Taiwan's LCD Makers Move to 3D

Taiwan's display makers are gearing up to develop panels capable of three-dimensional images as interest in the technology builds along with growth in volume, likely driving down prices. The island's liquid-crystal-display makers, including AU Optronics, Chimei Innolux and Chunghwa Picture Tubes, have fallen behind their Korean and Japanese rivals in upgrading their panel production technologies over the past few years. But the Taiwan companies are shifting focus to 3D panels, looking to boost their value in the TV supply chain, where margins are tightening due to falling set prices.

As flat-panel makers ramp up production of 3D panels and shipments of these panels increase, their average selling prices could fall 5% by the end of this year, and as much as 10% in 2011, said Jason Yang, an analyst at market research firm Digitimes Inc.

TV brands such as Samsung Electronics, Sony and Sharp don't outsource production of 3D panels to other companies because they prefer to rely on in-house technology to ensure quality control. But analysts said that as 3D products become more mainstream and gain ground with consumers, panel makers such AU Optronics and Chimei Innolux may start reaping benefits as soon as they can provide cheaper 3D-enabled panels.

"Chimei is likely to be a key beneficiary in the future from greater outsourcing of 3D panels as the firm is able to provide a one-stop solution for TV brands, from panel-making to set assembly," Mr. Yang said. Chimei Innolux's majority shareholder is Hon Hai Precision Industry, the world's largest contract electronics maker by revenue.

All three Taiwanese panel makers declined to disclose how much they are investing in 3D technology. Global sales of 3D TVs will likely reach 78 million units by 2015, up from 4.2 million this year, according to research firm iSuppli, with industry revenue expected to reach $64.3 billion in 2015 from an estimated $7.4 billion this year.

To be more competitive in the 3D market, AU Optronics is promoting 3D technologies that are compatible with cheaper polarized glasses (those that feed different images by adjusting the light reaching each eye) or technology that doesn't require glasses.

AU Optronics, the world's third-largest flat-panel maker by revenue after Korean rivals Samsung Electronics and LG Display, has been preparing for the 3D market to take off for a long time, said AU Optronics Chief Executive L.J. Chen. As part of its efforts, AU Optronics acquired the rights to 2D- and 3D-switchable display technology from U.K.-based Ocuity in February 2008.

AU Optronics started shipping panels for 3D digital photo frames for Fujifilm in the second half of last year. It is scheduled to introduce a 65-inch 3D TV panel with a Chinese TV brand this year and plans to launch display panels for mobile phones and computers, with or without glasses.

Chimei Innolux, which was formed by the merger of Chi Mei Optoelectronics and Innolux Display in March, has been one of the most ambitious developers of 3D products. It started mass-producing 22-inch 3D panels for gaming and introduced 47-inch 3D panels that don't require glasses in June 2009.

Chunghwa Picture Tubes, which focuses on small- and medium-size panels, has started shipping display panels compatible with shutter glasses for a 3D laptop introduced by AsusTek Computer last year. The company believes that 3D technology will be a market trend and for the past two years has invested resources to develop technology, a senior company official said. "By adding 3D functions, we can add several percentage points to our margins compared to those for ordinary 2D panels," the official said.

Still, technological challenges remain. Most of the available displays require viewers to wear either shutter glasses or polarized glasses. Glasses-free 3D technology remains in the prototype stage and requires viewers to look at the displays from specific angles.

By Ting-I Tsai and Charmian Kok, The Wall Street Journal