Panel makers are shifting their focus to new applications as tablet demand in the second half of 2014 is expected to be limited, according to industry sources.

Market observers estimate that tablet shipments during the second half will grow less than 5% due to competition from large-size smartphones as well as lower-than-expected sales of new units. Lower priced notebooks around US$250 in addition to wearable devices will also affect tablet shipments, the observers said.

Additionally, as vendors are looking to use pricing strategies to combat competition, they are looking to vertically integrate supply chains offering production from touch panels to LCD modules. This is helping vendors save costs and reducing time to market, but is decreasing the role tablet panel makers play in the supply chain. Moreover, vendors are increasingly looking to purchase open cell panels, which could limit profits for panel makers compared to sales of higher-end technologies.

While panel makers are forming new strategies to partner with other supply chain makers, choices are limited and such a business model is leaving some makers worried, particularly due to the limited demand tablets are expected to see in the second half. The makers therefore are looking to new applications to set the bar for vendors to follow as well as make up for limited shipments in the tablet segment, said industry sources.

The sources did reveal makers are developing new wearable device applications to spur new orders, and are also putting hopes in the LCD TV panel market, most notably for large-size and high-end units.

The observers meanwhile expect LCD TV demand to rebound slightly in 2014, the average size TV screen shipped to increase, and Ultra HD TV penetration rate is likely to reach 10%.