Market Trend

Between July 14, 2008 to July 25, 2008, the MCI index fell from 6599.2 to 6402.8, down by 196.4 points. Aside from the persisting downbeat outlook toward the TFT LCD industry, the decline was also attributed to the downfall in global markets, as the Fannie Mae and Freddie Mac mortgage crisis once again highlighted the troubles in the housing sector. Thus, despite steep drops in the oil price during the past two weeks, the general economic outlook remained uncertain.

During the start of 2007 before panel prices began to increase in Apr07, the MCI index fluctuated roughly between 6000~6400. WitsView believes a similar fluctuation will be seen for the time being. It is unlikely it will fall past the 6000 level, due to support from two primary factors. The first is the traditional strong seasonality of the third quarter. The second is the decision by some major panel makers (AUO and LGD have both indicated they will do so) in reducing their respective glass substrate input. When CMO, CPT and Hannstar hold their respective investor conferences this week, they are expected to make similar announcements.

The decision by panel makers to scale back production highlights the mounting pressures they face, as we stated in our previous MCI report it would be strategically unviable to do so during this particular time point. Improvements in the future market fundamentals will be strongly tied to how fast the inventory in the overall supply chain can return to a more balanced state. From an MCI index standpoint, the key sign to pay attention is when it at least begins to stands firmly above the 6500 level. According to WitsView’s recent internal analysis, when the index lies between 6500~7000, it represents a moderate confidence level.