By Liu Cheng
There is appearing an unprecedented trend of accelerated development that enterprises manufacturing complete color TV sets are marching towards the TV LCD module industry as one of the upstream industries.
Since Hisense Group became the first color TV enterprise to get engaged in the TV LCD module industry last year, such color TV enterprises as Xiahua Group, TCL Group and Skyworth Group Co., Ltd have announced their anabasis into the LCD module industry successively. And in the middle of April 2008, Hisense announced to start its construction of module production line (Phase 2). All of the above-mentioned evidences indicate that the complete TV set enterprises have begun to attach great importance on the competition of upstream production.
Why did color TV enterprises want to get engaged into the TV LCD module industry one after another?
For LCD TVs, the costs may be roughly dividend into three segments: those on a LCD module, those on an entire-machine circuit, and those on structural components. And the costs for LCD modules account for about 70 percent of the total shares.
Since 2007, a sharp depreciation of foreign-funded color TV brands has impacted such flat panel TV sets with a Chinese brand greatly. If analyzing the development vision of the entire industry, the status is even less optimistic. It is estimated by a related institution that in 2008, the global sales volume of flat panel TV sets is expected to exceed 100 million sets, among which the sales volume of the LCD TV sets will take up a dominant proportion. If China's color TV enterprises fail to strengthen their capability of cost control on LCD TV sets greatly, they will be trapped in the circumstance of marginalization. Therefore, to actively seek a breakthrough on the upstream industrial chain becomes the only way for China's color TV enterprises.
In terms of the upstream resources of LCD TV sets, it is an unbearable challenge for common enterprises as the manufacture of display panels as a part of LCD modules requires huge investment. So, module manufacture becomes a feasible option for domestic color TV enterprises. A module is a display subassembly assembled with a LCD display panel, connection parts, integrated circuits, printed circuit boards (PCBs), backlight units, and structural components. In a LCD TV set, the costs of a module account for around 70 percent of all costs on a complete TV set; so once the module technology is mastered, plus such technological advantages in terms of the complete TV set circuit and so on, China's color TV enterprises will own independent rights for about 60 percent of the complete TV set costs of LCD TVs in the proportion of controllable costs.
Hisense, ranking No.1 in terms of market shares in the domestic market for flat panel TV sets for 4 successive years, set about preparing for the module industry as early as 4 years ago. Last September, the first production line with an annual production capacity of 500 thousand pieces of television LCD modules ranging from 15 inches to 42 inches was put into production; in April 2008, a production line with a production capacity of television LCD modules with a larger dimension than 47 inches was started up and as planned, two more production lines will be established next year, which will make it possible for the annual production capacity of such modules to amount to 3 million pieces. During such a period of time, Hisense will build up a production line of LED backlight modules as well. On April 7, 2008, Skyworth Group announced that it would make an investment to take shares in LG Display's LCD module factory in Guangzhou, and both parties would set up a joint R&D company, building up such a cooperative mode that will integrate LCD modules and the complete LCD TV sets with efforts. On April 15, 2008, the LCD TV module project cooperated between TCL Group and Sumsung Electronics was initiated in Huizhou, Guangdong, and the annual production capacity of the project (Phase 1) was estimated to reach 2.33 million pieces.
"The module project even matters the survival and development of Hisense's flat panel TVs in a certain extent." Liu Werdong, General Manager of Module Business Department of Hisense Group, told the reporter that Hisense would independently develop such subassemblies, the costs of which will account for more than 60 percent of the total LCD module costs in the future. And the integration of modules and complete TV sets will increase the gross profit margin of Hisense's TV sets further.
For color TV enterprises, the more important purpose to get engaged into the TV LCD module industry is to build up their core competitiveness in the era of flat panel television.
Actually, some color TV enterprises with foreign brands have strengthened and enhanced their differentiation capacities through marching into the module industry. At present, such international color TV giants as Sony, Sharp Electronics Corporation, Panasonic Group, Hitachi Group, Samsung Electronics and LG Group have begun to design and manufacture the TV LCD modules with brilliant technological features successively.
"Once the technology about modules has been mastered, products can be designed absolutely according to one's own idea. And enterprises shall strive to get provided with independent technologies when marching into the module industry, only by which the technological risks can be eluded radically." Liu Weidong expressed that through the technology reservation during over 4 years and the practice in production and manufacture within a year, Hisense had independently mastered the technologies in the design, craftwork and manufacture of modules. Moreover, Hisense's "State Key Laboratory for Multimedia technologies" has conducted preliminary research and development of multiple technologies; Hisense's capacity to provide solutions to complete flat panel TV sets becomes stronger and stronger. The most conspicuous reflection on products is that flat panel TV sets are more and more differentiated. For instance, such new products with an obvious differentiation character launched by Hisense as Zhenguan series 120Hz plus 1080P high definition flat panel TV sets, the third generation recordable flat panel TV sets and high definition plasma TV sets are all provided with obvious characteristics of differentiation.
Lu Renbo, an expert focusing on studies on China's color TV industry, believed that by marching into the upstream of the complete TV set enterprises, it would be possible to get radically resolved the bottleneck challenges of flat panel TV development to be faced up by China's color TV enterprises. Firstly, the costs of a complete TV set could decrease and thus, there would appear more profiting margins; secondly, an innovative design can be conducted at the front end of products so as to shape up the differentiation advantage of products; thirdly, the steps of upgrading products can be accelerated, and the implementation of the state policy on energy reservation and emission reduction can be promoted at the same time. Such an analysis from the expert has been supported with data from various enterprises. As disclosed by Hisense, the newly developed large screen high definition plasma TV sets have realized the effect of saving 47 percent energy through the application of the independent-developed technologies in modules and energy saving.
As complete TV set manufactures and the upstream suppliers conduct close cooperation with one another, richer and more colorful products will been launched in the market; such a fact will surely drive the flat panel TV industry as a whole to develop soundly and fast.
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