Taiwan still ranks number two in the world in LCD production after losing the top spot in the third quarter of last year, statistics from computer-display research firm DisplaySearch show.
The nation entered the market in 1999 and rapidly rose to the number two spot in the world in the manufacture of thin-film transistor liquid-crystal display (TFT-LCD) panels, says Wang Chien-erh (王建二) president of DisplaySearch's Taiwan branch.
"There are basically only three players [in the market] -- South Korea, Taiwan and Japan," said Debbie Wu (吳岱玲), an analyst at Yuanta Core Pacific Securities Co in Taipei.
South Korea supplied 42 percent of the world's TFT-LCD panels last year, followed by Taiwan with 37 percent, and Japan with 21 percent.
Japan, which dominated the industry in the 1990s, has been squeezed out in the past two years by cheaper products from its two rivals, according to DisplaySearch.
With the exception of Sharp Corp, Japanese companies no longer produce the most popular size of panels -- 14- to 17-inch screens -- concentrating instead on more advanced technologies at the top and bottom end of the size spectrum.
Japan now leads in the manufacture of plasma screens measuring up to 60 inches across and small color screens for mobile phones.
Taiwan competes head-to-head with South Korea in the mass production of the most popular sizes, but lags six months behind in technology.
The reason is that South Korea's government subsidizes research, whereas the central government does not, Wu said.
Samsung Electronics Co and LG. Philips LCD started producing the newest generation of larger 17-inch screens this month, but local TFT-LCD manufacturers will not mass-produce the same products before summer.
The industry has seen plummeting prices since the Taiwanese started mass-producing flat-screen panels, creating an oversupply globally.
In the second half of last year, prices fell below production costs, causing local manufacturers to post losses in the last two quarters.
As local manufacturers prepare to catch up with their South Korean rivals in new fifth generation, or 5G, technology, prices have recovered briefly, but this will change again soon, analysts say.
"Prices will recover in the first half of 2003, but once Taiwan's 5G lines go on-line, prices will fall again, stabilizing at the end of 2003," said Martha Chen (陳紅), an analyst at Primasia Securities in Taipei.
The South Koreans have been shocked by Taiwan's rapid rise, but see future challenges from closer to home. China will constitute a major threat to the South Korean market within six to eight years if it doesn't continue to invest in technology, warned Chin Dae-je, president of Samsung Electronics' digital media division last month.
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