January LCD monitor production for top PC and monitor brands - about 85% of the market - was 12.5 million units, the highest level in more than a year, according to DisplaySearch. Additionally, near-term production build-plans show that March could be the highest monthly production of LCD monitors on record, reaching over 12.9 million units.

"In today's volatile PC market, OEM and brand production totals are leading indicators as to what the market may see in the near term, including pricing and supplies," noted Chris Connery, VP of personal computer displays at DisplaySearch.

While monthly production rates like these have not been seen since April 2008, prior to the global financial crisis, it is too early to attribute the higher production levels to an increase in end-market demand. "Just because you build it, does not mean that they will come," noted Connery. "Many other factors need to be considered alongside of actual production to get a true sense of the market."

Continued strong demand for 19- to 24-inch LCD TV panels is affecting the supply of similarly-size PC displays and can cause pricing for these panels to rise amid shortages.

The threat of increased panel pricing has historically caused monitor companies to pull-in or double-book orders to receive allocation prior to price hikes. Such a pull-in of production without increased end-market demand can set the stage for high inventories.

In China, which has become one of the largest consuming regions for monitors, end-market demand for LCD monitors is not very strong in the first quarter of 2010, but production requests from the major players in the China market are still strong, with many looking to stock up for the Lunar New Year.

The growing dominance of notebook PCs, which outpaced desktop PC shipments for the first time in 2009, calls into question where the increased demand for external, larger-size displays is coming from. Surveys show that consumers (those driving the PC trends towards mobile computing) are far less likely to use a monitor with their notebook than a professional user in a work environment.

The use of LCD technology in desktop monitor displays and in all-in-one desktop PCs means this is still one of the top markets for large-size LCDs. Historically the supply chain for these products could be managed on a quarterly basis. However, the fast-paced nature of the market and its inter-dependence on other markets such as notebook PCs and TVs, which compete for the same panel production, now requires that brands and their OEM production partners track production on a monthly basis. Otherwise, they are caught short on supply or end up spending too much on panels in a supply-constrained situation.