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For fabricators, the LCD picture lacks high definition

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The liquid crystal display (LCD) market is a relatively bright spot for indium fabricators despite a recent slowing after four years of incredible growth.

That means orders received by fabricators from LCD manufacturers and everyone in between should stay positive, given that indium is used in a transparent conductive indium-tin oxide coating that LCDs simply can't do without. As such, indium supply for LCDs is expected to remain positive for decades, although it could be somewhat volatile, fabricators say.

Almost 90 percent of indium consumption is accounted for by LCDs, which make up nearly half the global television market, according to AIM Specialty Materials USA, a Cranston, R.I.-based alloyer. Almost all consumer electronic devices require an LCD. Indium also is used in solar and battery applications. AIM believes that indium-tin oxide demand will rise to 2,193 tons in 2009 from 1,755 tons in 2008.

Another factor driving indium demand is the enlargement of LCD screen sizes for such electronics as the Apple iPod and growing incorporation of touch-screen interfaces into LCDs, which could lift the amount of indium used per panel. Small LCD screens can even be found under kitchen cabinets.

While the economic crisis is impacting the LCD industry, the dent doesn't appear to be anywhere near as deep as in other sectors. LCD glassmaker Corning Inc., Corning, N.Y., recently revised its growth estimates in the glass market for 2009 to 15 to 25 percent from 20 to 25 percent previously.

That's "outstanding" for a bad economy, according to AIM sales manager Brian O'Neill.

Indium Corp., a Utica, N.Y.-based fabricator, said its business growth will keep outpacing flat panel market growth, which is estimated at 4 percent from 2008 to 2015, according to figures from Austin, Texas-based research firm DisplaySearch. It points out that LCD TVs are in a maturing market but will have a higher replacement cycle than the antiquated indium-free cathode ray tubes. That difference, in turn, will help fuel indium demand.

About 70 percent of Indium Corp.'s revenue comes from flat panels, 10 to 15 percent from batteries and 15 percent from solar applications. Expectations are that 40 percent of indium demand will come from the solar market within three years.

Much of the current negative economic news has already been absorbed by indium fabricators like Indium Corp. when LCD and indium-tin oxide manufacturers decided to slice inventories in the third quarter of 2008. Still, the company is cautious about inventory levels, with LCD growth forecasts still cloudy for 2009. So far, Indium Corp. anticipates a growth rate of 18 percent for hand-held devices, computers and TVs, down from 30 percent during the past five years. Rapid industrialization in China and India is driving a continued strong demand outlook for new notebook computers, the company said.

"The impact from the recession is going to be minimal," Claire Miko, Indium Corp.'s sales manager in Europe, said with caution. "With the current economic problems, people will travel less but will still need to stay connected, so they will continue to buy systems and computers."

Although fears of low indium supplies are pervasive in the LCD world, Indium Corp. said the metal is three times more abundant than silver, which is produced at a rate of about 25,000 tons annually vs. 500 tons for indium. With adequate investment and open communication by refiners, extractors and recyclers, supply should flow smoothly, the company said.

"Certainly in my lifetime and my children's' lifetime there will be enough indium around the world to supply whatever needs there are," said Gregory Phipps, Indium Corp.'s vice president.

Indium Corp. studies show that current exploited mines and probable reserves combined can cover 60-plus years of supply. Projected supply from virgin and recycled indium in 2009 will total 1,749 tons, up from 1,478 tons in 2008, it said. Indium largely is a byproduct of zinc concentrate, with China being the world's top producer of primary indium.

Open communication has been key to keeping supplies balanced, a lesson learned by Indium Corp. and other industry players, who since 2005 have been much more transparent with their data. A miscommunication between suppliers and LCD makers led indium prices to jump more than tenfold to $1,100 per kilogram in 2005 vs. 2002 levels, Indium Corp. said. Stiff competition for indium among the LCD makers at the time—some booked orders with up to three suppliers simultaneously to guarantee supply—led to a bottleneck that caused prices to shoot up.

The company said it hopes that open communication will allay fears over the availability of material even as a search for indium-tin oxide substitutes continues. Companies like AIM believe it is unlikely that LCD makers will replace indium-tin oxide anytime soon, given the hundreds of billions of dollars they've already invested in indium-tin oxide coatings.

Plus, ITO is cheap—prices could triple from present levels without having much of an impact on overall LCD costs. AIM estimates indicate that indium costs roughly 10 cents per square foot and is at historical lows due to fierce competition in the indium-tin oxide target business. LCD cost reductions will typically focus on the backlight modules and on increasing production yields, AIM's O'Neill said.

Some 548 tons of indium will originate from primary suppliers in 2009 compared with 485 tons in 2008, according to Indium Corp., while reclaimed indium will contribute 1,201 tons vs. 993 tons in 2008.

Indium Corp. said that a drop below $500 per kg would result in production cutbacks, and pegged prices in a range of $500 to $1,000 per kg for the next few years, depending on reliability and quality.

AMM's free-market indium price hit $725 per kilogram at the end of April, up from a range of $400 to $475 per kg earlier in the month. While prices slipped to around $545 per kg in November, they remain far above the November 2003 average of $285 per kg.

Traders and speculators are playing a diminished role in influencing pricing, according to Miko. "Businesses now deal directly with the consumer," she said.

Prices could rise in the coming months in the wake of the shutdown of many Chinese zinc mines amid falling demand, and concerns of excess supply could drive prices higher, although Phipps points out that moderating LCD growth could help balance supply and demand.

"There are a few too many variables to make a solid forecast about prices, but considering that indium production in the next six months looks unlikely to increase because of the problem with zinc prices and that demand continues to grow, especially in the solar market, maybe they will increase," Miko added.

ANDREA NIEM


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