TrendForce: Despite LCD TVs shipment of Taiwan Sis grew by 12.5% in Q2, annual shipment to see decline for the first time

According to statistics of the report on shipments of LCD TV OEM makers in Taiwan by WitsView, the panel research division of TrendForce, the total OEM shipment of LCD TV in Taiwan in Q2 has reached 8.58 million units with a QoQ growth of 12.5%, while a QoQ growth of 25% can be expected in Q3. However, the annual OEM shipment is expected to see a decline for the first time with a YoY regression of around 13-16% and with total annual shipment dropping to around 37-38 million units. Meanwhile, WitsView has also reduced the forecast of total LCD TV brand shipment in 2012 to around 207 million units (as shown in Table 1) with an estimated annual growth of only 3.2%, while further downward revision has not been ruled out yet.

Table 1: The forecast on global shipments of LCD TV brand makers and LCD TV OEM makers in 2012 (K-PCS)

Source：WitsView

As indicated by Mr. Burrell Liu, the research AVP of WitsView, the main reasons for regression of LCD TV OEM shipment in Taiwan include: 1. The end demand has been affected by the stagnant global economy. 2. The over-reliance on Japanese brands whose competitive edges have been long gone. 3. Instead of the original strategy of pursuing market share, Japanese brands have now switched to the strategy of pursuing profitability. 4. The supply shortage of certain panels has led to unfulfilled order demand. 5. The emergence of second and third-tier OEM makers in China (accounting for 9.9% of total global OEM market share in 2010, while it is estimated to account for 13.4% this year).
Prior to 2011, the Japanese LCD TV brands have accounted for 30~34% of global demands for LCD TV, and such market share has dropped to 29% in 2011. It is expected to further drop to 22-23% this year. The market share of Korean makers has continued to grow with an estimated market share rising above 32%. Due to the support by policy benefitting the people, the market share of Chinese brands is expected to equal or surpass the market share of Japanese brands (as shown in Figure 1).

Figure 1: 2006-2012 (e) The overview of variation of regional market share of global LCD TV brands

Source：WitsView

From the perspective of the estimated annual OEM shipment of LCD TV in Taiwan, only Compal and Unihan have shown single-digit growths, while other brands have all shown regressions. Orders from Japan have accounted for 65% of total OEM in Taiwan. Under the threats of second and third-tier brands in China, LCD TV OEM makers in Taiwan have been actively pursuing future alternatives. For example, Compal has begun exploring the LCM (or BMS) OEM model, while Foxconn has found a new starting point of vertical integration based on SHARP G10 hoping to reach new height following the prior vertical integration mode of Innolux. In addition to the increased module OEM, Wistron will also acquire a certain brand OEM maker in China in order to increase the sources of orders. Briview has been performing well in terms of BMS (Backlight Module System) OEM. In addition to the orders from Samsung and Toshiba, it is expected to secure BMS OEM orders from SONY and Panasonic next year. However, the OEM of whole machine still requires the full support by the company.

WitsView noted that the second and third-tier OEM makers in China have been growing and should not be overlooked based on their advantages of LCM (or BMS) cost and exporting strategies in conjunction with support from some Chinese brands and domestic demands. Based on the prior LCM experience of monitor and the assistance from backlight manpower of Samsung panel factory, Samsung (SEC VD) has utilized their capabilities of vertical integration and control over all material costs to become the most successful case of optimized cost effectiveness of BMS among all brands. With the fading of Japanese brands, LCD TV OEM makers in Taiwan should take bigger steps forward with a more aggressive BMS strategy and recruiting plan in order to compete with the second and third-tier OEM makers in China. After all, the price and cost remain the first priority for consumers during economic downturn. Instead of losing R&D talents of backlight and film material to panel makers or competitors across the strait, Taiwanese makers should adopt more aggressive strategies for future layout and pursue the upward whole-machine integration in order to achieve cost optimization and enhanced competitiveness.