More LCD TVs from Contract Manufacturers?
July 29th, 2007By David Hsieh, Vice President
The major applications for large (10” and above) TFT LCD panels are notebook PCs, LCD monitors and LCD TVs. With the strong growth of the notebook PC and LCD monitor markets, a complete and efficient supply chain for those applications has been built, especially the OEM business in Asia, as most of the notebook PC and LCD monitor brands rely on contract manufacturers to build these products for them. Currently, 75% of notebook PCs are built by Asian-based contract manufacturers and 70% of LCD monitors. Brands outsource manufacturing for several reasons. They prefer to focus on marketing products instead of managing factories, and costs are lower from the contract makers, who are closer to the LCD panel suppliers in Asia. Because panels for notebook PCs panels and LCD monitors are quite commoditized, it’s easy for a dedicated assembly house to use panels from various suppliers, making the supply chain shorter and turn around faster.
On the other hand, LCD TVs have rapidly become the most important application for large-area TFT LCD panels; however, just 20% of LCD TVs are built by contract manufacturers. Most of the top tier LCD TV brands are still using their in-house capacity or even building regional assembly facilities around the world while most emerging brands, such as Vizio, Polaroid, Westinghouse and Syntax, are relying on contract manufacturers almost exclusively. These brands are also responding quickly to price changes in the market, and their supply chain efficiency seems very effective. Meanwhile, many subcontract assemblers are aggressively expanding their LCD TV OEM business with good support from video processor solution providers, as well as LCD TV panel makers.
Will 20%, the co-called “OEM ratio of LCD TV,” be increased in the future? Will the first-tier brands change their in-house assembly strategy to release more orders to contractors? Is it necessary for contract manufacturers to get the support from panel makers and solution providers to win more business from the brands? Do brands lose a competitive advantage by relying on contractors? Since regional module assembly appears to have the greatest impact on shortening the supply chain, will OEMs who backward integrate into providing regional module assembly be at a significant advantage? Can the system integrators ever obtain a share as high as they currently have in notebook PCs and LCD monitors?
www.displaysearch.com