A major slowdown in demand for large-screen LCD screens is triggering a big price drops for flat panels, making televisions and computer displays cheaper than ever.

Seasonally slow market conditions are causing an oversupply in large screen solutions, market researcher iSuppli said on Monday, with prices expected to continue dropping.

It’s a cause for concern that many panel suppliers reduced their fab utilization rates to 80 to 85 percent in December through January, down from 95 percent and higher in November, to prepare for the traditionally slow season,” said Sweta Dash, director of LCD and projection research at iSuppli. This failed to stop the steep fall in panel prices that we have seen in December and early in the first quarter.

LCD monitor panel prices in January fell by 4 to 6 percent, notebook panel prices declined to 2 to 4 percent and LCD-TV panel prices decreased by 3 to 8 percent compared to December.

The firm predicts LCD computer monitors should begin to stabilize in the second quarter of the year, however. Panel suppliers appear to be more cautious about capacity expansions and cutting utilization rates to control inventories, iSupply said.

Prices for televisions are expected to continue dropping, however. Although LCD-TV demand continues to be strong due to Super Bowl sales and the holiday season in Asia, most retailers and television manufacturers are continuing to reduce post-Christmas inventories to prepare for an expected slow first half of 2007. This is actually making the oversupply situation worse in January, causing prices to continue to plummet, according to iSuppli.

Slow seasonal sales and oversupply in the first quarter of 2007 will push prices to less than the $300 level for 32-inch LCD TV panels in March, the firm stated, which is below the manufacturing cost level.

The rate of price erosion is expected to slow in February. The reduced supply is the result of February being a shorter month and holidays due to Chinese New Year, according to Dash.