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LCD-TV reshaping electronics supply chain

Posted: 31 Oct 2006 ?? ?Print Version ?Bookmark and Share

Keywords:iSuppli? LCD? LCD-TV? DTV? panel?

The rise of LCD digital televisions (DTVs) is reshaping the global television and display industries, but the phenomenal expansion also is impacting the wider electronics business, affecting diverse areas ranging from semiconductor production, to the overall chip market, to contract manufacturing.

Worldwide shipments of LCD-TVs are expected to rise to 126.9 million units in 2010, increasing at a compound annual growth rate (CAGR) of 35.1 percent from 38.1 million units in 2005, according to data from iSuppli's Television Systems service.

LCD shipments in 2010 will have risen at a CAGR of 77.1 percent from 1.3 million units in 2002. This means that shipments will rise by nearly a factor of 100 during the period from 2002 to 2010. Such a rapid rate of growth is affecting the global electronics supply chain significantly, starting with semiconductor manufacturing.

Since LCD-TVs are inherently digital, they have a higher level of semiconductor content than conventional analog sets. LCD televisions have an average of $44 worth of semiconductor content in 2006, according to iSuppli's Digital Television Semiconductors service. In contrast, the average analog color TV in 2006 contains only $16.87 worth of semiconductors, iSuppli's Application Market Forecast Tool (AMFT) reveals. With more than two-and-a-half times more chip content per unit, and such a fast growth rate, LCDs are becoming a significant factor in the global semiconductor manufacturing business.

In 2002, the DTV segmenta category that includes and is increasingly dominated by LCD-TVsaccounted for less than 1 percent of global chip production when measured in terms of square inches on semiconductor wafers, according to iSuppli's Semiconductor AMFT. However, this will grow to 4.6 percent by 2010, up from 2.9 percent in 2006.

Mobile PCs, which represent a cornerstone application for the global semiconductor business, will account for 6.2 percent of global wafer square inches in 2006. Thus, by 2010, DTVs will be in a similar range as mobile PCs were this year in terms of wafer square inches.

Snacking on chips
The DTV display-driver market amounted to $785 million in 2005, according to iSuppli's digital television semiconductors service. Actual shipment revenue for DTV semiconductors will rise to $13.7 billion in 2010, increasing by a CAGR of 19.5 percent from $6.7 billion in 2006, and up by a CAGR of 45.9 percent from $668 million in 2002, according to the AMFT.

The AMFT shows that DTVs are expected to drive large volumes and rising revenue for semiconductors. Display-driver ICs revenue from sales to the DTV market will expand to $2.9 billion in 2010, increasing at a CAGR of 14.9 percent from $1.6 billion in 2006, and up by a CAGR of 41.2 percent from $182 million in 2002.

General-purpose logic parts will see DTV revenue rise to $3 billion in 2010, growing at a CAGR of 14.9 percent from $1.7 billion in 2006 and a CAGR of 40.9 percent from $195 million in 2002. Analog ASSP DTV sales will rise to $3.1 billion in 2010, growing at a CAGR of 26.9 percent from $1.2 billion in 2006 and a CAGR of 63.9 percent from $59 million in 2002, according to the AMFT. While logic ASSPs will achieve DTV revenue of $4.8 billion in 2010, increasing at a CAGR of 21.8 percent from $2.2 billion in 2006, and a CAGR of 47.6 percent from $211 million in 2002.

Among all the different types of semiconductors found in DTVs, logic ASSPs offer the best combination of large market size and fast growth for chip suppliers. Within the DTV logic ASSP segment is the key for market display processors, which perform digital signal processing tasks essential to drive the display.

Panels drive the LCD-TV market
While the rise of LCD DTVs is having a significant impact on the semiconductor business, it is having a much greater influence on the market for large-sized LCD panels, which iSuppli defines as being 10-inches or larger in size. This is not only due to the rapid sales growth for LCD-TVs, but also because of the high value of the panels used within these televisions.

The most popular size of LCD for televisions in 2006 is the 30- to 34-inch range. However, by 2010, shipments of 40- to 44-inch display sets will pull almost even with those of 30- to 34-inch sets. Unit production of LCD panels for televisions will rise to account for 28 percent of total large-sized LCD panel production by 2010, up from 2.1 percent in 2002, according to iSuppli's LCD Market Tracker service.

Television clearly has emerged as the driver of the large-sized LCD panel market. Large-sized LCD panel shipment revenue will rise to $83.5 billion in 2010, expanding at a CAGR of 13 percent from $51.2 billion in 2006, iSuppli predicts. Shipment revenue for large-sized panels for LCD-TVs will rise to $40.3 billion in 2010, rising at a CAGR of 18 percent from $20.8 billion in 2006. LCD-TV panel revenue by 2010 will be three times larger than DTV semiconductor revenue of $13.7 billion for the same year.

Television brands outsourcing
The impact of LCD-TV is magnified once again when looking at the television market itself. LCD-TVs will account for 56 percent of worldwide television unit shipments by 2010, up from 20.3 percent in 2006 and rising from less than 1 percent in 2002. Even more significant, LCD-TVs will account for 74.2 percent of total worldwide television manufacturing revenue in 2010, up from 29.1 percent in 2005.

Hence, most television brands are striving to take a position in the LCD-TV and are reshaping their supply-chain and brand strategies thusly. One major strategy that television brand names are employing is the outsourcing of LCD-TV production to contract manufacturers, mainly ODMs.

In the past, television makers have not employed outsourced contract manufacturing to a large degree. However, the availability of ASSP chips, which allow contract manufacturers to build sets more easily, have made outsourcing of design and/or manufacturing a more viable and attractive alternative to LCD-TV manufacturing.

Due to this outsourcing trend, contract manufacturing of LCD-TVs will grow at a faster pace than that of the overall industry. The ODMs and electronics manufacturing service providers will ship a total of 48.3 million LCD-TV units in 2010, rising at a CAGR of 43.3 percent from 11.4 million in 2005, according to iSuppli's Global OEM Manufacturing and Design Analysis service. Contract manufacturers will produce 38 percent of LCD-TV units in 2010, up from 30 percent in 2006.

- Jonathan Cassell
iSuppli Corp.

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