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Notebook prices will plunge – - but when?

...Sometime in 2001, when LCD famine ends

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Notebook prices are set to plummet -- but only when LCD shortages end sometime in 2001. Compared to historical levels, the cost of LCD panels is now so high that notebook price reductions seem inevitable when the shortage ends. By 2001 at the latest, Mr Wang (he of little first name) of Twinhead International expects an oversupply of LCDs, which will bring prices down at least to pre-1999 levels. Mr Wang would not speculate on the precise extent of any notebook price fall, but agreed that reductions of US$50 to $100 were quite possible. ING Barings' estimated price for 13.3-inch LCD screens (the most commonly-used size) next year is just over US$500, said Angela Soh, an analyst at ING Barings in Taipei. Taken together with Twinheads's prediction of a 17 per cent price drop when shortages ease in early 2001, this suggests a material cost saving for notebook makers of about US$85. Prices of LCD (Liquid Crystal Display) panels may fall a little at the end of the fourth quarter, but will probably remain high but stable throughout next year, despite the gradual introduction of new production capacity, according to Soh. "Basically you have production capacity coming up in Taiwan, Korea and from Sharp in Japan. Additional capacity is not so great that prices would collapse, but we are looking for a more significant price decline in 2001 -- right now we're looking for about a 17 per cent decline." There is a slim possibility that the shortage will ease next year, speculated Wang De Shou, vice president for purchasing at notebook manufacturer, Twinhead International. "There are some quite different perceptions about the shortage," he said, "some are saying that it will be over next year, other people say it will last until the end of next year." This uncertainty is one reason why Twinhead has still not committed to a long term supply contract with a manufacturer, he added. "One of the major reasons to anticipate a continuing shortages is the lack of basic components for LCDs," Wang said, "That's still unclear, but if you're are just lookng from the LCD manufacturing capacity point of view, then I think the shortage should be over next year, in the first or second quarter. But if the components shortage continues then the situation will be worse." The hard-to-find components include colour filters, driver chips, and ITO (Indium-Tin Oxide) glass. Supplies of ITO glass, also known as mother glass, are particularly uncertain, Wang said. A large number of Taiwanese companies are trying to break into the LCD components market. This is obviously good news for makers of LCD panels, said Angel Soh, but she is skeptical about the chances of some of the newcomers. Most of the new component makers have little relevant experience, but are trying to buy technology or form joint-ventures with Japanese and Korean companies. Industry sources say that one of the newest entrants, Taiwan Salt, appears to have been rebuffed by its intended Korean technology partner. "It's actually not a terribly exciting area to be in, because for color filter, ITO glass, polarizers, these kind of support industries, you already have a few companies with very, very large market share, it will be quite difficult for Taiwanese companies to break in there." ®

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