HDTVs

	The KLC-4266 from mainland China's Konka is a 42in HD-ready LCD TV with two HDMI inputs.

Greater China suppliers are poised to get a share of a line dominated by major players, starting with small and medium-sized offerings.

Manufacturers of HDTVs in Greater China have expressed readiness to join the full HD trend but are holding mass production and marketing plans until more content becomes available and higher demand evens the playing field currently dominated by major players.

Most mainland China TV makers, for instance, focus on HD-ready rather than full HD models. These large-screen HD-ready models are also targeted at the domestic market, with exports mainly consisting of small and medium-sized TVs. Their Hong Kong counterparts that produce HDTVs stay mostly within the 32in limit for overseas markets, preferring the 19in to 32in low-price segment to avoid colliding with big brands. Some of them, however, test the larger-screen market and offer full HD 37in and above models. Taiwan suppliers underscore their capability to meet orders for full HD units.

These suppliers, totaling more than 100 and coming from various electronics fields, mostly conduct their manufacturing activities in mainland China. The bigger players also maintain offshore facilities near their major markets such as Europe and other parts of Asia to reduce costs in this highly competitive line.

Aside from costs, makers continue to face problems in panel supply, especially of popular 26in to 37in LCDs and PDPs in general. To keep the situation from affecting their operations, makers aim for long-term and stopgap solutions. Some makers have entered joint efforts or invested in their own panel plants, while others have enlisted the cooperation of their panel suppliers.

A number of makers market under their brands, but the business thrust remains anchored on the OEM/ODM industry, especially for exports.

	The Olevia LX370 from SCHOT of Hong Kong features a 37in, 16:9 display with 1920x1080 pixel resolution and PIP function.

Mainland China has between 40 and 50 makers actively producing HD-ready TVs with some offering full HD TVs as well. About 70 percent of the makers are based in Guangdong. After years of development, the industry scale is forecast to stay stable in the near future due to fierce price competition. Production output, however, is expected to maintain a fast growth, thanks to increasing global demand. Lowering prices of flat-panel TVs in general continue to attract the consumer market, displacing traditional CRT TVs. In the domestic mainland China market, the Beijing Olympics is a demand driver.

According to custom statistics, mainland China exported 22.3 million LCD TVs worth $6.6 billion and 559,000 plasma TVs valued at $452 million in 2007. These figures translate to more than 50 percent y-o-y growth for the LCD TV line and about 40 percent for the plasma TV line. This trend is expected to be sustained, further boosting the LCD panel's dominance over the PDP.

PDPs remain in limited supply to mainland China TV companies, while certain sizes of LCD panels continue to be hard to secure. The booming demand for LCD TVs saw the industry face a panel shortage in 2007, specifically for the popular 26in to 37in segment. As an alternative, LG started to provide 32in PDPs to mainland makers in 2007 with Panasonic following suit with 37in PDPs.

Makers believe larger panels will be in a better situation this year as production lines for these panels start operations. Sourcing medium-sized LCDs, however, will still prove difficult.

To address this problem and enhance the LCD supply chain, some leading makers in mainland China have entered the panel industry. Konka Group Co. Ltd and Skyworth have reached a shareholding agreement with LG Display, which is planning to set up a liquid crystal module (LCM) factory for LCD TVs in Guangzhou in Guangdong province. LG Display has an operational LCM factory for LCD monitors in the same city. In cooperation with Samsung, TCL Multimedia Technology Holdings Ltd has started constructing an LCM factory in Huizhou, also in Guangdong. The plant will have an annual capacity of 2.33 million LCMs. Hisense Electric Co. Ltd, on the other hand, is expanding its LCM factory in Qingdao, Shandong province. Once fully operational, the facility will be able to turn out 1.5 million LCMs.

In the PDP segment is Sichuan Changhong Electric Co. Ltd, which announced the launch of its first PDP in 2008. The company's factory in Mianyang, Sichuan province, will be able to produce 2.16 million 42in PDPs after the first phase of its construction is completed.

Aside from panel supply, the increasing power of the yuan against the US dollar is another major challenge for mainland China makers. The rate of increase is about 10 percent y-o-y, affecting their quotes, especially when set against the fluctuating costs of LCD panels. This has forced some makers to review their prices on a per-order basis.

Hong Kong has less than 20 makers of HDTVs, mostly catering to the low-priced 19in to 32in segment. Some companies also offer full HD 37in and larger versions but depend on the small-screen models to drive sales.

As key components become mature and makers in the special autonomous region gain more experience, their LCD TVs are gradually stepping up the quality ladder while keeping their prices competitive. Most suppliers are engaged in the OEM/ODM business. Some are also into own-brand promotion.

Hong Kong makers achieved a total LCD TV shipment value of $423 million in 2007, with annual growth at more than 15 percent. Further boost is expected from the worldwide transition to digital TV and high-definition broadcasting and the steadily falling costs of LCD panels.

	Taiwan's BenQ has the SU4241, which delivers full HD 1920x1080 resolution.

Taiwan, boasting a mature supply chain, is a major manufacturing hub for LCD TVs with a 45 percent worldwide share. It has 30 to 40 companies involved in the line, including about 25 active manufacturers. These companies service an OEM client base and promote their own brands as well. They are capable of meeting demand for full HD units.

Among the notable players are CMO, Proview, Tatung, Amtran and TPV, as well as interviewed companies in this report AsusTek Computer Inc., BenQ Asia Pacific Corp. and Kolin Co. Ltd. Another interviewed company, Nexgen Mediatech Inc., is an affiliate of CMO. Some of the leading companies such as CMO and BenQ have their own panel factories, while other companies like Proview cooperate with panel suppliers to ensure stable supply.

Almost all Taiwan companies conduct their production activities in mainland China with Suzhou being one of the important manufacturing hubs. These makers also have SKD facilities in Europe or in the US to reduce production cost and import tariff.

SKD manufacturing is common in the industry. "Panel makers are building lines next to TV set makers' overseas factories to save logistics costs and enhance flexibility. TV OEM makers are building TV panel module lines not only in mainland China but in Europe as well," explained Deborah Yang, director of Taiwan and China Display Market Research at DisplaySearch.

A duty suspension is in effect for TV panel modules until the end of 2008. "Some TV makers who are producing TV panels in Europe are raising the requests to the EU to modify the tariff suspension. TV makers have to ensure the limited cost gain can cover SKD factory operation and supply chain costs incurred," Yang added.

DisplaySearch has noted that with LCD TV's maturing market, the line faces a period of slow growth accompanied by issues such as tough price competition, low profit, swelling supplier base and a possible market shakeout. Strengthening the cost structure by optimizing manufacturing efficiency has become a key factor to staying competitive. Yang observed, "The LCD TV industry has evolved to an IT-like manufacturing. To create competitive cost and supply advantages to TV brands, TV OEM/ODM makers have to prove their capability in controlling/managing key components and integral supply chain. Strong access to liquidity is required. A strategic partnership with supply chain players can help reduce risks."

A few exceptions to the OEM/ODM trend in companies in this report are mainland China's TCL and Hong Kong's South China House of Technology Consultants Ltd (SCHOT).

TCL exports under the in-house TCL and Rowa brands as well as the acquired RCA and Thomson brands. North America and Europe absorb about 80 percent of TCL's total exports, with the rest distributed to other regions.

SCHOT ships 60 percent of its TV output to distributors of the Olevia brand and 40 percent to OEM/ODM clients. The company has been US-based Syntax-Brillian's official distributor of Olevia LCD TVs since 2004. The success of Olevia over the past two years has prompted SCHOT to intensify its promotion and accelerate its market expansion. Some of its OEM/ODM clients have even started carrying the brand in their markets.

SCHOT's HDTVs are exported to South America, North America and Greater China. The company has stepped up expansion in Europe, the Middle East and Asia-Pacific. It has established an office in Australia and is in the middle of negotiations with an assembly factory in Europe. The partnership will enable SCHOT to penetrate the vast Europe market without losing price competitiveness by yearend.

Konka of mainland China exports 30 percent of its output overseas, mainly to North America, Europe and Asia. OEM/ODM and own-brand products account for 70 and 30 percent of total exports, respectively.

At Sichuan Changhong, OEM/ODM business represents 75 percent of exports with the rest marketed under its own Changhong brand. North America, Europe and the Middle East are the company's major overseas destinations, accounting for more than 60 percent of total exports.

Hong Kong-based Asano International Ltd's HDTVs are sold under its Asano brand but only in small volumes. The company's main business is the high-volume manufacture of low-priced LCD TVs. Europe is Asano's key export market, taking up 40 percent of its TV shipments. The company also has customers in South America, Australia and Africa, and has TVs sold in electronic retail chain stores in Hong Kong as well. Buyers can also choose to distribute Asano-branded TVs. The company is scheduled to begin shipping to Eastern Europe and Mexico this year.

Sentronic International Ltd's TVs are delivered mainly to OEM customers in Australia and France. Familiarity with different TV standards in different countries has enabled the company to easily customize its LCD TV models, said sales manager Franky Ho. Sentronic's Creation HDTVs are distributed in select electronic retail chain stores.

With most interviewed Taiwan companies, about 70 to 90 percent of the production is shipped abroad. OEM orders from international top brands such as Sony, LG and Samsung are major industry drivers. Taiwan suppliers also ship off-brand products to Europe, North America, Southeast Asia, the Middle East and Russia.

	Mainland China-based TCL offers the L42E9FE 42in LCD HDTV with a built-in TV recorder.

Konka, one of mainland China's biggest makers of consumer electronic products, focuses on CRT, plasma and LCD TVs, set-top boxes and mobile phones. It has eight production centers—five on the mainland and one each in India, Indonesia and Mexico. These factories have an annual capacity of 6 million TVs. Konka employs more than 1,000 R&D engineers for new product development.

TCL is listed sixth in mainland China's top 100 electronic enterprises in 2007. It has six domestic facilities, as well as factories in Thailand, Mexico, Poland and Vietnam, for color TV production. It has more than 1,000 product development engineers, and has established technology partnerships with its major components suppliers, including Genesis and LG Display. TCL has sold more than 15 million color TVs, including LCD and plasma units, worldwide.

Sichuan Changhong, also recognized as one of China's leading color TV makers, has a line of LCD TVs, plasma TVs and DLP front projectors. Like its peers, it has several factories—four on the mainland and one each in Russia, Indonesia and the Czech Republic. More than 2,000 engineers carry out product development activities. Sichuan Changhong has developed its own decoder IC solutions in cooperation with PixelWorks. The company also has technology partnerships with its major components suppliers Trident, MStar, LG Display, CMO, SVA and Samsung, as well as with Dolby.

Hong Kong suppliers of HDTVs have factories mainly in Guangdong, Jiangsu and Shanghai in mainland China. They have dedicated production lines for LCD TVs but can also produce other home entertainment appliances such as DVD players and digital set-top boxes.

SCHOT expects overall shipments to reach 1.2 million units in 2008. About 1 million TVs were produced by the company in 2007. OEM shipments were dominated by 37in models, accounting for 40 percent of the total. Own-brand deliveries were led by 19in units.

SCHOT runs two factories in mainland China—one in Nanjing, Jiangsu, and the other in Shenzhen, Guangdong. Having two factories gives SCHOT the flexibility of shipping from Shenzhen or Shanghai, whichever the customer prefers. SCHOT has six R&D engineers who focus on LCD TV development. A division of the company provides technical consultancy and equipment for professional A/V and home automation solutions—two of its core businesses before it entered the LCD TV business.

Asano manufactures CRT TVs and some TV components at factories in Foshan and Huizhou, Guangdong. CRT TVs are assembled in Foshan, where SMT workshops are also housed. The Huizhou factory handles LCD TVs and has a production capacity of 150,000 units monthly. More than 2,500 workers are employed in the two factories. Whenever necessary, Asano converts its production lines in Foshan for LCD TV assembly. Buyers have the option of finished TVs or CKD and SKD deliveries.

Asano's OEM services start from design to manufacture and aftersales service. During product development, Asano receives technical support from component suppliers Philips, Mitsubishi, Sanyo and Toshiba.

Sentronic, founded in 1996, manufactures HDTVs in Zhuhai, Guangdong, where its assembly, testing and R&D facilities are located. Up to 100,000 HDTVs monthly can be produced at the factory, which has 400 employees, including 50 R&D staff. The company also produces digital set-top boxes to complement its TV line.

The interviewed companies from Taiwan come from the IT and home appliance sectors.

AsusTek, known for its computers, network devices, personal electronics and PC peripherals, strives to become an integrated 3C solution provider. It entered LCD TV manufacturing in 2005 but its sales volume for this line has yet to grow. Its current offerings are 32in, 37in and 42in LCD TVs.

BenQ produces LCD monitors and TVs. It benefits from being an associate company of AUO, one of the world's leading LCD panel producers. The company expects to turn out 2 million LCD TVs in 2008, from 400,000 units last year. Its TVs are available in screen sizes of 26in, 32in, 37in and 42in.

Nexgen enjoys the resources of CMO, which include production facilities in Taiwan and mainland China. It is also in charge of the bigger company's own-brand business. The cooperation offers a wide line of LCD panels, monitors and TVs. Nexgen plans to produce about 17 million TVs in 2008.

Kolin is one of the leading home appliance manufacturers in Taiwan. Its LCD TV selection encompasses 20in to 65in models. The company collaborates with Japan's Mitsubishi in technology development.