Research and Markets (http://www.researchandmarkets.com/reports/c69008) has announced the addition of Large-Sized TFT-LCD Industry Report, 2006 to their offering.
The labor cost only accounts for 6% of the total cost, while the cost of raw materials accounts for 70%. To reduce the cost of 17-Inch TFT-LCD panel production, the key is to reduce the cost of raw materials. This is the reason why TFT-LCD panel manufacturers must perfect the supply chain. The raw materials cost of 32-inch LCD-TV accounts for more than 79% of the total cost. The TFT-LCD industry is an upstream-dominant industry. On the one hand, only a few manufacturers exist in the upstream market, less than 10 manufacturers in each field of color filter, glass substrate, driver IC, backlight unit, polarized panel and liquid crystal. Moreover, Top 5 in each filed are having about 70% to 100% market shares. On the other hand, the photoresist for color filter, CCFL lamp for BLU and TAC for polarized panel, are monopolized by less than five manufacturers. Therefore, this report mainly focuses on the upstream domain. Although the revenues of AUO and CMO were far behind of Samsung and LG Philips, CMO and AUOs gross margin was 7 and 6 times more than that of LG Philips respectively. Nevertheless, almost all secondary-line manufacturers suffered a loss.
The high gross profit mainly resulted from the good layout on raw materials, but not relying on low labor cost. Except for glass, AUO and CMO can produce all other upstream raw materials. Considering the cost of raw materials accounting for more than 70% of the total cost of LCD panel, manufacturers in Taiwan naturally make more profits than Samsung and LG Philips. Take AUO as an example, the Wellypower, affiliated with AUO, can provide CCFL lamps; the Daxon which was invested by AUO, can produce polarized panel. Moreover, AUO can self-provide color filters, the Corning, locating in the same industrial park with AUO, can provide glass substrate, the Novatek, also affiliated with AUO, is the largest TFT-LCD Driver IC manufacturer in the world.
Compared to AUO and CMO, secondary manufacturers suffer great loss. BOE has a huge deficit of RMB 570 million, and its revenue is the least. SVA Group also suffers a lot. BOE takes 17-inch TFT-LCD panel as its knockout product, while SVA NEC regards 15-inch TFT-LCD panel as its leading product. Nevertheless, the market development of 15-inch TFT-LCD panel is quite limited, only having thin profit margin.
Except for glass substrate, Taiwan manufacturers can produce other raw materials by themselves, whose quality is better than original auxiliary components made by Korean manufacturers. Manufacturers can hold purchase right under the condition of mastering the core technology of TFT-LCD panel, as technical engineers finally decide the purchase of raw materials. As long as manufacturers reserve purchase right, they are able to compete in the upstream market. The technology of BOE comes from Hydis, while SVAs technology is from NEC. It is well-known that NEC has already completely withdrawn from LCD market. Therefore BOEs technology is stronger than that of SVA. The most important process for producing TFT-LCD panel is Array, similar with the process of wafer fabrication. What differs is that wafer is put on silicon chip while TFT-LCD on glass substrate. Taiwan manufacturers have rich experience in producing wafer as well as manufacturers in Korea and Japan. But mainland manufacturers pretty lack of experience in manufacturing wafer.
Additionally, the establishing industry chain is not simply attracting manufacturers to move into its own industrial park. What the most important is that manufacturers must master its own technology and productivity, and then have power to occupy upstream market. Like AUO in Taiwan, it is the parent company of Daxon and Cando, big shareholder of Wellypower as well as an affiliated company of Novatek. Whereas, even if BOE or SVA NEC attracts overseas providers to move into China, these overseas providers will still transfer their profits to overseas markets. Since price given to BOE or SVA NEC won’t be lower at all, the possibility of loss exists.
Manufacturers won’t make huge profits unless they completely master technology and production capability, but it needs a long course and huge financial support.
Please note this report is currently only available in Chinese. However, if you wish to obtain an English version, a translation service is available which will take 3-5 working days.
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