IT managers might want to plan their notebook purchasing strategies well in advance this year due to a forthcoming LCD panel shortage in the first half of next year.
The bottom line: Notebook sales are exploding, and there is greater demand for flat panel displays that would displace traditional desktop monitors.
Notebook and display manufacturers are bracing for the worst scenario, in which demand would outstrip supply due to rapid growth in the notebook and desktop LCD market. This situation occurred two years ago, resulting in a severe shortage of notebook products.
Stephen Lin, chief executive officer at Sceptre Technology, a flat panel display manufacturer in City of Industry, Calif., believes shortages in LCD panels are imminent.
"There will be delays in 13.3-inch and 14-inch screens in the first half of 1999," Lin predicts.
If growth exceeds forecasts made by flat panel manufacturers, notebook shortages, could occur -- the flat panel manufacturers need to forecast at least six months in advance of shipping finished products.
"Certain LCD panel manufacturers will have to choose between the notebook market and the desktop market. If flat panels [displays for the desktop] take off next year, there could be notebook screen shortages," says Rhoda Alexander, a senior analyst at Stanford Research, in San Jose, Calif.
"Panel manufacturers have one piece of glass. Some may choose to use it for the desktop industry, because it has a steeper growth curve and they want to establish themselves for the future in that market," Alexander says.
Toshiba and Dell officials are already looking into ways to avert disaster, but the problems run deep within the manufacturing process used to produce LCD panels.
"Not just Hewlett-Packard but all of us in the industry are concerned that a couple of years out we may not have enough manufacturing capacity because the [panel] manufacturers require a long-term capital investment," Archuleta says. "The big debate in the industry is trying to predict the mix. If there is a big mix change, it could take three to four months to adjust."
Compounding the problem: LCD manufacturers plan as much as five years in advance, forecasting the size of the screen that will need volume production, according to Craig Rittenhouse, vice president of product strategy and integration at NEC.
When notebooks moved rapidly from 10.4-inch to 12.1-inch displays two years ago, LCD makers were left behind, and it took months for them to recover. The same thing could be happening in moving from 12.1-inch to 14-inch displays.
Also putting pressure on LCD supply is forthcoming low-priced notebooks. "At a price of US$1,000, there will be a tremendous increase in new notebook purchases," says Rich Archuleta, general manager of Hewlett-Packard's mobile computing division.
Many IT managers are already familiar with the problems posed by notebook shortages.
"It is a pain, because notebook requests come in on short notice, and if there are delays, it's a big problem," says Brian Jaffe, director of network and client services at Bantam Doubleday Dell, in New York.
At the same time, several notebook vendors are currently looking into alternative technologies for display manufacturing, such as plastic-based screens.
Although some vendors argue that the technology is not ready and could compromise the quality of the screens, several sources have noted that using plastic could save weight, shipping, and damage costs.
The notebook drought
Finite supply could spell notebook shortages.
-- Larger margins go to the flat panel manufacturers for making desktop monitors
-- Steeper growth rate in monitor market
-- There is a bigger long-term market in desktop flat panel displays
-- Poor forecasting may lead to the retooling of LCD manufacturing lines