With prices of liquid-crystal-display (LCD) panels seeing a gradual drop, Fitch Ratings yesterday said more mergers and acquisitions (M&As) are likely to happen among second-tier panel makers as they seek to increase economies of scale.
"With the declining trend in panel prices, we expect more challenges for the lagging companies to keep pace with the frontrunners," Kevin Chang (張崇人), associate director for corporate affairs in the Asia-Pacific region, told reporters.
These mid-level makers have a more restrained product mix and lower capital spending to fund the establishment of newer factories, and therefore will feel the pressure as panel prices are declining, he added.
"They'll have to resort to M&As for survival, or they'll need to find a niche product line other than the common notebooks or monitors to ensure competitiveness," he said.
Those who can satisfactorily address product mix, cost management and client needs will be the best positioned to maintain their lead, he said.
LCD panel prices for notebooks, monitors and laptops have shown a gradual decrease in recent years, while experiencing a drastic drop in 2004, he said.
"Electronics products are not necessities and purchasing decisions vary from time to time, being mainly dependent on lower price tags," Chang said.
The nation's second-tier panel makers, such as Hannstar Display (瀚宇彩晶) and Chunghwa Picture Tubes Ltd (中華映管), have been feeling the heat since AU Optronics Corp (友達光電), the world's third-biggest LCD maker, announced plans to merge with the smaller player Quanta Display Inc (廣輝電子) on April 7.
The combined entity will create an LCD panel supplier whose market share could potentially exceed that of leaders Samsung Electronics Co and LG Philips LCD Co, according to iSuppli Corp.
In terms of Chi Mei Optoelectronics Corp (
Fitch Ratings also said that LCD TVs will be the new cash cow for panel makers to jump onto.
"As most countries are making a push to switch from analog TV broadcasting to digital between next year and 2012, LCD televisions will enjoy greater popularity among households," Chang said.
DisplaySearch forecasted that LCD penetration in television displays will rise to 46 percent in 2009, from 22 percent this year.
Meanwhile, iSuppli said in a report last Thursday that makers of plasma displays, which rival LCDs, are also being hindered.
"Profitability has been challenging for the majority of plasma-display makers, despite rising consumer uptake of plasma TV sets," the report said.
"Multiple factors are driving consolidation in the market, including swiftly declining panel prices, slower sales growth and increasing competition with alternative technologies in the large-screen TV market," it said.
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