Analysts are warning of a tightening of supply for the display market after stronger than expected sales of TVs and monitors during the 2007 holiday season.

Demand in the key US market rose more than 70 per cent compared with the previous year, according to researchers from Japan's Nomura Securities.

Sales of 32in LCD TVs are strong, and there has been a significant rise in sales of 40in and larger models, the researchers said.

LCD panel manufacturers such as Korea's LG-Philips LCD and Samsung and Taiwan's AU Optronics saw operating margins surge from below five per cent at the beginning of 2007 to almost 20 per cent by the third quarter.

Inventories are low following the strong holiday season sales, promising extra business for manufacturers as distributors restock.

"In a typical year, the first quarter is a slow period for [LCD] panel makers, but we think it is increasingly likely that Q1 2008 will be busy, without the usual seasonal decline," said Nomura's analysts.

Demand could exceed supply by more than 10 per cent by the second quarter, possibly pushing prices higher.

While LCD prices will continue to fall as manufacturing costs decrease, the average price drop during 2008 could be as low as five per cent, Nomura predicts.

According to the company's forecasts, 175 million LCD monitors and 133 million LCD notebook screens will be sold during the year. LCD TV sales will exceed 100 million units annually for the first time ever.