Friday, July 22, 2011

Accelerates:Display Market Outsourcing Accelerates

Screen-sourcing strategies are increasingly evident, not because technology is better screen resolution. LG Display, according to reports from The Wall Street Journal, today announced its second quarter net profit fell 96 percent from a year ago. How recent moves by the panel of manufacturers Toshiba Corp. (Tokyo: 6502) and Sharp Electronics Corp. makes sense: The display market is bottoming out.

Last week, Toshiba sold one of its LCD manufacturing plants to Compal Electronics, in an effort to modernize its supply chain for LCD. Also last week, Sharp and Foxconn announced it would establish a joint venture for the purchase of LCD TV panels and components. Although iSuppli market research firm IHS said that prices of LCD TVs in the U.S. rose in June, world prices are falling and panel manufacturers have struggled to maintain profit margins. The result, says iSuppli analyst Wu Juffrey IHS in a press release will be the increased outsourcing of manufacturing of panels:

The continued growth of the LCD TV industry over the last couple of years, despite the economic crisis has further intensified the competition between brands of television and contract manufacturers. However, even in the midst of this growth, prices have fallen, causing profit margins to decrease and leading brands to increase outsourcing to achieve greater cost efficiency.

While Toshiba maintains that it is out of the LCD manufacturing market, selling its plant in Mexico to Compal's outsourcing agreement. Toshiba will continue to power the plant and said the sale is to increase efficiency in its acquisition of the local panel. The panels supply facilities in Mexico to end products for the Americas, Toshiba said EBN.
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