According to a new iSuppli report, as plummeting prices and eroding margins force, many brands outsource their factory operations, and it is expected that worldwide production of LCD TV produced by contract manufacturers will be double from 2010 to 2015.
EMS (electronics manufacturing services) providers and ODM (original design manufacturer) companies, the two major parts of the outsourced electronics business, will produce 127.9 million LCD TVs in 2015, growing from 65.1 million in 2010. In 2015, the EMS and ODM companies are supposed to share 43% of LCD TV production, comparing with 36.2% in 2010.
'The continued growth of the LCD TV industry during the last couple of years, in spite of the economic downturn, has further intensified the competition among television brands and contract manufacturers,' Jeffrey Wu, senior analyst for EMS and ODM at HIS, said. 'However, even amid this growth, prices have fallen, causing profit margins to dwindle and prompting brands to increase outsourcing to achieve greater cost efficiency.'
As the dominant part of the flat-panel TV market, LCD TVs drive the growth of the flat-panel TV industry greatly and will continue to do so. From 2010 to 2015, the shipments of LCD TV rise at a compound annual growth rate (CAGR) of 10.6%, increasing from 179.8 million units to 297.6 million units. While, by comparing, plasma television shipments will reduce from 19.6 million units to 8.6 million units with negative 16.5% CAGR during the same period.
In order to capitalize on the growth momentum in the LCD TV industry, brands need to maintain attractive product lineups while containing their costs, Wu said.
Benefits from LCD TVs Outsourcing
Based on iSuppli research, there are many benefits getting from outsourcing LCD TV brands. Among these, cost reduction is the most obvious one.
And then asset flexibility is also one of the benefits. A number of Japanese and South Korean brands operate LCD panel and module production plants in addition to LCD TV manufacturing facilities, which require significant capital expenditures and high overhead. In order to improve asset flexibility, reduce headcount and contain operating expenses, these original equipment manufacturers (OEM) increasingly utilize contract manufacturers.
Then, the impact of exchange rate fluctuations is reduced by the use of contract manufacturing. Particularly, the export business of Japanese brands has been hurt since the Japanese yen's appreciation by almost 25% in the last three years, which forces many companies resort to ODMs for lower-cost LCD TV manufacturing.
The next one is that EMS and ODM companies deliver an enhanced manufacturing footprint to help OEMs establish presence in the end market, allowing them to enjoy economies of scale and operate LCD TV activities across multiple locations cost effectively. Hon Hai and TPV, two of the largest LCD TV contract manufacturers, now conduct LCD TV manufacturing activities across Asia (mainly China), Eastern Europe and Latin America.
Last but not least, vertically integrated production, delivering benefits, including cost savings and a leaner supply chain, are offered through an increasing number of contract.
Among the leading Japanese brands, Toshiba is the top one in outsourcing, and then Sony is also active on this front. This topic comes from http://www.hqew.net