The growing adoption of the open cell business model in the LCD panel industry has generated different views on the future of the backlight unit (BLU) sector, said Wang Pen-Jan, chairman of Taiwan-based BLU maker Radiant Opto-Electronics. Panel makers have been shipping more open cells to TV makers and therefore have been reducing their procurement of BLUs. This means BLU makers has less control over TV applications, but they need to find ways to face the challenges, said Wang.
In the past, panel makers mostly shipped LCD modules (LCMs) - which integrates panels and BLUs - to TV brands. But now panel makers usually ship only open cell panels to TV brands, which then make their own decisions on which BLU suppliers to work with. Wang noted that the rise of open cell business model has changed the rules of the game for BLU makers and demand for BLUs from panel makers has been dwindling.
Tablet, notebook BLUs offer stable gross margin
Wang said now BLU makers have two options for the TV segment: either give it up completely or develop their own relationships with TV brands. Wang believes BLU makers should focus on the core technology of light guide plates. Therefore, Radiant places strog emphasis on tablet, notebook, and monitor applications. However, Radiant is not giving up on the TV market, said Wang.
In fact, gross margins for the BLUs used in tablets and notebook are relatively high at double-digit levels, because the BLU technologies for the two segments are still evolving. Each new generation of products will require new specifications and technologies, allowing BLU suppliers to maintain certain levels of gross margin, Wang explained.
To meet customer demand, new products may require different BLU technologies and designs, and therefore BLU prices vary. Therefore, technological differentiation for BLU firms is very important when they deal with international brands, Wang noted.
However, not all customers have special requirements in terms of BLU specifications and technology, said Wang. Of course, Wang added, this type of customers are often competing in the entry-level markets, and therefore severe price competition is normal, Wang disclosed.
Survival strategies
Wang believes the open cell business model is a huge challenge for the BLU makers and firms need some time to search for new areas for development in the TV market.
In addition, South Korea-based Samsung Electronics believes in the future, 70% of the TVs will be direct-lit models. This type of TVs does not need light guide plates and this will change the business model of many BLU makers, added Wang.
Radiant has been monitoring the development of the BLU market and is likely to find a new and competitive business model in the fourth quarter of 2013.
The open cell business model is harder to adopt for tablet and notebook makers, Wang noted. Some notebook makers have tested the open cell model for several years, but have achieved little success because they lack the core technology to deal with the key components, Wang said.
It has been tough for BLU firms to stay in the industry, Wang stated. In the past, Radiant was able to see 20-30% of revenue growth each year but now the challenge is different as the market matures, Wang said. BLU makers need to add more value to their products to survive, and firms need to develop core technology, Wang emphasized.
Value-added products
Wang noted that the market has been concerned over the effect of Apple's strategy to decrease reliance on Samsung. But Wang disclosed that Radiant is an important partner for both firms.
Radiant is the main provider of BLUs for Samsung's tablets and notebooks. As Apple shifts some orders to other panel makers, Samsung Display has been eager to obtain panel orders from other firms and some of the BLU orders have been passed on to Radiant, said Wang. Apple has been shifting some panel orders to other firms such as LG Display, which is also a client of Radiant, Wang said.
Recently, Ultrad HD TV panel has been a hot topic in the industry and the production for BLUs for Ultra HD panels is not significantly different from the production for other BLUs. Wang is optimistic about the development of Ultra HD TV panels.
China-based panel makers have been expanding and growing, said Wang. China Star Optoelectronics Technology (CSOT) and BOE are both Radiant's customers, added Wang.
