Taiwan will replace South Korea this year as the world’s largest manufacturer of liquid-crystal display panels, according to the island’s leading think tank.
According to estimates by the Industrial Economics and Knowledge Center (IEK), total revenues of Taiwan’s LCD panel makers will reach US$28.78bn by the end of 2006, compared with US$25.77bn from their Korean competitors.
“If you include other technologies such as plasma display panels or organic light-emitting diodes, the Koreans are still bigger than us. But in terms of LCD, we are the king today,” Tu Tze-chen, director-general of IEK, told the FT.
The development proves that Taiwan’s flat panel makers have managed to grow faster than their Korean counterparts although they are smaller, entered the industry later, own less proprietary technology and lack brands of their own.
Taiwan became the world’s largest LCD panel producer in terms of shipments two years ago, but the latest development shows that its lead is not confined to low-price mass production.
“Mainly, the big Taiwanese players have grabbed market share in the segment from 30 inch to 42 inch panels – the mainstream sizes for television panels which in themselves are the largest and most important growth segment,” said Jim Chung, IEK’s display research manager.
Less than three years ago, Taiwan’s LCD makers were still struggling to match the quality of their Japanese and Korean counterparts. At the time analysts were predicting Taiwanese LCD makers would lose the race for market share and profits because they were slower than their competitors in adopting the newest generation of LCD plants.
But since then, Taiwan’s flat panel makers have been winning market share. AU Optronics and Chi Mei Optoelectronics, the island’s market leaders, have been enhancing their profitability. AUO, which ranks third worldwide, has become much more profitable than LG Philips, its larger peer.
Analysts attribute the surprising development to two main factors. First, the Taiwanese, who are pure contract manufacturers, are gaining more production orders from branded TV vendors than their Korean rivals. “If I were Matsushita, I would also give orders to AUO rather than Samsung because there’s no conflict of interest,” said Mr Tu.
Second, Taiwan’s leading players have successfully protected themselves from profit margin erosion by simplifying the product structure.
AUO’s takeover of its smaller rival Quanta Display this year and the exit from display technologies other than LCD, has also helped Taiwanese companies’ performance.