UPDATE 2-Fujifilm, Konica see slow recovery in LCD film demand

Wed Sep 22, 2010 7:09am EDT

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* Demand for film used in LCD panels has been weak since Aug

* Fujifilm, Konica see slow recovery in Oct-Dec

* Fujifilm sees 10/11 LCD film sales Y215-220 bln, beats plan

* Sees 10/11 LCD film shipments up 12-13 pct vs 10 pct target (Recasts with Konica Minolta interview)

By Sachi Izumi and Reiji Murai

TOKYO, Sept 22 (Reuters) - Japan's Fujifilm Holdings (4901.T) and Konica Minolta Holdings (4902.T) expect LCD film demand to recover only slowly through December due to lower-than-forecast growth in LCD TV sales, company executives said on Wednesday.

Sales of high-tech film used in liquid crystal display (LCD) screens have slowed in the past few months after panel makers betting on strong business bought the component in bulk earlier this year and saw a hefty buildup of stocks.

Panel production is expected to start recovering from October but will likely remain soft for the rest of the year, Hisamasa Abe, the head of Fujifilm's flat panel display materials division, told Reuters in an interview.

"The feeling about a month ago was that it will come back strong from October, but now we expect a slow recovery from October and it will take until December or so for the industry to really come back," he said.

Fujifilm dominates the market for high-tech film for LCD panels, such as triacetyl cellulose (TAC) film which protects polarisation plates. It holds nearly 80 percent of the TAC film sector, with Konica Minolta taking most of the rest.

Fujifilm and Konica Minolta supply TAC film to panel makers such as Samsung Electronics (005930.KS), LG Display (034220.KS) and Sharp (6753.T), through LG Chem Ltd (051910.KS), Nitto Denko (6988.T) and other polariser makers.

NORTH AMERICA, CHINA COOL OFF

Research firm DisplaySearch estimated in June that global LCD TV shipments would rise 29 percent in 2010 but there were some indications of trouble in key markets in April-June, with TV shipments in North America dropping and China's LCD TV market cooling off.

According to Bank of America Merrill Lynch analyst Ryohei Takahashi, Fujifilm's TAC film sales dropped 35 percent month-on-month in August.

Despite the recent slowdown, Fujifilm's Abe said the company expected LCD film shipments to rise 12-13 percent in the business year to next March, buoyed by brisk first-half demand that beat its earlier forecast of 10 percent growth.

He said film demand was likely to continue growing in coming years on the back of rising sales of LCD TVs.

Sales in its flat display panel material division will likely beat its original target of 210 billion yen ($2.5 billion) and reach 215 billion to 220 billion yen this business year, helped also because price declines will likely be limited, Abe said.

The company generated 216.5 billion yen in LCD film sales in the last financial year.

But Masami Akiyama, who leads Konica Minolta's LCD film business, warned that downward price pressure may increase in the second half of the financial year.

"The demand-supply balance of all components was very tight in the first half, and the price fall ended up being smaller than expected and than in the past, not only for polarisers but for other materials including TAC film," he said.

"But now the demand side has lost steam, and TV prices may fall further, so (TAC film) prices could come under pressure."

Demand for larger film sizes is expected to keep growing as bigger TVs become popular, and Fujifilm is investing 40 billion yen to build new LCD film-making lines to supply wide film.

It will decide next year, depending on market conditions, whether to add an extra line, which would likely cost about 18 billion yen, Abe said.

Konica Minolta also started operating a new line for wide film in July. ($1=85.13 Yen) (Additional reporting by Isabel Reynolds; Editing by Michael Watson and Edmund Klamann)

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