Sept. 22 (Bloomberg) -- LG.Philips LCD Co., the world's largest maker of liquid-crystal displays, Samsung Electronics Co. and their peers may face a greater-than-expected glut of screens in the second half, market researcher ISuppli Corp. said.

Third-quarter supply of LCDs measuring at least 10 inches diagonally will exceed demand by 5 percent, compared with an earlier forecast for a 3.8 percent glut, ISuppli said in an e- mailed statement. Consumers are also not buying as many larger- screen LCD televisions as expected and panels used in computer monitors are seeing an inventory buildup, the research firm said.

ISuppli joins analysts at brokerages including Macquarie Securities Ltd. and CJ Investment & Securities Co. in saying producers in the $35 billion industry may have overestimated demand as higher oil prices threaten to keep consumers from buying TVs and computers. The International Monetary Fund yesterday cut its estimate for global economic growth and said risks are currently ``slanted to the downside.''

``There's definitely an oversupply and intense competition,'' said Nicholas Yeo, an investment manager at Aberdeen Asset Management in Singapore, which manages $12 billion including Samsung shares. ``LCD makers are seeing one of the shortest recoveries in the industry.''

Consumer Confidence

Higher oil prices, lower consumer confidence, and slower economic growth may prevent second-half LCD sales from meeting earlier expectations, according to the research firm. Macquarie analyst Michael Bang this week cut his stock recommendations on LCD makers including Seoul-based LG.Philips LCD and Hsinchu, Taiwan-based AU Optronics Corp., the industry's third-largest producer.

Macquarie recommends investors switch to memory chipmakers such as Hynix Semiconductor Inc., according to the report. Seoul- based CJ Investment earlier this month cut its target price on LG.Philips LCD's stock, citing concern that panel prices may fall as demand growth slows.

El Segundo, California-based ISuppli also raised its oversupply projection for the fourth quarter to 6.2 percent from an earlier 4.2 percent estimate.

Shares of the world's top-six LCD makers, which are all based in Asia, fell. LG.Philips LCD dropped 1.6 percent to close at 42,850 won on the Seoul stock exchange. Suwon, South Korea- based Samsung, the world's No. 2 producer of displays for computers and televisions, dropped 0.2 percent to 600,000 won. AU Optronics plunged 5.1 percent to NT$41.30 in Taipei.

Seasonal Strength

By comparison, Morgan Stanley Capital International Inc.'s $5.7 trillion Asia-Pacific Index, which tracks 1,035 stocks in the region, fell 0.5 percent.

Not all analysts agree with ISuppli and Macquarie's view.

``Inventory levels remain stable and LCD TV demand could emerge sooner than expected,'' Citigroup's Taipei-based analyst George Chang said in a report dated yesterday. ``We expect their shipments to continue to grow, driven by seasonal strength in the near term.'' Chang maintained his ``buy'' rating on panel makers.

Samsung, Asia's largest electronics maker by market value, has also become more optimistic on the LCD business. The company raised its shipment forecasts for the industry by 6.7 percent, citing higher-than-expected demand for panels used in televisions and computers, Chu Woo Sik, head Samsung's investor relations, said in a Sept. 20 interview.

Samsung expects global shipments of LCD panels sized at least 10 inches diagonally to rise 46 percent to 191 million units this year from 131 million last year, Chu said. Shipments for 2006 are expected to increase 24 percent to 236 million units, he said.

The following is a table summarizing ISuppli's latest projections for industry supply and demand. Figures are in millions of units.

        1Q'05  2Q'05  3Q'05  4Q'05  1Q'06  2Q'06  3Q'06  4Q'06
 Supply  42.9   49.3   52.0   56.2   55.3   58.6   63.5   67.2
 Demand  41.6   48.4   48.5   52.0   51.5   55.9   60.6   68.1
 Glut    3.0%   1.8%   5.0%   6.2%   6.8%   4.7%   4.6%  -1.4%

To contact the reporter on this story: Young-Sam Cho in Seoul at ycho2@bloomberg.net

Last Updated: September 22, 2005 03:17 EDT