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Electronics Production | November 10, 2006

Price Erosion Likely to Spur Consolidation Among Mobile-Phone Display Suppliers

Continued severe price erosion in the market for small/medium displays is likely to lead to a consolidation among suppliers in the coming years, according to panel members speaking here today at iSuppli Corp.'s Flat Information Displays 2006 (FID 2006).
The predictions came at an FID session that examined issues for buyers and sellers of small/medium displays, i.e. screens 9-inches or less in size, which are mainly used in portable electronics devices like mobile phones. Vinita Jakhanwal, principal analyst, mobile displays for iSuppli, noted that the average pricing for small/medium display modules has fallen by 20 to 30 percent annually over the last few years. Observing that the pace of price erosion continues unabated, Jakhanwal queried industry representatives on whether the small/medium display business can continue to bear such declines.

"This erosion is not sustainable with some further consolidation (of suppliers)," said Marcel Fuhren, senior director at small/medium display maker TPO Displays Corp.

Richard Blair, of LCD panel maker Sharp Corp., agreed that such price reductions cannot continue at present rates.

"(Price erosion) is making suppliers' lives difficult," Blair said. "I can't imagine these drops continuing indefinitely. All the suppliers are driving down the costs of materials because of this."

In an interview, Jakhanwal said in addition to cost reductions, suppliers can counter the impact of price erosion by gravitating toward higher-end displays using more attractive form factors and more advanced technologies. Such displays command higher margins, thus countering the impact of price reductions.

"If you look into detail in the product mix, the price declines are mainly for entry-level and lower-end displays, like 1.8-inch LCDs using QCIF resolutions," Jakhanwal said. "The decline for higher-end displays is more limited. For example, there's a great deal of demand for thin form-factor displays. The minute a supplier goes to a panel 1 millimeter in thickness, the additional polishing can justify
additional cost."

Such thin panels have come into higher demand due to their use in fashionable products like Motorola Inc.'s RAZR mobile phone and Apple Computer Inc.'s iPod nano MP3 player.

Beyond fashionable thinness, small/medium display suppliers can stave off erosion by adopting higher-resolution screen technologies.

"The companies that are most successful in this market-such as Toshiba Matsushita Display Technology Co. Ltd. (TMD), Sanyo Epson Imaging Devices Corp. and Sharp-made early investments in new-generation fabs that can produce high-end Low-Temperature Polysilicon (LTPS) LCD panels. Because of this, these companies can achieve higher yields for LTPS. It's very important for small/medium display makers to have a product mix that offers customers a higher-end solution that allows the suppliers to maintain their margins, whether it's LTPS, or another product like the Active-Matrix Organic Light-Emitting Diode (AM-OLED) display."

Jakhanwal predicted the worldwide small/medium display market will grow to 3.8 billion units in 2010, up from 3.5 billion in 2006. Meanwhile, global revenue in this market will decline marginally, with sales amounting to $22.3 billion in 2010, compared to $23.1 billion in 2006, illustrating the impact of price erosion on small/medium display suppliers.
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