new, high-capacity LCD plants have raised doubts about the ability of the markets to absorb so much glass at a price that the manufacturers can afford, and here’s evidence that excess production capacity is indeed a serious problem. For the short term, it should mean good news for consumers as the large inventories will result in downward pressure on product prices.