As shipments to the channel continued to be significantly faster than end-user sales, LCD monitor inventory rose in the second quarter. According to iSuppli Corporation, the rise in inventories led to a decrease in factory orders in July and August, prompting a sharp drop in monitor panel prices in the third quarter of 2010.

In the first half of 2010, the unit output of LCD monitors was 11% more than the consumption of end users, which is in line with historical trends. However, due to just getting rid of the recession, manufacturers and channel participants are taking more stringent control of inventory levels. Slower-than-expected sales in the consumer market in July and August added to the inventory problem, especially for those companies that had previously been burdened with stocks.

In the first half of 2010, in the global desktop PC market, the supply of LCD monitor panels, total plant output, and end-user sales were increasingly out of line. Although panel shipments and overall output increased in the first and second quarters, brand shipments and end-user sales declined. This situation has caused the market to fall into oversupply, especially in the consumer market.

Although the inventory growth is worrying, the monitor demand in the second quarter remained stable. Preliminary data for the second quarter showed that end-user sales were close to market expectations, at 41.2 million units, down 1.9% from the first quarter but up 8.4% from the same period in 2009.

The figure below shows iSuppli’s estimates for LCD monitors, brand shipments, and end-user sales for the quarters of the second half of 2009 and the first half of 2010. In the illustrated output of the LCD monitor panel, about 1.5 to 2 million pieces enter the TV market every quarter without entering the monitor market.

Indeed, more extreme inventory conditions occurred two years ago. However, the good news is that unlike the mid-2008 period, monitor manufacturers and channel vendors have responded more quickly to rising inventory. And unlike at the end of 2008, terminal demand is still growing.

From the perspective of unit shipments, the outlook for monitor consumption by end-users remained good in 2010 and is expected to increase by 6% or more. However, operating income growth will be lower. This is because manufacturers use lower panel costs to actively lower the price of the whole machine during the holiday season.

iSuppli Corp. predicts that consumer demand for monitors will recover in the fourth quarter as prices continue to fall, especially for 23-inch and larger products. The slim industrial design with LED backlighting will provide a very good premium opportunity in the consumer market, and those who are ready to launch new products during the crucial holiday season will also have the opportunity.

However, the mobile trend is affecting consumer demand in the monitor market. Manufacturers continue to face the challenges of the mobile industry and strive to improve the rate of monitor placement for mobile devices.

Stimulate demand

Corporate demand has remained strong in 2010, and suppliers and channel participants continue to report that orders in this area are healthy. Most of these requirements are targeted at SXGA and 16:10 monitors, making it still beneficial for enterprise customers to provide these monitors. iSuppli's electronic display research shows that manufacturers report increased interest in new products using LED backlights, which should stimulate demand at the end of the year, especially in Europe/Middle East/Africa.

As panel makers significantly reduce capacity utilization to stabilize prices and end-user demand is expected to grow in the fourth quarter, monitor makers may again face panel shortages before the end of the year, especially SXGA and 16:10 panels. Recently, manufacturers have reduced capacity utilization. The rate has the greatest impact on these panels.

However, the economic outlook remains uncertain. Although manufacturers and users firmly believe in positive growth signals, they also expect the economy to not experience a double-dip recession.