Better supply-chain management and stronger cost-reduction abilities are the key for liquid-crystal-display (LCD) manufacturers wanting to outperform peers as industry cycles become less volatile, market researcher DisplaySearch said yesterday.
This is one of the major reasons why Taiwan's leading LCD manufacturers, AU Optronics Corp (
In the past, companies could boost profits by riding the industry cycles, but now "the one who can get [a sufficient] supply of lamps, or can get TAC [Triacetyl cellulose] film at lower prices, will win the game," said David Hsieh (謝勤益), vice president of DisplaySearch, at a seminar in Taipei yesterday.
Lamps and TAC film are two of the key components in the manufacture of thin-film-transistor (TFT) LCD panels.
DisplaySearch expects the tight supply of lamps to linger in the first half of the year, while the supply of TAC film would be a constraint in the second half on mounting demand for bigger LCD TVs, which use much more TAC film than computer monitors do.
"It looks like the performance of AU Optronics, Chi Mei Optoelectronics and LG.Philips LCD are closer than before," DisplaySearch analyst Jane Hsu (
Hsu attributed manufacturers' strong performance to improved cost-saving abilities.
“Local companies have the strongest ability to cut costs, largely because of their experience in making computers,” Hsu said.
The two Taiwanese firms outpaced the Korean-Dutch venture with a much wider operating margin for last quarter.
Hsu added that the price gaps between manufacturers are expected to decline, while the cost gap could grow owing to the shorter and less drastic crystal cycle, which will make reducing costs much more important in the future.
"The trend will become more striking when most LCD companies move to manufacturing LCD TV panels, as component costs will increase in accordance with the need for more parts," Hsu said.
DisplaySearch reversed a previous pessimistic outlook for the LCD industry by saying that panel supply would largely match demand for the whole of this year, citing strong sales of TVs and monitors at the end of last year.
Taiwanese LCD-panel manufacturers have been trying to slash costs further by expanding their control over key component suppliers through share purchases in the companies, Hsu said.
They save as much as 25 percent in costs by making color filters mostly in-house, rather than purchasing from outside suppliers, she added.
In recent years, they also reached out to suppliers of lamps, microchips, polarizers and other key components, Hsu said.
AU Optronics gained a major stake of 11 percent in Wellypower Power Corp, the world's No. 4 maker of lamps used in flat-panel displays, through a venture-capital affiliate to secure its lamp supply while keeping costs down, she said.
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