Central/Eastern Europe Becoming LCD-TV Manufacturing Hub

By Jeffrey Wu, iSuppli Corp. While China is generally perceived to be the electronics manufacturing epicenter of the world, varying market conditions, logistics requirements and government regulations warrant the formation of a number of regional manufacturing hubs around the globe, according to iSuppli Corp. Case in point is Eastern Europe, which has emerged as one of the world’s most thriving hubs, with an array of production activities proceeding in the region. iSuppli has noted an influx of investments into Eastern Europe to tap the growing demand for LCD TVs and to eschew the 14 percent tariff imposed on such televisions in the European market. This influx of capital and technology, driven by OEMs, Original Design Manufacturers (ODMs) and Electronic Manufacturing Services (EMS) providers, is still in its infancy and will gradually impact the incumbent LCD-TV producers in Europe as it progresses, iSuppli believes. OEMs expanding internal manufacturing capacities Japanese and Korean companies are the most aggressive OEMs when it comes to establishing and expanding theirin-house production facilities in Eastern Europe. Reasons for this include: • To attain tariff exemption • To protect proprietary production processes • To maintain control and bargaining power in the material supply chain • To shorten the response time to changes in market conditions Table 1 below presents the investments in Eastern Europe made by select Japanese and Korean OEMs in recent years. LCD TV OEMs' Investments in Eastern Europe Contract manufacturers establishing new operations Taiwanese ODMs long have been focusing their production activities in Greater China, and have failed to establish global manufacturing presences. However, in order to serve their LCD-TV OEM customers and to maintain their competitive positions in the industry, a number of these ODMs have established facilities in Eastern Europe. Regional investments by select LCD-TV ODMs are summarized in Table 2. LCD TV ODMs' Investments in Eastern Europe iSuppli’s research suggests that in 2007, 29.1 percent of worldwide LCD-TV shipments will be outsourced to ODMs while only 2.1 percent will be allocated to EMS providers such as Jabil Circuit Inc. However, a number of EMS providers are aggressively expanding their participation in LCD-TV manufacturing by setting up operations in Europe. For example, Flextronics International Ltd. and China-based HiSense Co. Ltd. in 2005 established a joint venture in Hungary to manufacture flat-panel televisions. Impact on European LCD-TV manufacturers and suppliers All these deployments by OEMs and contract manufacturers in recent years will have an impact on the LCD-TV supply chain in Europe. For example, take Turkish LCD-TV manufacturer Vestel A.S., which could be negatively impacted by these developments. Figure 1 below presents Vestel’s estimated customer portfolio in 2006. Since OEMs such as Sharp Electronics Corp. and Toshiba Corp. continue to expand their manufacturing operations in Europe, they may reduce their reliance on Vestel. Other OEMs served by Vestel—such as Hitachi, JVC, Medion, Sanyo and Schneider—now have alternatives to Vestel, made possible by Taiwanese ODMs’ investments in Europe. On the other hand, electronic and mechanical component suppliers in Central and Eastern Europe will benefit from the OEMs’ and contract manufacturers’ efforts to localize their material supply base to reduce costs and to streamline their supply chains. Vestel's Major Customers and Share Splits in 2006 Jeffery Wu is a senior analyst for EMS and ODM services at iSuppli Corp. For media inquiries on this article, please contact Jonathan Cassell, editorial director and manager, public relations, at jcassell@isuppli.com. For non-media inquiries please contact analystinquiry@isuppli.com A more detailed analysis of the LCD TV value chains can be found in iSuppli’s recently released report, Global OEM Manufacturing and Design Analysis (GOMDA) – Flat-Panel TVs Module. For more information on this report and the GOMDA service, please visit: http://www.isuppli.com/catalog/detail.asp?id=8617 This article was created by Jeffrey Wu, iSuppli Corp. for evertiq.