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Korea is holding on to its lead in the liquid crystal display market in terms of size thanks to Samsung Electronics and LG Philips LCD, but Taiwan¡¯s AU Optronics (AUO) and Chi Mei Optoelectronics (CMO) are fast catching up. And while Taiwanese LCD companies have lost ground in terms of volume, they started to outstrip their Korean counterparts in terms of operating margin in the fourth quarter last year and are inches from overtaking Korean firms in terms of market share.
AUO and CMO, the world¡¯s no. 3 and no. 4 in the sector, posted sales of US$2.0048 billion and $1.461 billion in the first quarter of this year, behind Samsung Electronics¡¯ $3.34 billion and LG Philips LCD¡¯ $2.57 billion. But the Taiwanese pair racked up some $200 million in operating profit, and their operating margin was 10 percent as against Samsung Electronics¡¯ 4 percent and LG Philips LCD¡¯s 2 percent. That will be the pattern into the second quarter this year, experts say.
Korean LCD firms are analyzing factors that boosted their rivals¡¯ performance. Onlookers say Korean LCD panel manufacturers do better in terms of product competitiveness or cost savings but are still losing ground.
¡°There are many reasons why Taiwan¡¯s performance in the market has improved so much, but above all they pay 20 percent less than we do to procure parts,¡± a Samsung Electronics staffer said. Korean firms procure parts at home first, but Taiwanese firms are increasingly importing major parts such as backlight units from China at lower prices.
And while the Korean companies shifted their focus to panels larger than 30 inches in 2005, the Taiwanese are still concentrating production on smaller panels. Last year, the prices of large panels dropped sharply, but the prices of smaller panels were relatively stable. For example, 40-inch LCD panels have dropped more than 20 percent from $1,159 to $941 this year alone, but 17-inch LCD panels saw only a 10 percent decrease from $192 to $179.
The Koreans invest around W3 trillion every year in facilities, so depreciation may have played a role in sending their operating margin south, experts say.
But experts say the trend will change. ¡°The reason why Taiwanese LCD firms¡¯ performance did so well is that they focused on an already established market segment of smaller LCD panels,¡± says Park Hyun, a researcher with Prudential Investment and Securities. ¡°But Korean LCD firms, which have made farsighted investments in the 40-inch and bigger LCD market, will see their performance improve in the second half of this year.¡±
(englishnews@chosun.com )
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