DisplaySearch Expects Sales Of TFT LCD Manufacturing Equipment To Jump 40% To $11.6 Billion In 2008

[The following is a release from DisplaySearch]

January 16, 2008

DisplaySearch, the worldwide leader in display market research and consulting, reports that sales of equipment used to manufacture TFT LCDs is expected to surge 40% to more than $11.6 billion in 2008, and will likely remain at a similar level through 2009 in its Quarterly TFT LCD Supply/Demand and Capital Spending Report. According to DisplaySearch Vice President of Manufacturing Research Charles Annis, “2007 turned out to be an excellent year for TFT LCD panel makers. Unfortunately, it was a very challenging year for equipment companies, who generated only $8.3 billion in revenues, down 35% from 2006 levels. These dynamics of reduced investment and healthy panel maker earnings, coupled with continued strong demand, are now setting 2008 up to be a bumper year for almost all segments of the LCD industry and a reversal of fortune for equipment companies.” “New investments in 2008 and 2009 will increase capacity, help keep prices on a declining curve, and likely push demand further than even previously expected,” Annis added. “However, the entire TFT LCD supply chain needs to be careful, if all panel makers rush to dramatically increase capacity in the next two years, the industry could once again set itself up for a significant over-supply and a repeat of the crystal cycle in 2010.” Additional highlights from the DisplaySearch Q4’07 Quarterly Supply/Demand and Capital Spending Report include • Compared to the previous estimates, new investments and capacity expansions have been increased and pulled in so now 46 individual fab investments are forecast between the start of Q3’07 to the end of Q3’10, eight of which will be for new LTPS lines, conversions of a-Si to p-Si or expansions of current capacity. • Counting a new IPS Alpha fab, AMLCD TFT array capacity is expected to rise at a compound annual growth rate of 34% from 4.5 million m2 in 2000 to over 209 million m2 in 2013. Color Filter capacity is on a similar growth curve, expanding from 5.3 million m2 in 2000 to over 216 million m2 in 2013. • Multiple older PDP lines are being shut down as more productive lines come on stream, especially those not able to meet 1080p precision requirements. And even despite the recently announced Matsushita, Hitachi and Canon alliance, Matsushita is still expected to forge ahead and build a 12-up, 42” equivalent PDP mega fab that should focus on 50” and larger TV production. • The top five LCD makers—Samsung, AUO, LPL, CMO and Sharp—are forecast to continue to invest at the highest rates increasing their total share of capacity from 79.6% in Q3’07 to 82.9% in Q3’09. • In terms of TFT LCD capacity, supply/demand was extremely tight from Q2-Q4’07. Supply/Demand is now closely linked to seasonality, and is expected to be loser in Q1’08, but then grow tight through the end of the year, helping to keep panel pricing firm. Based on the current outlook, 2009 and 2010 supply/demand should grow progressively looser. • Supply/Demand of key components such as CCFLs, glass substrates, CF, TAC film and PVA film also affect panel maker’s ability to utilize capacity. In Q3’07 and Q4’07, color filters and glass substrates were in shortage, restricting the amount of panels that could be produced. Key component supply will remain a gating factor for panel production in 2008 and then should loosen in 2009. • TFT fab utilization as an industry average continuously increased from a very low 85.4% in Q1’07 to a very high 95.7% in Q3/Q4’07, which is the highest level recorded since DisplaySearch started tracking this segment in 2000. • As shown in the following table below, with Gen 10, lots of Gen 8 and other expansions, including a second IPS Alpha fab, going forward TFT equipment makers should see significantly higher revenues than 2007. Year Revenues Growth 1999 $3.6 0% 2000 $6.7 85% 2001 $3.8 -43% 2002 $5.2 36% 2003 $6.3 22% 2004 $13.3 109% 2005 $10.5 -21% 2006 $12.7 22% 2007 $8.3 -35% 2008 $11.6 40% 2009 $11.3 -3% 2010 $10.5 -8% 2011 $9.6 -8% • TFT LCD makers achieved pre-tax profit margins of 17% on average in Q3'07, the best performance since Q2'04 and exceeding the prior peak. Large area TFT LCD panel margins are forecast to be even higher in Q4’07 and push into the 20% level during 2008. Most industry participants are quite optimistic about 2008. The metrics behind these trends and breaking industry news are explained and analyzed in great detail, and further backed up by expanded Excel data tables in the recently published Q4’07 Quarterly Supply/Demand and Capital Spending Report. The Quarterly TFT LCD Supply/Demand and Capital Spending Report is one of DisplaySearch’s most comprehensive publications, which offers detailed insights on actual and forecast AMLCD fab activity, panel supply/demand, fab utilization and the capital equipment market. Furthermore, the report provides a broader prospective on the FPD industry through discussion of module, PDP, OLED and color filter fab activity, total announced capital spending, panel maker financial information and a variety of other relevant topics. The 280-slide PowerPoint report covers a wide 13-quarter rolling forecast range, with this edition evaluating Q3’07 – Q3’10. Annual forecasts extend from 1999 through 2011 or 2013. The PowerPoint file is accompanied by DisplaySearch’s proprietary database of TFT array fab install and substrates per month and square meters capacity. The easy to filter, sort and sum Excel data includes fields for fab region, manufacturer, fab name, glass size, generation, technology, expansion phase, equipment maximum capacity, purchase order, install, mass production, end dates and probability factor. The data tables have been expanded to include all equipment total data for easy reference. The report continues to increase content and depth of analysis with every edition, since Q1’07 the following new features have been added: • PDP equipment forecast • Expanded panel maker coverage—For example, Samsung Electronics (SEC) was added to the CapEx historical numbers and forecast analysis. Innolux, TPO and Wintek are now included in the list of companies covered in the Taiwanese fund raising activities section. Innolux was added to panel maker debt-to-equity and liability analysis. • A new chapter on quarterly Investor Conferences and Financial summaries • Enhanced data file with sum totals for capacity by individual fab, equipment data in Excel, including array equipment spending by region and generation • Added “tier” definitions for small/medium producers • Capacity conversion analysis • Substantially increased inside information and DisplaySearch analysis of relevant trends through a subsection of “TFT LCD News & Information Analysis” and “Implications” slides • Unit size demand forecast breakout by application • Explanation and data on depreciation schedules by region • Install date range details added to the detailed equipment investment timing tables to better represent how equipment moves into a fab over time

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