The Final Battle:LCD TV

The TV of the new era will be more than a black box.

Take a stroll to Hannspree's flagship store on Dunhua South Road in Taipei, and see what Hannspree calls a design revolution reflecting individual tastes. It is not only adopting Hitachi's AS-TPS wide-angle technology to attract consumers, it is also winning them over with an innovative appearance featuring bags of French fries, teddy bears and American NBA pro-baseball-a revolutionary point-of-sale design.

"Let the cold TV be warmed by human feelings and a life aesthetic"-this is the bold program adopted by Hannspree to reflect consumers' tastes and interests. With an outlay of NT$5.5 billion aimed at acquiring rights from the American NBA and Disney, Chiao Yu-chi, concurrent chairman of Hannspree and HannStar Display Corporation, personally made repeated trips to the US to carry out negotiations.

Only time will tell whether Hannspree, which was only established last year, can succeed in the fiercely competitive consumer electronics market. But in fact the company found itself with little choice but to take this plunge.

Leaving Taipei behind, and stepping into Hannstar's Yangmei and Tainan plants, production-line employees anticipate that once the new brand is launched it will soak up a 40% production-capacity surplus. This will make it possible to break out from depressed profits and escape from the fate of remaining an original equipment manufacturer (OEM).

As well as providing better visual quality, could the future of televisions also lie in their ability to reflect the unique tastes of their owners? This picture shows Hannspree's Batman set.

Another MIT

In view of an annual global market for TVs of over 160 million units, Taiwan's five "flat-panel tigers" cannot but see the next ten years as a decisive battle. This is particularly so given the rapid popularization of large flat-panel TVs, bringing down prices with ever-growing demand. Given that market growth for that other flat-panel mainstay-personal computer displays-has become volatile, securing a strategic position in the LCD TV market has become essential for industry players.

According to an estimate by the Market Intelligence Center, sales of LCD TVs this year could account for some 20 million units, or more than 10% of the entire global TV market. Of that, Taiwan is expected to account for more than 3.4 million units.

Principally an OEM manufacturer, Chi Mei Optoelectronics last year accounted for 15% of global LCD TV output, putting it in third place behind South Korea's LG Philips LCD and Samsung Electronics. Today, international companies such as Gateway, Hitachi, HP, Sharp, Sony and even mainland China's Haier, are all competing for Taiwan's flat-panel OEMs' products. Even South Korea's LG Philips, itself a flat-panel giant, has come to Taiwan to place orders, hoping that Taiwan's production capacity can help it rapidly increase its market share.

Facing the decisive LCD-TV battle, HannStar chairman Chiao Yu-chi has personally invested in Hannspree, deciding to take the road of branding. He is not alone. Although the future direction of Quanta Computer Group's Quanta Display Inc. remains unclear, Taiwan's biggest flat-panel maker AU Optronics Corporation, part of the BenQ Group, has been aggressively promoting the BenQ brand, while Chi Mei has established its own brand, Polyvision Nexgen Mediatech. Meanwhile Chunghwa Picture Tubes, subordinated under local home appliances giant Tatung Corporation, is the only Taiwanese manufacturer of CRT, LCD and plasma TVs.

"It seems that the five flat-panel tigers have identical tactics in the battle to advance LCD TV," says Photonics Industry and Technology Development Association vice president Frank Ma. He notes that, on the one hand, they are upgrading their production lines to reduce costs and prices, while using OEM orders to maintain revenues; and, on the other hand, they are developing branding, in an effort to one day become equal competitors with the companies they presently rely on for orders.

"The profits in OEM are thin, and compared to personal computers, purchasers of LCD TVs and other consumer electronics tend to rely more on brand names," says Ma, while also noting: "The path from OEM to branding will be steeper for LCD TV makers it was for Taiwan computer manufacturers in the past."

Compiled by vito lee,
art by Tsai Chin-pen

Pincer attack

In the coming new era's big battle to eliminate the CRT TV, the leading players in the first wave are actually plasma TV makers.

Comparing LCD TV and plasma TV, in terms of attributes such as picture quality and response speed, not to mention LCD's tendency to leave an after-image during rapid changes, before 2004 LCD was consistently inferior.

Add to this in particular the fact that, despite the efforts of Taiwanese and South Korean players, until now supply shortages and high costs have made it unprofitable for large-size LCD panels to compete with plasma TV.

Looking ahead, that situation should change. "With the technology constantly being upgraded, LCD panels are getting bigger and bigger. To date four manufacturers have achieved volume production of 47-inch panels; with prices now sliding, it may be that LCD's time has come in the battle for control of the post-CRT TV era," says the vice-secretary-general of the Taiwan Electrical and Electronic Manufacturers Association, Luo Huai-chia. Nevertheless, it is still not certain that the door to the world market has been flung open for LCD TV.

"Facing the huge commercial opportunity of a steady explosion in demand for LCD TV, we hope that governments everywhere will unconditionally open up their markets, though obviously that's not going to be easy," says Luo. It will be difficult because many governments, faced with an oligopolistic market, apply measures such as requiring increased local sourcing by manufacturing operations in their countries, or levying punitive anti-dumping duties.

Compiled by vito lee and Lin Ying-yi,
art by Tsai Chin-pen

Constant redefinition

Since 2002, LCD panels have significantly captured the TV market, seeing a growth rate of 105% in 2003, and slightly less in 2004 at 94%. At the same time, the computer-screen market grew by only 60% in 2003 and 32% in 2004. A long-term favorable outlook is stimulating investment, but all the same nobody can say with certainty where it's headed. In the fourth quarter of last year, the flat-panel sector again experienced oversupply and plummeting prices.

Despite a confusing outlook, manufacturers are still prepared to enter the self-branding fray. The reason is very simple. "For the last half century, all of Taiwan's major manufacturers have passed through the OEM era of narrow profits, and everybody understands the value of branding," says Lin Ying-yi, special projects manager for the Taiwan Electrical and Electronic Manufacturers Association. In the past, electronic products adhered to a "philosophy of the second-rate," following the American lead with standardization, low prices, and rapid delivery, and the only exception was probably Acer.

Since starting to concentrate on developing its notebook brand in 2001, Acer has endured the agony of falling ODM orders as it made the transition from contract manufacturer to own-brand manufacturer, before last year finally achieving success and taking the leading position in western Europe's notebook computer market, thus becoming Taiwan's most representative value brand.

Can Taiwan produce another proud brand success story like Acer in the consumer electronics market, which has seen such rapid growth in OEM/ODM manufacturing over the past six years? Can this sector take Taiwan to new economic heights?

As the LCD flat panel industry takes the baton from the silicon wafer OEMs, becoming the new fount of Taiwan hi-tech prowess, those questions have many people breathless with anticipation.