India Tries Again
In 2015 the Indian government was said to have contacted a number of LCD panel producers under the auspices the 2014 “Made in India” plan, trying to convince them to build LCD panel production fabs in the country. However after evaluation, panel producers were not convinced that India could support such facilities and the projects were never developed. The government was successful in convincing Apple (AAPL) that the country would provide cash subsidies and tax breaks if it set up production in India, and while Apple itself does not a named factory in India, it was in part the reason for Apple’s key assembler, Foxconn (2354.TT) to begin operation in the country, along with a number of other component feeder companies and OEMs.
One of the problems that has faced CE companies that have set up production in India is the relatively low productivity of its workforce, which has been estimated to be ~60% of the productivity of an equivalent line in China. That said, the cost of those workers in India is an amazing 33% of the cost of workers in China, making production in India a ‘value’ proposition. Such a model is better suited for assembly, where significant manual labor is involved but is still limiting for manufacturing situations that need highly skilled workers, such as panel production, and opportunities for education to bring workers up to the necessary skill level are also limited.
While the India government is will to subsidize panel production in the country there does not seem to be a company in India willing to become the leader in the LCD space as a company known as SVA did in China, a company that owned a TV factory in Shanghai. SVA convinced NEC (6701.JP) to invest part of the cost to build a Gen 5.5 LCD fab, however the fab and most of the components and materials came from Japan, producing profits for NEC and its parent Sumitomo Chemical (4005.CH) but losses for SVA, which eventually declared bankruptcy. Chinese companies in the CE space tend to work for lower margins than companies outside of the Mainland, which gives them the ability to dominate their industries but little room for margin expansion, however the recent rise in LCD panel prices has encouraged panel producers to believe that a new era has begun, one where they can continue to increase profit margins.
Whether that is the case is up for discussion, but the Chinese display industry has built itself a robust supply chain, making it more difficult for it to be replaced, at least at the panel production level, and India remains unable to attract display production investment from current producers, even with the promise of subsidies. While few expected Japan to ever be displaced from being the leader in the display space many years ago, and South Korea the same, while India might not be ready to step forward as the next migration for panel producers, China is not impervious to those changes and should never assume that it holds a guarantee on the display space. India might not be ready yet, but it has a growing population and growing demand. It just needs someone to the ‘chicken’ to the display industry’s ‘egg’, to begin such a transition.
One of the problems that has faced CE companies that have set up production in India is the relatively low productivity of its workforce, which has been estimated to be ~60% of the productivity of an equivalent line in China. That said, the cost of those workers in India is an amazing 33% of the cost of workers in China, making production in India a ‘value’ proposition. Such a model is better suited for assembly, where significant manual labor is involved but is still limiting for manufacturing situations that need highly skilled workers, such as panel production, and opportunities for education to bring workers up to the necessary skill level are also limited.
While the India government is will to subsidize panel production in the country there does not seem to be a company in India willing to become the leader in the LCD space as a company known as SVA did in China, a company that owned a TV factory in Shanghai. SVA convinced NEC (6701.JP) to invest part of the cost to build a Gen 5.5 LCD fab, however the fab and most of the components and materials came from Japan, producing profits for NEC and its parent Sumitomo Chemical (4005.CH) but losses for SVA, which eventually declared bankruptcy. Chinese companies in the CE space tend to work for lower margins than companies outside of the Mainland, which gives them the ability to dominate their industries but little room for margin expansion, however the recent rise in LCD panel prices has encouraged panel producers to believe that a new era has begun, one where they can continue to increase profit margins.
Whether that is the case is up for discussion, but the Chinese display industry has built itself a robust supply chain, making it more difficult for it to be replaced, at least at the panel production level, and India remains unable to attract display production investment from current producers, even with the promise of subsidies. While few expected Japan to ever be displaced from being the leader in the display space many years ago, and South Korea the same, while India might not be ready to step forward as the next migration for panel producers, China is not impervious to those changes and should never assume that it holds a guarantee on the display space. India might not be ready yet, but it has a growing population and growing demand. It just needs someone to the ‘chicken’ to the display industry’s ‘egg’, to begin such a transition.
RSS Feed