WitsView: Taiwan’s LCD TV OEMs Growing Annually, with 2011 Estimates Around 23%-25% of Worldwide Shipment Demand

According to WitsView, the research arm of TrendForce, Taiwan's LCD TV OEMs shipment by major LCD TV OEMs in Taiwan grew by 7.3% in Q2 relative to Q1 of this year. Demand for worldwide overall LCD TV was adjusted, decreased to 201-203 million. In Q2, brand shipment declined 2% compared to Q1. Although Taiwan's overall LCD TV shipment was affected, the Q2 shipment of Taiwan's LCD TV OEM had a remarkable growth of 7.3%.

1.    Taiwan's LCD TV OEMs growing annually: 2011 estimate around 23-25% of worldwide demand shipment:

Burrell Liu, research associate of WitsView, indicated that starting in 2008, Taiwan's OEM ratio of LCD TV gradually grew from 15.7% to the estimated 23-25% (a volume about 47~49 million) for 2011 worldwide LCD TV (Table 1). According to the worldwide average data, one out of every four LCD TVs was made by Taiwan's OEMs. The gradual growth of Taiwan's OEM LCD TV in overall worldwide demand also demonstrates that it is a future trend for brands to outsource LCD TV. Due to their quality, services, and competitive and cost advantages, Taiwan’s OEMs will remain an important option for the international brands during this economic downturn.

Table1: 2008~2011 TW SI Share Ratio in Worldwide LCD TV Demand

Source:WitsView

WitsView pointed out that Hon Hai Group purchased SONY's TV assembly plants in Mexico and Slovakia (capacity around 15-20 million) last year, Compal also purchased Toshiba's plant in Mexico (capacity around 3-5 million) in the middle of this year; in addition, Hitachi and other brands also intend to release orders to Taiwan's OEMs. These facts demonstrate that the Taiwan's OEMs still possess advantages and growth momentum.

2. Taiwan's LCD TV OEMs shipment status in the first half of the year and Q2:

Chimei's TV OEM unit (formerly Innolux) was formally incorporated into the Hon Hai Group in July; the overall market share increased significantly as a result.  Burrell Liu compared the overall shipment of Taiwan's TV OEMs in the first half of the year (Table 2): TPV ranked first with a market share of 31%. TPV finalized its contract details with Philips TV brand, securing the number one OEM position in 2011 worldwide TV.  Dr. Jason Hsuan, CEO of TPV deserves the credit in various successful strategies and the overall direction in starting TPV's transformation from CRT to LCD display in the 1990s and then followed up with the OEM of LCD TV.

Table 2: 2011 1st Half TW LCD TV SI Share Ratio for TW SI

Source: WitsView

After merging Chimei’s TV OEM, Hon Hai quickly rose to the number two position in worldwide OEM (also number two in Taiwan).  Despite the weak orders from Sony this year, their momentum after the merger, vertical integration synergies, and the close partnership in brand strategy (Sony/Sharp/Vizio) should not be overlooked; they remain a respectable and formidable competitor among all OEMs.

Also worth noting was Wistron, although also affected by the weak demand from Sony, its market share ranked third in Taiwan at 17%. Despite ranking fourth, Compal should have strong growth potential after finalizing the details of cooperation with Toshiba. Amtran, impacted by the decline of Vizio's North American market share, its overall OEM volume only had a 9% ratio in Taiwan; close observation is necessary to determine whether the peak orders from Vizio will reappear in Q4. Even with only a 6% ratio, Unihan's long-term growth power should not be overlooked in particular its 100% ODM strengths and the fact that it has opened up access to the European brands. On a quarter on quarter (QoQ) overall basis in Q2, Unihan had the highest growth of 36%, followed by Hon Hai Group's 18% and Wistron’s 17%. In addition, the overall volume of Taiwan’s TV OEMs falls between 47-49 million in 2011. Each OEM's ratio is shown in Figure 1.

Figure1:2011 TW LCD TV SI YEAR BP SHARE FCST

Source: WitsView

Conclusion:

Despite the fact that worldwide LCD TV brands continued downgrade their annual plans along with the 2% QoQ shipment decline, Taiwan's TV OEMs shipment still grew 7.3%. According WitsView, there will be a 12-15% growth of LCD TV brands in Q3 with contributing factors includes lead time and inventory reduction.  Taiwan's TV OEMs will have an estimated 6-9% growth momentum in Q3. Currently, with the panel supply being greater than the demand, the brand and OEMs’ shipment growth are not helping with the panel price hike; however, it may be good news to the current supply and demand imbalance.

With over half a century's history in Taiwan, CRT TV was immediately followed by the rapid network development and the age of marginal profit where information is available everywhere. However, LCD TV reached its maturity under ten years. Therefore, in addition to profit and loss, Taiwanese manufacturers continue to face problems such as the ODM's in-house design and development capacities, the co-branding strategies and the vertical integration of the supply chains. These are all important factors affecting the momentum for expansion to the next generation of TV assembly. In order to maintain its leadership position in worldwide OEM with the dawn of 3D TV, (2011 penetration rate around 8%, up to 28% in 2013), Taiwan's TV assembly plants has to initiate independent R&D and develop future territories immediately while gradually increasing demand for SMART TV.