LG has announced that it will be buying millions of its LCD panels from rival company, Sharp. The Korean company said yesterday that it would be buying two million 32-inch LCD panels from Sharp, and an unknown quantity of 52-inch ones too.
LG already buys in a large number of its LCD panels from third parties, but due to a shortage of 32-inch and 52-inch panels, this is the first time LG has gone to one of its biggest rivals.
Sharp has the ability to manufacture more LCD panels than many other companies, which is why it is able to supply LG with these extra products. It also helps that Sharp makes some extremely good LCD panels.
It’s actually not the first time that Sharp has partnered with another TV manufacturer in recent months. It bought a stake in fellow-Japanese company, Pioneer not long ago. Pioneer recently announced its withdrawal from the plasma panel market, and it’s expected that it will start selling LCD TVs using panels made by Sharp before the end of 2008.
What does it all mean?
The implications of these kind of deals are far-reaching, and it’s all to do with economies of scale. The more panels that Sharp can produce and sell on, the lower its manufacturing costs become.
And in the end, this is good for everyone. It’s good for Sharp, because low manufacturing costs mean it can keep its own TV products competitively priced. It's also good for companies like LG, who are able to buy in LCD panels for less. These companies are then able to pass on the low costs to consumers. Everyone saves money, and everyone stays happy.
What's more, the ability to supply these cheaper products will help the likes of Sharp, LG and Samsung fend off the inevitable challenge from Chinese manufacturers, who are able to make really cheap products. Some analysts think that China is destined to become the major player in TV production, which is something the Japanese giants are understandably not keen on at all.
We’ve contacted Sharp for a statement on this matter.
del.icio.us
Digg
reddit!
Facebook
Stumbleupon
Newsvine
Your comments (3) Click to add a new comment
elmoscog
March 13th
3. While I don't disagree that LG buying from Sharp has implications to the flat panel space, I do disagree with your conclusions and some of the facts. First, Sharp is not the biggest producer of LCD panels, nor does it have the current capability to produce more panels than others. In 2007, AUO was the largest TV panel producer, with 19.5M units, followed by Samsung, LG Display, and Chi Mei. Sharp produced ~9.5M panels, considerably behind the others. In 2008 it is expected that while Sharp will increase TV panel production by 67%, they will remain roughly #5 in unit volume for TVs.
What will ultimately be beneficial for the consumer, and the industry as a whole, would be panel manufacturers focusing on reducing LCD material costs, which are up to 75% of the cost of a panel. Building larger fabs, while it does spread costs across more glass, has been done in many instances to capture market share (look at the rivalry between Korean manufacturers samsung and LG Philips in 2006), and while this ultimately caused an oversupply and reduced prices (good for the consumer), it was a very bad time for the industry. More recently, panel manufacturers have shown some restraint in new fab construction, but things change quickly and another rivalry (which could potentially occur in 2010 when a new player enters the market) could once again make life difficult for the industry.
As to the chinese...unfortunately the do not have the technical expertise or the reliable infrstructure to compete in the LCD TV market currently. The three panel producers in china were unable to even agree on a way to join together to capitalize on economies of scale. It will be years before the chinese will be significant players in local panel production. The chinese are very good at assembling panels, modules, and sets, but are not technically advanced enough to build large fabs yet. Also, they need to have a reliable infrastructure to run such fabs, which is a question in china. Japan, Korea and Taiwan have spent those dollars years ago.
Alert a moderator
elmoscog
March 13th
2. While I don't disagree that LG buying from Sharp has implications to the flat panel space, I do disagree with your conclusions and some of the facts. First, Sharp is not the biggest producer of LCD panels, nor does it have the current capability to produce more panels than others. In 2007, AUO was the largest TV panel producer, with 19.5M units, followed by Samsung, LG Display, and Chi Mei. Sharp produced ~9.5M panels, considerably behind the others. In 2008 it is expected that while Sharp will increase TV panel production by 67%, they will remain roughly #5 in unit volume for TVs.
What will ultimately be beneficial for the consumer, and the industry as a whole, would be panel manufacturers focusing on reducing LCD material costs, which are up to 75% of the cost of a panel. Building larger fabs, while it does spread costs across more glass, has been done in many instances to capture market share (look at the rivalry between Korean manufacturers samsung and LG Philips in 2006), and while this ultimately caused an oversupply and reduced prices (good for the consumer), it was a very bad time for the industry. More recently, panel manufacturers have shown some restraint in new fab construction, but things change quickly and another rivalry (which could potentially occur in 2010 when a new player enters the market) could once again make life difficult for the industry.
As to the chinese...unfortunately the do not have the technical expertise or the reliable infrstructure to compete in the LCD TV market currently. The three panel producers in china were unable to even agree on a way to join together to capitalize on economies of scale. It will be years before the chinese will be significant players in local panel production. The chinese are very good at assembling panels, modules, and sets, but are not technically advanced enough to build large fabs yet. Also, they need to have a reliable infrastructure to run such fabs, which is a question in china. Japan, Korea and Taiwan have spent those dollars years ago.
Alert a moderator
elmoscog
March 13th
1. While I don't disagree that LG buying from Sharp has implications to the flat panel space, I do disagree with your conclusions and some of the facts. First, Sharp is not the biggest producer of LCD panels, nor does it have the current capability to produce more panels than others. In 2007, AUO was the largest TV panel producer, with 19.5M units, followed by Samsung, LG Display, and Chi Mei. Sharp produced ~9.5M panels, considerably behind the others. In 2008 it is expected that while Sharp will increase TV panel production by 67%, they will remain roughly #5 in unit volume for TVs.
What will ultimately be beneficial for the consumer, and the industry as a whole, would be panel manufacturers focusing on reducing LCD material costs, which are up to 75% of the cost of a panel. Building larger fabs, while it does spread costs across more glass, has been done in many instances to capture market share (look at the rivalry between Korean manufacturers samsung and LG Philips in 2006), and while this ultimately caused an oversupply and reduced prices (good for the consumer), it was a very bad time for the industry. More recently, panel manufacturers have shown some restraint in new fab construction, but things change quickly and another rivalry (which could potentially occur in 2010 when a new player enters the market) could once again make life difficult for the industry.
As to the chinese...unfortunately the do not have the technical expertise or the reliable infrstructure to compete in the LCD TV market currently. The three panel producers in china were unable to even agree on a way to join together to capitalize on economies of scale. It will be years before the chinese will be significant players in local panel production. The chinese are very good at assembling panels, modules, and sets, but are not technically advanced enough to build large fabs yet. Also, they need to have a reliable infrastructure to run such fabs, which is a question in china. Japan, Korea and Taiwan have spent those dollars years ago.
Alert a moderator
Tell us what you think
You need to Log in or register to post comments