Concerns are rising regarding the sub prime mess, the turmoil surrounding the financial markets and how these issues will impact business and consumer spending in the U.S., the research firm says. Rising defaults on U.S. home loans may limit consumers’ disposable spending during the holiday period this year, iSuppli adds.

“While LCD panel suppliers expect prices to increase for the remainder of 2007 due to supply tightness, iSuppli believes inventory increases will result in softness in panel demand among end-product makers and channel participants, especially in the monitor market,” said Sweta Dash, director of LCD and projection research at iSuppli. “This may affect fourth-quarter pricing of large-sized panels. The issue could become more of a problem if consumers stop spending and tighten their purse strings because of the mortgage problems in the fourth quarter.”

From April through September, LCD makers raised the prices of products at a 15 to 25% rate for notebook and monitor panels, and a 5 to 7% rate for 32-inch and smaller TV panels, reports iSuppli. However, branded vendors are being forced into price cuts to move inventory. The North American market is the biggest cause for concern right now because of the tumultuous economic atmosphere. However, the ramifications of this will be felt among the Asian manufacturers and the global supply chain, the firm states.

In addition, while long-term demand for notebook panels is still positive, notebook production may be impacted as a result of component shortages, says iSuppli. Notebook panel production also may be impacted as manufacturing capacity for these displays is diverted to fast-growing small- to medium-size applications such as digital photo frames, personal navigation devices, car TVs and ultra-mobile PCs.

Panel suppliers Innolux, CPT and AUO are planning to shift more of their fourth and 4.5-generation capacity in some of their fabs to small- and medium-sized panels, says iSuppli. Some are even planning to use some fifth-generation capacity for those size panels. Notebook panel prices increased by between 1 and 2% in September compared to August, the company notes.

iSuppi predicts actual notebook PC shipments in the second half of the year will fall short of expectations because of component shortages. Besides LCD panels, notebook PC manufacturers are reporting shortages of ICs, batteries, optical drives and PCBs. Many notebook PC suppliers said they expected these component shortages to last until October, while others are concerned that they may continue through the end of the year. If notebook PC production is indeed impacted by this component shortage throughout the remainder of 2007, it will impact panel demand, adding to the overall uneasiness being felt in the LCD industry, says iSuppli.