In a race to build bigger and better next-generation fabs, large-sized LCD panel manufacturers in 2010 are set to boost their spending on capacity expansions by more than 40 percent-likely triggering an oversupply of LCD panels by late this year, according to iSuppli Corp. For the Top 13 large-sized LCD panel makers, capital expenditures in 2010 are forecasted to reach $16.9 billion, up a hefty 43.2 percent from $11.8 billion in 2009. This follows a decline of 29.3 percent during the recession year of 2009.

"The boom in capital expenditures-all designed to expand LCD panel production capacity- come in the wake of expected strong demand among consumers for larger-sized LCD-TVs and other specialized technology carried by flat-panel televisions, including 3-D and LED backlighting," said Sweta Dash, senior director for LCD research at iSuppli. "However, the increase has put LCD panel production in overdrive, contributing to an excess in panel supply."

The oversupply situation began in the second quarter. The market had been expected to enter state of tight supply in the third quarter as television brands increased ordering to prepare for the holiday season. However, because of high inventories in China in the second quarter, panel purchases in the third quarter are likely to be lower than previously predicted.

While the overall large-sized panel market is in a state of oversupply, there is a shortage of products that use LED backlights, Dash noted.

The strategy of capacity expansion from panel suppliers will lead to price reductions because of oversupply, and also will help to trigger market demand, especially for larger-sized TV panels, Dash added.

The LCD panel manufacturers with the projected highest capital expenditures for 2010 include the South Korean giants of LG Display, in first place with approximately $4.6 billion, and Samsung Electronics Co. Ltd., in second with $4.3 billion. Virtually tied in third place are Taiwan's AU Optronics Corp. and Chimei Innolux Corp. (CMI), each with about $3.1 billion in capital spending.