China's LCD TV Vendors Quest
July 23, 2008
CCID Consulting projects, by
the end of 2008, China's LCD TV shipments will reach 11.57 million, up from
7.26 million in 2007, and a projected growth rate of almost 60%. LCD TVs
currently account for 90% of all flat panel TVs. The key driver for growth
is China's increase in living standards of its extraordinarily large
population. Consumers want color TVs, and are also replacing their older CRT
TVs as well.
The race to capture the
China markets intensifies. Competition can be broadly categorized into two:
multinational vendors such as Samsung, Sony, Sharp, and Toshiba, and China's
domestic vendors such as Hisense, Skyworth, Konka, and TCL. The main
differentiator between these two categories is the control of the upstream
supply chain, where multinationals have a significant advantage.
Chinese vendors are facing
the prospect of increased upstream panel prices, controlled by multinational
vendors, and downstream price reductions at the consumer level. In short,
Chinese vendors are squeezed at both ends of the supply chain, and the
result is a large loss of China's LCD TV market share.
Chinese vendors are
responding by proceeding stepwise upstream in the supply chain and
increasing efficiencies. The first step is developing LCD module production
capability. In 2007, Hisense was the first Chinese vendor to do so. TCL and
Konka are developing these capabilities in 2008.
Chinese vendors are also
looking for ways to decrease cost by increasing efficiencies in assembly,
such as those involving the LCD module and other components. Vendors may be
able to find decreases in product costs in the 5% to 10% range.
By successfully adopting
R&D capabilities in the LCD module, Chinese vendors are better able to
develop more core design competencies, and move away from competing on
price, and more on value.
Still a long way to go.
Given Chinese vendors' size
and scale, the LCD module is a good first step. However, the core is still
LCD panel production competencies, which require the technical expertise and
scale economies that only a few Japanese, South Korean, and Taiwanese
vendors have. They control the speed of scale of any technology transfer.
Chinese vendors will not be
acquiring any LCD panel capabilities in the short term. Moreover, Chinese
vendors' LCD module production is still fundamentally dependent on LCD panel
supply, and therefore there is still investment risk in such a first step.
Also, smaller Chinese vendors will be at further risk, as they will lack any
upstream capabilities compared to larger vendors.
Similar to the CRT era, the
Chinese government played an important role in developing China's own CRT
color TV industry. The government considers China's flat panel industry as
In 2007, the special
government funds have been established to develop various aspects of the LCD
supply chain, especially LCD panel production. These include funds for
developing production capabilities in the areas of TFT-LCD screen and
module; TFT-LCD color filter; glass substrate; IC driver; polarizer; LED
backlight; associated manufacturing and test equipment; and integration of
the final TV product.
With governmental support
at the national and local levels, China has preliminarily formed LCD
industry clusters in the Pearl River Delta, Yangtze River Delta and North
China. Multinational vendors have come to invest in these areas for LCD
module, panel, color filter, glass substrate, and other LCD materials.
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Unless otherwise specified,
all information provided is sourced from CCID Consulting.