Abstract

Many Variables Still Exist in TFT Panel Supply Relationships

Sufficient Production Capacity, Stable Supplies Are Vital

In the mobile phone market, demand is high but product life spans are short and customer concentration is high, so panel production capacity can be affected. Mobile phone manufacturers are very concerned about the capacity promises of their display panel suppliers. Japanese companies specializing in the development of small- and mid-sized display panels have an easier time accommodating international manufacturers in terms of production capacity than Taiwanese and Korean TFT manufacturers which simultaneously focus on panels of all sizes. However, with Taiwanese and Korean already having established higher generation lines' product development strategies and with supply and demand entering seasonal cycles, there are special production lines for the production of small- and mid-sized panels. As TFT technology becomes more common large mobile phone manufacturers will be forced to find more suppliers; but these suppliers must have economies of scale and be able to conform to logistics systems of large manufacturers in order to keep costs low and respond to changes as demanded by these large manufacturers. Only then will long-term relationships be formed.

Integration of Components Continues

In the past Japanese TFT manufacturers needed to support companies within their conglomerates and were supported in turn by semiconductor divisions in the same conglomerates. This allowed them to meet the needs of mobile phone manufacturers, develop specifications, and lead the market. With the entrance of Korean and Taiwanese companies into the market, although many IC companies are still unable to win large orders and support their product development, and are therefore unable to gain strong market share, but they are able to assist the standardization of specifications and indirectly contribute to the fall in LCM prices. Japanese companies use LTPS technology more often than a-Si, and because the LCD driver ICs used by LTPS products must be customized, these companies must have stable component suppliers. But the LCD driver ICs used by a-Si panels have long used non-Japanese products, which is the main reason why Japanese LCD driver IC manufacturers are still having difficulties dominating the market. As the Taiwanese TFT panel industry value chain has become increasingly comprehensive, there are more and more TFT panel LCD driver IC manufacturers entering the industry. Larger Taiwanese TFT manufacturers are actively investing money to establish close partnerships with LCD driver IC makers. This is done in order to control the schedule of specification development and ensure product supply. Mobile phone manufacturers also have an indirect influence on TFT manufacturers' decisions on LCD driver IC, creating complex business models in the supply chain. This forms an even greater impetus for TFT manufacturers to form close relationships with LCD driver IC makers in order to gain a place in the market.

Taiwan's Role in Handset Industry Beneficial for TFT Panel Makers

Taiwanese companies account for only 10% of the world's mobile phone contract manufacturing, but ODM (Original Design Manufacturing) and OEM (Original Equipment Manufacturing) makers control panel procurement rights, providing a key channel for Taiwanese TFT makers to obtain orders. In addition, large EMS (Electronics Manufacturing Services) companies, which place a premium on vertical integration, use contract manufacturing to bring their group's TFT units into the supply chain. This also lowers the entry threshold for new TFT makers and creates long-term partnerships. This is an advantage for Taiwanese TFT manufacturers, and is an important way for them to expand operations. Also, because mobile phone manufacturers have recently been focusing on developing the value-line market, they are making increasing use of contract manufacturing to lower costs. Through the contract production role played by Taiwanese system makers in the mobile phone industry's value chain, Taiwanese panel makers can directly or indirectly enter the supply chain of mobile phone manufacturers.

In general, Japanese manufacturers rely on existing customer relationships, production capacity advantages, and technology leadership to retain their leading position in the mobile phone panel industry. The production capacities of Taiwanese and Korean TFT manufacturers continue to increase, but building up customer relationships will still take a period of time. Add to this the multifaceted character of the TFT business and even STN manufacturers or LCM contract manufacturers without TFT panel front-end production technology all remain very interested in the mobile phone panel business. Currently emerging markets are supplied not only by the top five leading mobile phone manufacturers but also by mobile phone design houses, which also have considerable demand for TFT panels, and are potential markets for TFT, STN, or LCM makers. Color phones are already mainstream in the mobile phone market, but because of the large number of companies and multifaceted supply relationships, panel module supply relationships have created a complex and variable industry, which will impact TFT manufacturers' development strategies in the future.

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