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Companies Focus on Strategic Sourcing of Displays

There have been a number of moves in recent weeks that underscore the increasing importance of displays as part of manufacturers' overall sourcing strategies. Panel makers, such as {complink 4907|Sharp Electronics Corp.} and {complink 5648|Toshiba Corp.}, and consumers of displays, such as {complink 2125|Foxconn Electronics Inc.} and {complink 1259|Compal Electronics Inc.}, are shoring up their supply lines through joint ventures and outsourcing agreements targeted at reducing procurement costs.

According to Asian trade journal DigiTimes, Sharp and Foxconn are establishing a joint venture for the procurement of LCD TV panels and components. According to DigiTimes, the driver behind this move is to minimize costs and to better compete against South Korea-based vendors:

    Joint procurement will include glass substrates and color filters (CF), the report indicated. Through the joint venture, Chimei Innolux (CMI), an affiliate of Foxconn, will provide Sharp with TV panels of 20-40 inches, while Sharp will supply 60-inch and larger panels for CMI to minimize production costs, it added. In line with the exchange in panel supply, Sharp has transferred energy-saving panel technology to CMI and will appropriate part of in-house capacity for making small- to medium-size panels used in smartphones and other types of terminal devices.

Last week, Toshiba said it was revamping its Americas LCD supply chain by selling one of its panel manufacturing plants in Mexico to Compal Electronics. A Toshiba spokesperson told EBN in an email:

    This transfer of the Mexican plant is positioned in Toshiba's continuous, overall review of the optimum production/supply structure of LCD TVs for major markets. Toshiba is committed to reinforcing our global presence in the LCD TV market, including Mexico, and we continue to use the Mexican plant, which will be transferred to Compal in terms of ownership, as an important source of Toshiba-branded TVs.

    Other than Mexico, our major LCD TV plants are in China, Poland, Indonesia and Egypt. We have also been using Compal as an ODM source of TV products for the North American markets.

Panel prices are going up: Market research firm IHS iSuppli reports LCD TV prices in the US increased by as much as 14 percent in June. However, this is on the heels of a prolonged price decrease and oversupply in the global display market. And IHS iSuppli does not expect price hikes will continue:

    Overall for June, trends showed many premium features experiencing a price decline. Given that the U.S. TV market is mature, brands will need to keep offering attractive features like full high definition, LED, Internet-enabled capabilities and 3-D in order to continue moving forward—all the while keeping prices in mind, IHS believes. This is especially true as the country continues to grapple with the effects of a weak housing market, high unemployment and elevated gas prices.

I'm not yet sure what any of this means or if it has implications for the overall LCD market. It does seem clear, though, that displays continue to be the focus of strategic sourcing initiatives.

4 comments on “Companies Focus on Strategic Sourcing of Displays

  1. Jay_Bond
    July 19, 2011

    It is interesting to see that cost have risen 14%, but the marketplace is still cutting prices to get consumers to purchase their product. I would assume that they are just slightly cutting into their profit margin in order to keep sales going. I'm not surprised that multiple companies are creating partnerships and joint ventures to help reduce costs. I have a feeling we are going to see this happen more often and in other segments throughout the supply chain.

  2. HM
    July 19, 2011

    That is interesting. So probably strategic sourcing is fair even with lower margin since the percentage of time and man power consumed in making the product is also low.

  3. Nemos
    July 19, 2011

    “Sharp and Foxconn are establishing a joint venture for the procurement of LCD TV panels and components.”

    That is great news, I hope this will stabilize the increasing prices of LCD. The Lcd panel is a basic part in almost all electronic devices and it determines the total price of the product.

  4. saranyatil
    July 21, 2011

    This joint venture  is definitely going to help many there will be a considerate increase in the price initially may be later on it will stabilize.

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