Flat-Panel Growth Picture Turns Fuzzy

Slowdown worries are coming into view in the hot flat-panel TV market.

Investors fear that the credit crunch that started this summer in the U.S. mortgage sector could slow the economy by crimping consumer spending. That could push high-definition TVs right off the holiday must-have list, say industry watchers.

But even without a U.S. consumer slowdown, sales growth looks ready to slow in the luxury TV market. That's because some big makers of liquid crystal display panels -- such AU Optronics (AUO) and LG Philips (LPL) -- held back on expansion efforts last year and early this year.

These moves could leave the industry with a low supply of key TV components, say analysts.

The scarcity, especially in the most popular 32-inch TV screen size, may put the brakes on sales growth this year, say industry experts.

"This is going to be a crunch year for LCDs," says DisplaySearch analyst Paul Gagnon. "The market wants to grow more, but demand will exceed supply. There are not enough panels."

The tricky balance between supply and demand seems to have an uneven path ahead this year. A shortage in the prime-sized TVs will help sustain margins but deflate sales volume. To compensate, TV makers and retailers will have to slash prices on the 40-inch and above models to keep sales juiced, say analysts.