LCD TV Production by Contract Makers to Double from 2010 to 2015: HIS

Worldwide production of liquid crystal display TVs (LCD TVs) by contract manufacturers is expected to nearly double from 2010 to 2015, as plummeting prices and eroding margins force many brands to outsource, according to HIS. 

The major information and analysis provider pointed out that the two major segments of the outsourced electronics business—electronics manufacturing services (EMS) providers and original design manufacturer (ODM) companies—together would produce 127.9 million LCD TVs in 2015, up from 65.1 million in 2010. The EMS and ODM companies would account for 43% of LCD TV unit production in 2015, up from 36.2% in 2010, IHS said. 

Jeffrey Wu, senior analyst for EMS and ODM at HIS, says the continued growth of the LCD TV industry during the last couple of years, in spite of the economic downturn, has further intensified competition among TV brands and contract manufacturers. However, even amid this growth, prices have fallen, causing profit margins to dwindle and prompting brands to increase outsourcing to achieve greater cost efficiency. 

LCD TVs clearly have become the dominant segment in the flat-panel TV market and will continue to drive growth of the flat-panel TV industry. From the 2010 to 2015 period, LCD TV shipments are projected to rise at a compound annual growth rate (CAGR) of 10.6%, expanding from 179.8 million units to 297.6 million units. In comparison, plasma TV shipments would decrease from 19.6 million units to 8.6 million units, equivalent to -16.5% CAGR during the same period, Wu said. In order to capitalize on the growth momentum in the LCD TV industry, brands need to maintain attractive product lineups while containing their costs.

Beyond cost reductions, IHS pointed out, a host of other benefits can be obtained by manufacturers in outsourcing LCD TV brands, including: greater asset flexibility (Original equipment manufacturers (OEMs) increasingly utilize contract manufacturers in order to improve asset flexibility, reduce headcount and contain operating expenses); mitigating the impact of exchange rate fluctuations; EMS and ODM companies deliver an enhanced manufacturing footprint to help OEMs establish presence in the end market; and an increasing number of contract manufacturers offer vertically integrated production, delivering benefits such as cost savings and a leaner supply chain. 

Many troubled Japanese OEMs, including Sony, Sharp and Panasonic, may further increase reliance on contract manufacturers to remain competitive in the LCD TV market, IHS said.