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Short-term static, but long-term promise for LCD makers

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The imminent replacement of analog broadcasting by digital, growing demand from industrializing countries and the constant push for higher-and higher resolution television viewing paint a bright picture for the liquid crystal display (LCD) market, at least in the long term.

For the short term, however, things might be a bit more rocky. LCD makers anticipate a slowing in market growth in coming months due to the changing financial environment. But growth, albeit slower, is still positive for the indium industry. The metal is an operative element in the transparent conductive indium-tin oxide coatings that are essential to all LCDs, particularly since there's no viable substitute yet despite tons of research into alternative materials.

Sharp Corp., for example, saw its first-half 2008 sales to China alone near triple those of a year earlier, and the company expects strong results in other so-called BRIC—Brazil, Russia, India and China—countries as well. Is the LCD market maturing after several peaks over the past six years? Perhaps, but it's not there yet, according to Sharp. "We don't think the LCD TV market is matured," said a spokeswoman for the Osaka, Japan-based company.

Sharp continues to push for higher-resolution TVs, investing $3.8 billion in a 10th-generation plant in Osaka that's set to open in 2010. The company can technically produce 2,000- by 4,000-pixel displays, although the supporting broadcasting software doesn't exist yet. This resolution beats the 1080p format—also referred to as the progressive scan high-definition television (HDTV) format, Full HD, True HD and Ultra HD—which is the sharpest currently available on the market with a resolution of 1,920 by 1,080 pixels.

Developments are being closely watched by indium fabricators and alloyers because the amount of indium-tin oxide used in LCDs rises both with resolution and increased LCD output. An 800- by 600-pixel display, for example, requires 2.3 times more indium-tin oxide than a 640- by 320-pixel display, according to LG Display Co. Ltd., Seoul, South Korea.

"We do many studies keyed to reduce the number of parts in LCD panels to reduce costs," an LG spokesman said. "But ITO (indium-tin oxide) is such an essential part of the LCD that it cannot be replaced or reduced yet."

AU Optronics Corp. (AUO), Hsinchu, Taiwan, which worries about indium price volatility, has been tirelessly searching for alternatives to replace and reduce its dependency on indium, but the company has yet to find a viable substitute. Indium makes up about 86 percent of an indium-tin oxide coating, according to AUO, which currently holds more than a 50-percent share of the global mini-notebook panel market.

Traditionally, a rise in indium prices has been associated with higher LCD sales. In 2005, for example, indium prices peaked at $1,100 per kilogram in the free market, more than 11 times the $95-per-kg average seen in early 2002, according to AMM's price archives. That same year, the number of LCD TVs sold in the United States soared to about 4.2 million units, almost double the level of the previous year, according to Rey Roque, vice president of marketing at television maker Westinghouse Digital Electronics LLC, Sante Fe Springs, Calif.

Companies like LG have addressed higher component costs through innovative cost models that trimmed its LCD costs by 7 percent in the third quarter of 2008 compared with the second quarter.

Meanwhile Sharp, AUO and others have been recycling indium to squeeze more performance life from the material. AUO also has been devoting resources to reducing product material weight, consequently reducing its indium-tin oxide utility levels. However, the company says it is satisfied with the quality and low price of its indium-tin oxide supplies.

AUO said that although indium has been difficult to acquire at times, the market is currently fully supplied, which is keeping prices relatively low.

Nevertheless, experience shows that indium prices are susceptible to volatility due to supply issues, especially given the current reduction in global zinc production—indium is a byproduct of zinc concentrate—as zinc prices continue to fall, AUO said.

Westinghouse Digital said that the cost for indium, because it's part of a blended cost of an LCD panel, can't be passed on to customers. However, it is able to recoup those costs in other ways, like selling the smaller LCD TVs that most American households can afford.

New broadcasting regulations also are expected to drive LCD sales. The federally mandated switch to digital from analog TV broadcasting on Feb. 17 sets the stage for large-scale sales of digitally compatible LCDs to replace the older analog cathode ray tube (CRT) devices. Sharp estimates that the global CRT TV and flat panel markets totaled 220 million units in 2008, with LCD TVs accounting for almost 44 percent, or 96 million units, leaving lots of room to grow. In 2007, total global TV demand was about 190 million units, with LCDs accounting for about 39 percent. "We do believe this (transition to LCDs) is something of a revolution," Nexgen said.

But lurking in the background are organic light-emitting diodes (OLEDs), a potential LCD substitute that TV makers like Westinghouse would pursue if the technology becomes cost efficient. The OLED display doesn't require a backlight, which means it can be paper thin and flexible, and its picture quality is excellent. Indium-zinc oxide also is being researched as a replacement for indium-tin oxide in OLED displays for its smoother surface and reduced need for oxygen treatment, according to the OLED Association.

At the moment, OLEDs are still much too expensive for mass-market production, with Tokyo-based Sony Corp.'s 11-inch OLED TV, for example, costing $2,500. ANDREA NIEM


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