In the first half of 2013 Korea, China, Japan, and Taiwan, four major players in the global display market, showed a clear distinction in performance. Korea, first in the industry, is singing the blues, while China, Japan, and Taiwan are aiming for growth by building momentum.
According to industry sources, on August 11 the Korean display industry showed disappointing results in the first half year, while its Japanese counterpart strove to make a comeback by taking advantage of the weak yen. As for the Taiwanese industry, it has already found its way by devising differentiated strategies amid the biggest growth of Chinese competitors.
Korean display makers, which seemed to take an upturn after showing signs of bottoming out last year, lost their momentum in the first half of this year. The reason is that the ramification of the stagnant market was bigger than expected. The problem lies in its failed inventory adjustments in Q1 2013, while Beijing ceased to give out subsidies during Q2 this year. Samsung Display saw a decrease in sales during Q1 and Q2 this year, compared to the same period last year. LG Display's sales in Q1 this year were up compared with the same period in the previous year, which is nothing but a relative increase due to poor performance a year ago.
The question is what will happen in the second half. Usually the two months before Black Friday is the period for companies to work to get the best sales performance. But the Chinese market has started to stagnate because of the suspension of subsidies provided by its government. Meanwhile, there are no special factors favorable to the US or EU markets. As a result of a reduction in demand, the price of display panels has been declining steadily.
Korea's competitors, in contrast, picked up steam. Japanese companies succeeded in reducing losses or turning a profit, thanks to Abenomics. SHARP logged humongous losses of 6.3 trillion won (US$5.66 billion, 545.3 billion yen) last year, but recorded profits of 34.5 billion won (US$31.1 million, 3 billion yen) during Q2 this year. Its net losses are steadily decreasing. The recovery is mainly attributable to its securing of stable suppliers through investment by Samsung Electronics, as well as its competitiveness in the world display market on account of a weak yen. The operating profits of Panasonic and Sony also surged.
But, most of all, China enjoyed unrivaled growth. The sales of major Chinese display makers have been increasing since working at full capacity. It is interpreted as the effects of Beijing's decision to raise tariffs. Chinese panel producer BOE Display and China Star Optoelectronics Technology (CSOT) are both expected to break their sales records in Q2 following their best performance in Q1. And yet, the profit rate might be lower than expected, owing to aggressive investments.
In the meantime, Taiwanese panel makers are considered to have defended themselves well in the face of crisis. They escaped by pursuing unique strategies while losing the Chinese TV market, which is in their own backyard, to local panel producers in China.
AU Optronics (AOU) reaped sales profits of 4.2 trillion won (US$3.7 billion, TWD112.335 billion) in Q2 this year, an 18% increase, compared to those of 3.54 trillion won (US$3.18 billion, TWD95.189 billion) in Q2 last year. This is due to its adoption of a niche marketing strategy and its choice of distinct products, such as embedded touch screens. Innolux, number one in the Chinese TV market, witnessed the 0.9% decrease in sales, which is minimal.
A spokesperson for the display industry said, "Chinese aggressive investments, weak yen, and Taiwanese niche marketing strategy are too much for Korean companies," adding, "Korea needs a premium strategy to gain a competitive advantage over rivals."