March 6, 2012 — One of every three liquid crystal display (LCD) TVs is expected to be produced through an outsourcing partner in 2012, reports Displaybank in "LCD TV Outsourcing Production Industry Analysis and Forecast." LCD TV outsourced production accounted for 29% of the global LCD TV market with 59.5 million units in 2011. This will grow to 32.5% in 2012. Displaybank predicts that the outsourcing production ratio of LCD TV will be expanded to 47% in 2015.
|Table. Representative outsourced production makers’ 2011 LCD TV shipments (Millions). SOURCE: Displaybank, LCD TV Outsourcing Production Industry Analysis and Forecast.|
|Year over year (YOY)||-10%||9%||46%||82%||-1%||-15%|
Outsourcing production has advantages in fixed costs, minimal investment, R&D cost savings, risk reduction of component/material supply and demand, efficiency in inventory management, and other areas. Many TV makers are expected to expand their outsourcing production ratio of LCD TVs. Sony significantly decreased its fixed costs by diminishing its number of TV production plants from 12 to 4 through the restructuring of TV business. Recently, the company has announced a plan to divide their TV division into LCD TV division, next-generation TV division, and outsourcing division.
The LCD panel accounts for the largest cost portion (based on 32", 52% of cost). By adopting outsourcing production, the risk caused by the panel price fluctuations can be offset to some degree.
|Figure. Production cost structure of 32" HD CCFL 60Hz LCD TV. SOURCE: Displaybank, LCD TV Outsourcing Production Industry Analysis and Forecast.|
TV makers are predicted to expand outsourcing to improve profits. Japan-based giant TV makers such as Sony, Panasonic, Sharp, and etc. are building the strategy to expand their outsourcing production. Most outsourcing production companies have aggressive business plans this year. LCD TV outsource makers include Taiwan-based TPV, Wistron, and Compal, China-based Foxconn, as well as Europe-based Vestel. TPV ranks top based on robust customer relationships and the experience of the monitor outsourced production. Foxconn is becoming a top-tier outsource maker rapidly, thanks to strong value chain integration. Vestel is expanding its market share based on the local TV brand customers all over Europe.