Chinese flatscreen makers, once dismissed as second-class players in the global LCD market, are drawing envious looks from big names such as LG Display Co Ltd and Samsung Electronics Co.
While the South Korean giants were busy developing next-generation organic light emitting diode (OLED) televisions, little-known Chinese companies have started selling a type of display that is sharper than the standard LCD and cheaper than OLEDs — Say hello to ultra-high-definition (UHD) displays.
METEORIC RISE
Until last year, the UHD market had been almost nonexistent, with just 33,000 sets sold in the 200 million unit LCD television market. Since then, shipments have soared about 20-fold, thanks to China, data from research firm IHS shows.
Chinese consumers who want brighter and sharper images, but cannot afford OLED screens made by LG and Samsung Display, a unit of Samsung Electronics Co Ltd, are turning to UHD.
As South Korean display makers work on their response to this growing menace, Chinese UHD makers are enjoying the fattest margins in the industry.
Even cross-strait rivals Innolux Corp (群創光電) and AU Optronics Corp (友達光電) of Taiwan have joined in the fray, drawn by promises of big profits.
The risk for OLED displays is that the newcomer may become mainstream and the long-awaited cheaper OLEDs will arrive too late to displace it, analysts say.
OLEDs’ long-term potential is huge as they feature ultra-high resolution and can be thin enough to conceivably be curved or even rolled up, among other things.
However, their slow introduction into the market and austere prices have thrown open a window of opportunity for UHD makers, in this case, Chinese companies like BOE Technology Group Co Ltd (京東方) and TCL Corp’s LCD unit, China Star Optoelectronics Technology (華星光電).
In China, 55-inch UHD models sell for about US$1,800. By contrast, an OLED set of similar dimensions sold by Samsung costs about US$10,000.
“[I] have to admit that we hadn’t fully appreciated the potential of the UHD market,” LG Display chief executive Han Sang-beom said recently.
“We assumed it’ll be too early for this type of display to take off and thus didn’t think much of having diverse UHD product line-ups, especially in the low end, but I think we are not late just yet and we are working hard to lead the market here,” Han said.
In the second quarter ended on June, Shenzhen-listed BOE Technology reported an 8.9 percent operating profit margin, while China Star Optoelectronics posted a 9.6 percent margin.
By comparison, Japanese flatscreen pioneer Sharp Corp reported a razor-thin 0.5 percent operating profit margin and LG Display, the world’s No. 1 LCD maker, posted a 5.6 percent margin.
Samsung Display, a unit of Samsung Electronics, had a margin of 13 percent, the biggest in the industry. Yet excluding its fledging OLED business, its LCD margin is between 3 percent and 7 percent, according to a Bernstein Financial Services forecast.
Just as South Korea overtook flatscreen pioneer Japan in the early 2000s, the surprise offensive by Chinese flatscreen makers may be a taste of what is to come, analysts say.
Chinese UHD producers have steadily expanded their capacity. In terms of cost and technological know-how, UHD screens present lower barriers to entry compared with their OLED counterparts.
EARLY BIRDS
“The Chinese have done very well so far this year and their momentum is likely to continue at least for another year or so, as they have spotted the potential of this niche market well ahead of bigger rivals,” said Nam Dae-jong, an analyst at Hana Daetoo Investment & Securities.
“They’ve got also strong captive customers: Chinese TV manufacturers and a booming China market. It will take quite a while for Samsung and LG, which made a strategic mistake by ignoring the potential of UHD, to overtake them,” Nam said.
Jolted by the reality of the growing UHD market, Samsung Electronics unveiled a 110-inch UHD TV in January. Interestingly, the UHD displays were not made by Samsung Display, but were produced by AU Optronics.
“Even with some expansion of the Chinese panel suppliers, we do expect Samsung and LG Display to stay dominant and continue production in LCD,” IHS director Sweta Dash said.
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