Flat screen maker LG.Philips LCD Co. Ltd. and two Taiwan rivals are set to post strong quarterly profits, and growing demand for flat screens and tight supply are likely to ensure a healthy market through 2008.

LG.Philips, the world's second-biggest maker of large-sized LCDs used in popular flat screen TVs, is forecast to report on Tuesday a 513 billion won ($561.6 million) net profit in the third quarter ended September, according to a mean forecast from nine analysts polled by Reuters.

That would be its best result since the second quarter of 2004, when it posted a 701 billion won net profit.

It would also mark a spectacular improvement from a 321.5 billion won net loss a year earlier and more than double its 228.5 billion won profit in the previous quarter, which officially marked the LCD maker's dramatic turnaround.

LG.Philips should reap the rewards of higher IT panel prices, lower costs and increased productivity, said Park Hyun, an analyst at Prudential Investment & Securities.

Hit by tumbling prices and oversupply last year, the liquid crystal display (LCD) industry has made a stronger-than-expected recovery in 2007 as chastened manufacturers chose to reduce new investment and focus on profitability.

Meanwhile, accelerating demand from emerging markets, led by China, has exceeded expectations.

The main question is how long the current shortage will last, said M.S. Song, an analyst at CJ Investment & Securities. It looks like the market will fare well until late 2007.

Average prices of 15-inch notebook screens and 19-inch computer screens rose by about 13 percent in the third quarter, according to Macquarie Research. Meanwhile, 42-inch TV panel prices fell less than 3 percent, and 32-inch panel prices, a highly popular format in developing markets, rose 4.6 percent.

LG.Philips competes with bigger home rival Samsung Electronics Co. Ltd. and Taiwan's AU Optronics Corp. and Chi Mei Optoelectronics Corp.

Operating profit on a consolidated basis is expected to land at 502 billion won, from a 382 billion won loss in the year-ago period, according to a poll of 17 analysts by Reuters Estimates.

Sales on a consolidated basis are expected at 3.85 trillion won, up from 2.77 trillion a year earlier and 3.35 trillion won in April-June.

For all of 2007, the joint venture between LG Electronics Inc. and Philips NV is expected to earn 977 billion won in net profit, reversing a 769 billion won loss in 2006, according to 27 analysts polled by Reuters Estimates.

OLYMPIC DREAMS

In Taiwan, AU Optronics, the world's third-largest LCD maker, is expected to earn a net profit of T$14.82 billion for the July-September quarter, according to a mean forecast from 17 analysts surveyed by Reuters Estimates.

That would be sharply higher than the T$613 million profit a year ago, when screen prices sagged on weaker sales of computers and LCD TVs. The figure will also more than double T$5.99 billion AU earned in the previous three months.

Helped by recovering demand, smaller local rival Chi Mei Optoelectronics is seen booking a net profit of T$9.96 billion in the third quarter, according to Reuters Estimates. That's a swing from the year-ago loss of T$1.41 billion and nearly three times the T$3.39 billion profit in the second quarter.

Worldwide demand for LCD TVs is likely to grow even more in 2008 as consumers upgrade their televisions to view the Beijing Olympic games.

According to market research firm iSuppli, global shipments of LCD TV panels are expected to rise to 102.5 million units in 2008, up 27 percent from 2007, marking the first time shipments have surpassed the 100 million mark.

While analysts expect average prices to drop in the fourth quarter, many believe the seasonal price fall will be limited in time, with shortages resuming in mid-2008.

Even if prices drop in the fourth quarter, increased output should make up for it, said Prudential's Park.

Park forecast LG.Philips will post an operating profit of 1.4 trillion won in 2008, a 75 percent improvement from 2007.

The longer-term outlook on the LCD market hinges on how quickly makers ramp up production. Several analysts are betting on another supply glut in 2009.

Shares in LG.Philips, which has a market value of more than $17 billion, rose 6.6 percent in the third quarter, trailing an 11.6 percent gain in the broader Korean market.

($1=913.4 Won)

(Additional reporting by Baker Li in Taipei)

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