Taiwan Manufacturers Bank on FPD for Growth:  Standardization Needed

by David Baldwin

Nikkei Electronics Asia, May 2003 - At this year's SEMI Taiwan FPD conference, several interesting market forces and technical barriers were discussed. The event was held jointly by SEMI (Semiconductor Equipment and Materials Industry) and SID (Society for Information Displays) in January 2003. The explosive revenue growth and new applications of FPDs have made them the new attraction for equipment and material manufacturers. According to Stanley Meyers, president and CEO of SEMI, in 2002 while most of the high-tech world was in the doldrums, revenues from the flat panel display market grew by 31% to almost US$29 billion.

Faced with a stagnant IC market around the world last year, the Taiwanese saw an opportunity in the FPD market, which showed a strong 31% growth in 2002. K Y Lee, chairman of AU Optronics, believes applications of the digital lifestyle will drive the next wave of growth for LCD displays.

Taiwan is now the world's second largest producer of FPDs, second only to Korea. It is expected that the FPD industry someday may rival Taiwan's current electronics powerhouse, IC production, especially if LCD TVs can gain widespread global popularity. However, the yield in the FPD industry is lower than that of the IC industry, and ever-changing substrate sizes hamper the speed-up of that process and hence profits.

Ross Young, president of market research firm DisplaySearch, believes the worldwide FPD market is large enough to sustain continued overall growth. "The industry could no longer say there were too many players and not enough market," said Young. "Rather than being driven solely by notebook PCs, FPDs are now widely used in mobile phones, PDAs, and soon-to-be TVs." The TV market is seen, in fact, as the next major growth area for the large size FPD industry. "LCD TVs are ready to appear in living rooms," said Chen-Lung Kuo, a director of the Chi Mei Optoelectronics Corp, who also addressed the SEMI FPD market seminar. "Unit shipments of LCDs for TVs will reach 4.2 million this year and are forecast to increase to almost 17 million by 2006." Ever larger substrate processing machines may make for high revenues but low profits. "The 6th-generation LCD fabs will cost more than US$1 billion each, therefore, smaller players will have to collaborate in order to sustain the necessary investments required to go forward." he said.

The Taiwanese government is also committed to help this vital home manufacturing sector to lead the world in FPD production.

Standardization Needed:  One thing that is slowing down industry growth though is the lack of standards for glass substrate and panel sizes. This has resulted in inefficiencies in manufacturing, according to industry experts. Young of DisplaySearch said that suppliers of FPD manufacturing equipment focused all their attention on substrate sizes rather than increasing throughput. "We could get to lower price points faster if there was standardization on substrate sizes," he said.

If Taiwan's FPD manufacturers really do see the coming market being in FPD TVs though, they must move to larger substrate sizes in order to keep up with their Korean competitors. Otherwise, the Japanese and Koreans will always be seen as having the top of the line products.

Consolidation in the Taiwan FPD industry flat panel industry would seem inevitable. Currently there are approximately 17 large-size FPD makers in the world. That number is likely fall to between five and eight within five years, according to the industry executives who spoke at the SEMI market seminar. But of the 11 new 5th- and 6fth-generation plants announced for the next few years, the Taiwanese account for almost half that growth.