Korea’s market share in the world LCD panel market stood at 44% and 50% in the global TV industry last year. Befitting the prestige of a digital superpower, Korea again recorded exceptional performance in 2007. But the country’s LCD manufacturers now face a serious challenge which could topple them from the No.1 spot they’ve held for five years. With Japan looking to bring back the glory days as the world’s top electronics maker, Korea’s competitors are quickly catching up. Today we have invited reporter Yoo Chang-jae of the Korea Economic Daily to talk about how Korea can overcome the challenges posed by its competitors and maintain its lead in the digital sector. First, we will look at what kind of challenges threaten Korea’s LCD sector.
Today’s LCD panel market is led by Korean companies. Samsung Electronics is the world’s number one LCD maker, followed by LG Philips. But now Japanese firms are making aggressive investments to catch up with Koreans. Sharp Corporation is currently the world’s 5th largest LCD manufacturer, but it’s aiming to mass produce LCD panels for the 60-inch TVs, the so-called “10th generation LCD.” Also Matsushita, which used to make only PDP TVs, has also invested in the 8th generation LCD manufacturing with the year 2010 as the target date for mass production. Japanese TV makers, who still dominate the global TV market, are highly likely to turn to these LCD manufacturers to meet their high demands. This certainly is a threat to Korean companies.
In the late 20th century Japan was the undisputed leader in the world’s electronics industry. But the emergence of Korean electronics companies with quality semiconductors, LCD TVs and display panels, and other IT products left Japan in the second tier in the 21st century. It’s no surprise that Japan is regrouping to gain back its supremacy in the world’s digital market. Matsushita, Hitachi, and Toshiba have established a joint LCD corporation and Japanese TV makers plan to leave panel production to Sharp and Matsushita and concentrate only on design and brand marketing. Japanese firms have boldly reorganized the industry and made aggressive investments. But the most crushing news for the Korean LCD industry was the dissolution of the Samsung-Sony alliance. Here’s reporter Yoo Chang-jae with further explanation.
Until now Sony’s biggest supplier had been Samsung Electronics, but Sony decided to add Sharp to its list of LCD panel suppliers. In 2004 LCD manufacturers were looking for ways to capitalize on the burgeoning LCD TV market. At that point Sony and Samsung Electronics formed a strategic alliance, which helped Samsung Electronics to spurt ahead of its competitors and take the lion’s share of the market. The alliance also allowed Sony to make up for the lack of flat panel display technology. But this year Sony’s focus is placed on its TV business with a goal of selling 20 million TVs. So it became imperative for Sony to secure a steady supply of flat panels, which ultimately led to Sony looking for an additional source of LCD panels instead of relying solely on Samsung. Some also speculate that Sony’s decision was formed under a bigger strategy to enhance the competitiveness of the entire Japanese IT industry.
The joint investment of Samsung Electronics and Sony propelled Samsung to the No.1 spot in the global TV market and Sony to the immediate second. However, Sony’s partnership with Sharp in the 10th generation LCD panel production poses a threat to that dominance. Japan may very well take over the lead in the LCD panel business and, to make matters worse, Taiwanese competitors are surfacing as crucial variables.
Many people aren’t aware yet, but Taiwan is an IT frontrunner as well. Although Taiwan is technologically behind Korea and Japan, it’s quickly catching up. Currently Taiwanese companies AUO and CMO are the second and third largest LCD panel makers in the world. Taiwanese semiconductor makers are also formidable. So Taiwan can easily slip by and seize the profitable market while Korea and Japan are busy battling over a bigger slice of the pie. This means that Taiwan is in the position to tilt the balance to either side by siding with either Korea or Japan.
Taiwanese LCD panel makers are lesser-known power players in the global LCD panel industry. But they have already started building the production line for the 8th generation LCD panels and can join hands with either Korea or Japan. As a matter of fact, Taiwan’s AUO offered Sony a joint venture to build a plant for the 8th generation LCD panels. It’s clear the nation’s competitors will not shy away from forming partnerships to steal the title of industry leader from Korea. So how should Korea handle such an onslaught of competition?
Last year Korea established an association for display manufacturers to promote cooperation. From now on major Korean IT companies such as Samsung Electronics, LG Electronics, LG Philips LCD, and Hynix Semiconductors should cooperate in many areas, including technological ones, to pioneer new markets. Frankly I don’t think the latest strategy by Japanese companies will work. It was a decision made with nationalistic sentiments, rather than cool-headed market principles. So it’s uncertain whether that alliance would work in the global market. Now that Korea has had a wakeup call, it has to pick up the slack to maintain stable ties with its customers and its lead in the industry.
In order for the Korean LCD industry to maintain its global competitiveness, it must strengthen its fundamentals and develop sophisticated strategies. Korean companies should cooperate further to share equipment and co-develop key facilities. The most important element in all this, however, is having a clear idea about where Korea stands in the industry. If Korea was not the world’s top IT superpower, Japan and other competing nations would not band together to beat Korea. If looked from a different perspective, the challenge faced by Korean LCD panel makers is an affirmation of Korea’s dominance and a rite of passage. Samsung Electronics and other Korean LCD panel companies should continue to develop cutting-edge technologies and make bold investments to safeguard their places at the top tier of the industry.
Korea’s market share in the world LCD panel market stood at 44% and 50% in the global TV industry last year. Befitting the prestige of a digital superpower, Korea again recorded exceptional performance in 2007. But the country’s LCD manufacturers now face a serious challenge which could topple them from the No.1 spot they’ve held for five years. With Japan looking to bring back the glory days as the world’s top electronics maker, Korea’s competitors are quickly catching up. Today we have invited reporter Yoo Chang-jae of the Korea Economic Daily to talk about how Korea can overcome the challenges posed by its competitors and maintain its lead in the digital sector. First, we will look at what kind of challenges threaten Korea’s LCD sector.
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