The practice of outsourcing the LCD panels fitted in LCD TV displays is becoming increasingly commonplace among TV manufacturers. According to a new report, more than one-third of LCD televisions that were shipped worldwide in the third quarter of last year actually used LCD panels which were sourced elsewhere (i.e. not produced by the TV brand itself).
The Quarterly LCD TV Value Chain Report published by California-based market research company DisplaySearch provides valuable insight into the dynamic relationships between HDTV makers, OEM/ODM companies and LCD TV panel suppliers through monitoring of shipment data. The latest analysis revealed that the proportion of LCD TVs outsourced amounted to 34% in Q3’10, which is the highest recorded to date.
Sony and LG Electronics partially contributed to this rise in outsourcing activity, as they bumped up the percentage of LCD panels procured from other vendors to in excess of 50% and 20% respectively. Cost-cutting is the main factor responsible for the gradual if inevitable shift from developing in-house panels to buying from third-party companies.
In December 2010, Japanese daily Yomiuri Shimbun broke the news that Sony will be raising its LCD panel outsourcing ratio from 30% to 50%. At that time, Sony executives said that the company had to undertake this measure to remain competitive in the marketplace, because of the strength of the yen and sluggish consumer demand. An LCD panel accounts for approximately 70% of the manufacturing costs of an LCD TV, and there is no easier way to reduce expenditure than to obtain LCD panels at a cheaper price via outsourcing.
Besides better cost management, LCD TV manufacturers also see outsourcing as an effective means to scale up production and expand access to LCD panel supplies. An earlier piece of quality analysis from DisplaySearch forecast an increase in the LCD panel production among OEM and ODM companies in spite of an overall dip in global LCD TV shipment during the first quarter of 2011, again highlighting the growing trend of subcontracting panel manufacturing to OEM/ODM firms.