05.18.2001
DTI drops out, Taiwan makers step in

• It is reported that Toshiba and IBM plan to stop producing TFT-LCD panels for PCs at their joint venture Display Tech Inc. (DTI). DTI has a monthly capacity of 400k large-size TFT-LCD panels (10.4-inch and over), compared to a total Taiwan output of 735k in April. Toshiba plans to shift production into small-size TFT-LCD (under 10.4-inch) for handsets and PDA, while IBM will outsource. We expect Taiwan makers to be major beneficiaries of IBM outsourcing.

• We believe Acer Display (2409 'Da Ji') and Hannstar (unlisted) may especially benefit from this situation, as IBM Japan and Toshiba are the respective technology partners of ADT and Hannstar. IBM Japan has purchased TFT-LCD panels from ADT since it started mass production.

• NEC, another Japanese TFT-LCD maker, also plans to halt production of TFT-LCD panels used in PCs from 2002. We believe that as more Japanese manufacturers abandon TFT-LCD, consolidation in the large-size TFT-LCD sector will accelerate and the relationship between demand and supply will start to balance out.

• VB Primasia Opinion: We expect that Taiwan TFT-LCD makers' difficulties will bottom out in 2Q01. We predict earnings will improve in 2H01 as TFT-LCD panel prices stabilize and raw material costs level off.

MarthaChen@Primasia.com +886-[0]2-2547-8878