Display-sourcing strategies are becoming clear, and not because screen resolution technology is any better. LG Display, according to reports in The Wall Street Journal, announced today its second-quarter net profit declined by 96 percent from a year ago. So recent moves by panel manufacturers Toshiba Corp. (Tokyo: 6502) and Sharp Electronics Corp. are making sense: The display market is bottoming out.
Last week, Toshiba sold one of its LCD manufacturing plants to Compal Electronics in an effort to revamp its LCD supply chain. Also last week, Sharp and Foxconn announced they were establishing a joint venture for the procurement of LCD TV panels and components. Although market research firm IHS iSuppli noted that LCD TV prices in the US increased in June, global prices are dropping and panel makers have had difficulty sustaining profit margins. The result, says IHS iSuppli analyst Juffrey Wu in a press release, will be the increased outsourcing of panel manufacturing:
The continued growth of the LCD TV industry during the last couple of years, in spite of the economic downturn, has further intensified the competition among television brands and contract manufacturers. However, even amid this growth, prices have fallen, causing profit margins to dwindle and prompting brands to increase outsourcing to achieve greater cost efficiency.
Although Toshiba maintains it is not exiting the LCD manufacturing market, the sale of its Mexico plant to Compal is an outsourcing agreement. Toshiba will continue to source from the plant and said the sale is aimed at increasing efficiencies in its local panel procurement. The Mexico facility supplies panels for end-products destined for the Americas region, Toshiba told EBN.
Source:http://www.ebnonline.com/author.asp?section_id=1071&doc_id=231593&itc=ebnonline_gnews
