TFT-LCD panel component suppliers expect the global panel market to remain flat sequentially or increase just 2-3% in the third quarter of 2010, compared to the 10% growth in past years, despite the optimistic outlook from most of the panel makers, according to industry sources.

Some component suppliers are being conservative due to the higher-than-expected inventory level in the end market in the wake of Europe's debt crisis, the sources said.

The sources indicated that panel prices increased in the first quarter of 2010 due to stronger-than-expected demand driven by low inventory in the channel. But inventories have piled up in the end market following the debt crisis in Europe, which weakened demand in the second quarter.

System makers have also turned conservative regarding this year's overall demand in Europe, the sources said.

LCD product sales during the Labor Day holiday in May in China were also weaker than expected, resulting in high inventories in the end market and weakening demand for for panels in the third quarter, the sources added.

LCD panel prices may drop in the the third quarter due to weakened demand, as well as increased capacity from LG Display's 8G plant, Sharp's 10G plant, AU Optronics' (AUO) 7.5G plant and Chimei Innolux's (CMI) 8.5G plant, the sources said.