As per a recent report, the prices of 32-inch LCD TV panels are witnessing an increase. A 32-inch LCD panel is now priced at around $215, compared to $180 in the middle of June. The rise in price can be attributed to the shortage of a specific type of glass required for the panels, coupled with excess demand from Chinese manufacturers.

This is expected to negatively impact LCD TV manufacturers, such as Sony Corporation (SNE), who will incur higher costs for their LCD panels, but will be unable to pass it on to the end customers. This is mainly because of sluggish consumer spending, increasing prices and the global economic downturn.

We expect Sony to be among the worst affected, since the company’s LCD FPTV sets are already sold at premium prices, which consumers are not willing to pay in the current economic environment.

On the other hand, companies like Sharp Corporation, will derive some benefit from the increasing prices, as they are manufacturers and sellers of the LCD panels. Sony is clearly at a disadvantage, as the company sources its LCD panels mainly from Taiwanese and South Korean suppliers, who are increasing prices.

Sony expects an operating loss from the LCD segment in the coming quarter, so this cost disadvantage on the LCD segments needs to be addressed.

Although, on Jul 30, Sharp and Sony entered into a definitive agreement regarding their joint venture to produce and sell large-sized LCD panels and modules, we expect this to take some time to materialize. Until then, Sony will have a tough time protecting its LCD segment.

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