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DTV growth reshapes electronics supply chain

Posted: 01 Nov 2006     Print Version  Bookmark and Share

Keywords:iSuppli  LCD  LCD-TV  DTV  panel 

The rise of LCD digital televisions (DTVs) is reshaping the global television and display industries, but the phenomenal expansion also is impacting the wider electronics business, affecting diverse areas ranging from semiconductor production, to the overall chip market, to contract manufacturing.

Worldwide shipments of LCD-TVs are expected to rise to 12.69 crore units in 2010, increasing at a compound annual growth rate (CAGR) of 35.1 per cent from 3.81 crore units in 2005, according to data from iSuppli's Television Systems service.

LCD shipments in 2010 will have risen at a CAGR of 77.1 per cent from 13 lakh units in 2002. This means that shipments will rise by nearly a factor of 100 during the period from 2002 to 2010. Such a rapid rate of growth is affecting the global electronics supply chain significantly, starting with semiconductor manufacturing.

Since LCD-TVs are inherently digital, they have a higher level of semiconductor content than conventional analogue sets. LCD televisions have an average of $44 worth of semiconductor content in 2006, according to iSuppli's Digital Television Semiconductors service. In contrast, the average analogue colour TV in 2006 contains only Rs.779.56 ($16.87) worth of semiconductors, iSuppli's Application Market Forecast Tool (AMFT) reveals. With more than two-and-a-half times more chip content per unit, and such a fast growth rate, LCDs are becoming a significant factor in the global semiconductor manufacturing business.

In 2002, the DTV segment—a category that includes and is increasingly dominated by LCD-TVs—accounted for less than one per cent of global chip production when measured in terms of square inches on semiconductor wafers, according to iSuppli's Semiconductor AMFT. However, this will grow to 4.6 per cent by 2010, up from 2.9 per cent in 2006.

Mobile PCs, which represent a cornerstone application for the global semiconductor business, will account for 6.2 per cent of global wafer square inches in 2006. Thus, by 2010, DTVs will be in a similar range as mobile PCs were this year in terms of wafer square inches.

Snacking on chips
The DTV display-driver market amounted to Rs.3,627.49 crore ($785 million) in 2005, according to iSuppli's digital television semiconductors service. Actual shipment revenue for DTV semiconductors will rise to Rs.63,307.70 crore ($13.7 billion) in 2010, increasing by a CAGR of 19.5 per cent from Rs.30,960.70 crore ($6.7 billion) in 2006, and up by a CAGR of 45.9 per cent from Rs.3,086.03 crore ($668 million) in 2002, according to the AMFT.

The AMFT shows that DTVs are expected to drive large volumes and rising revenue for semiconductors. Display-driver ICs revenue from sales to the DTV market will expand to Rs.13,400.90 crore ($2.9 billion) in 2010, increasing at a CAGR of 14.9 per cent from Rs.7,393.60 crore ($1.6 billion) in 2006, and up by a CAGR of 41.2 per cent from Rs.841.02 crore ($182 million) in 2002.

General-purpose logic parts will see DTV revenue rise to Rs.13,863 crore ($3 billion) in 2010, growing at a CAGR of 14.9 per cent from Rs.7,855.70 crore ($1.7 billion) in 2006 and a CAGR of 40.9 per cent from Rs.9,01,095 crore ($195 million) in 2002. Analogue ASSP DTV sales will rise to Rs.14,325.10 crore ($3.1 billion) in 2010, growing at a CAGR of 26.9 per cent from Rs.5,545.20 crore ($1.2 billion) in 2006 and a CAGR of 63.9 per cent from Rs.272.64 crore ($59 million) in 2002, according to the AMFT. While logic ASSPs will achieve DTV revenue of Rs.22,180.80 crore ($4.8 billion) in 2010, increasing at a CAGR of 21.8 per cent from Rs.101,66.20 crore ($2.2 billion) in 2006, and a CAGR of 47.6 per cent from Rs.975.03 crore ($211 million) in 2002.

Among all the different types of semiconductors found in DTVs, logic ASSPs offer the best combination of large market size and fast growth for chip suppliers. Within the DTV logic ASSP segment is the key for market display processors, which perform digital signal processing tasks essential to drive the display.

Panels drive the LCD-TV market
While the rise of LCD DTVs is having a significant impact on the semiconductor business, it is having a much greater influence on the market for large-sized LCD panels, which iSuppli defines as being 10-inches or larger in size. This is not only due to the rapid sales growth for LCD-TVs, but also because of the high value of the panels used within these televisions.

The most popular size of LCD for televisions in 2006 is the 30- to 34-inch range. However, by 2010, shipments of 40- to 44-inch display sets will pull almost even with those of 30- to 34-inch sets. Unit production of LCD panels for televisions will rise to account for 28 per cent of total large-sized LCD panel production by 2010, up from 2.1 per cent in 2002, according to iSuppli's LCD Market Tracker service.

Television clearly has emerged as the driver of the large-sized LCD panel market. Large-sized LCD panel shipment revenue will rise to Rs.3,85,853.50 crore ($83.5 billion) in 2010, expanding at a CAGR of 13 per cent from Rs.2,36,595.20 crore ($51.2 billion) in 2006, iSuppli predicts. Shipment revenue for large-sized panels for LCD-TVs will rise to Rs.1,86,226.30 crore ($40.3 billion) in 2010, rising at a CAGR of 18 per cent from Rs.96,116.80 crore ($20.8 billion) in 2006. LCD-TV panel revenue by 2010 will be three times larger than DTV semiconductor revenue of Rs.63,307.70 crore ($13.7 billion) for the same year.

Television brands outsourcing
The impact of LCD-TV is magnified once again when looking at the television market itself. LCD-TVs will account for 56 per cent of worldwide television unit shipments by 2010, up from 20.3 per cent in 2006 and rising from less than 1 per cent in 2002. Even more significant, LCD-TVs will account for 74.2 per cent of total worldwide television manufacturing revenue in 2010, up from 29.1 per cent in 2005.

Hence, most television brands are striving to take a position in the LCD-TV and are reshaping their supply-chain and brand strategies thusly. One major strategy that television brand names are employing is the outsourcing of LCD-TV production to contract manufacturers, mainly ODMs.

In the past, television makers have not employed outsourced contract manufacturing to a large degree. However, the availability of ASSP chips, which allow contract manufacturers to build sets more easily, have made outsourcing of design and/or manufacturing a more viable and attractive alternative to LCD-TV manufacturing.

Due to this outsourcing trend, contract manufacturing of LCD-TVs will grow at a faster pace than that of the overall industry. The ODMs and electronics manufacturing service providers will ship a total of 48.3 million LCD-TV units in 2010, rising at a CAGR of 43.3 per cent from 1.14 crore in 2005, according to iSuppli's Global OEM Manufacturing and Design Analysis service. Contract manufacturers will produce 38 per cent of LCD-TV units in 2010, up from 30 per cent in 2006.

- Jonathan Cassell
iSuppli Corp.

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