Analyst: Slowdown in LCD tool sales worsens to a “tailspin”

October 11, 2007 – What was expected to be a barely-double-digit decline in the market for array processing equipment for making TFT-LCDs has turned into a “tailspin,” with sales now expected to plunge 50%, according to a report from the Information Network.

Uncertain about how emerging macroeconomic factors will impact consumer spending for products like TVs and monitors — e.g., the housing market in general and subprime mortgage collapse, specter of rising fuel prices heading into the colder months, and new data suggesting weakening outlooks for global economies — LCD manufacturers have stomped the brakes on their capital spending, notes Robert Castellano, president of the market research firm, in a statement. LCD firms remain hesitant to invest even though panel prices are recovering from declines suffered in late 2006-early 2007. “The LCD equipment market is in a tailspin,” he writes. “Blame it on the FUD (fear, uncertainty, doubt) factor.”

TFT-LCD array equipment sales dropped 11% in 2006 to roughly $4.64 billion, and now are expected to sink as much as 50% to around $2.32B, he notes. The current supply glut should abate by 2Q08, and LCD makers will be ramping their Gen8 plants to meet expected demand for larger LCD TVS — leading to a capex recovery through the rest of next year (+20%), and into 2009 (+9%).

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