Relative low and high point of WitsView’s LCD market confidence index (MCI) projected to occur respectively in Mar09~Apr09 and Aug09~Sep09

by WitsView on Mar.03 2009

Use of the Fourier Transform on WitsView’s monthly averaged MCI data (Sep03~Dec08) reveal that the next relative MCI low and high point are projected to occur during Mar09~Apr09 and Aug09~Sep09, respectively.

The Fourier Transform is a mathematical tool used in wave analysis, where applications include the studying of heartbeats, sound waves, atmospheric waves and so forth. In essence, the Fourier Transform breaks down a time series dataset into different periodic wave components. Each component represents a certain wave frequency. Some have higher amplitudes, while some are lower. The amplitude can be viewed as the “strength” of a particular wave component, where the higher it is, the less likely it will be susceptible to external influences.

The main goal in using the Fourier Transform is to find the two strongest wave components, and use them to predict when the relative MCI low and high points may occur in 2009. When a predicted low point occurs, an upward momentum should theoretically occur in the next 1 or 2 months. Thus, further MCI index drops should be less likely. For the high point, it is the opposite.

Results indicate that the wave component with a 21.3 month period owned the highest amplitude, followed by the 16 month period (Figure 1). The prediction accuracy of the former before 2009 showed that aside from the second low point prediction (Jun07~Jul07), where the following upward momentum was hampered by the subprime crisis, the other 3 prediction points all followed the projected subsequent movement (Figure 2). Meanwhile, for the 16 month period, there was 1 respective inaccuracy for the 3 high and 3 low prediction points. The inaccuracy was attributed to the lower amplitude of the 16 month period wave component. Nevertheless, WitsView believes the 16 month period remain a viable reference.

It is interesting to note that the respective prediction by the 21.3 month and 16 month period of the relative MCI low and high points in 2009 is nearly the same. The former projects the low and high point to be Mar09~Apr09 and Aug09~Sep09. Meanwhile, the latter puts it at Apr09~May09 and Aug09~Sep09 . The coincidence further adds to the validity of the 2009 prediction.

Based on this outcome, March, April or May could all be the next relative MCI low point (the probability is higher in the March and April period, as the 21.3 month period owns a stronger amplitude). Thus, 1Q09 and 2Q09 will likely remain tough for panel makers. Despite panel prices stabilizing and the monitor ASP rising slightly, coupled by the influx of rush orders, the uncertain end market demand is still a big variable. In 3Q09, when the MCI index enters into a relatively higher point, there should be a higher probability in seeing a more notable TFT-LCD market rebound. As for 4Q09, with the MCI predicted to experience another downward momentum after September at the latest, the market fundamentals could once again weaken.

Finally, it should be noted that the impact from the current unprecedented financial crisis should not be overlooked. Results from the Fourier analysis on the MCI data should be looked in conjunction with the forthcoming macroeconomic development in better accessing the state of the TFT-LCD industry.

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Relative low and high point of WitsView’s LCD market confidence index (MCI) projected to occur respectively in Mar09~Apr09 and Aug09~Sep09

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