Hong Kong: Makers Upbeat Despite Stiff Competition from China

Despite stiff competition from over 200 LCD display makers in China, vendors in Hong Kong are confident of holding their own in this industry by claiming to offer better quality products albeit at slightly higher prices than their Chinese counterparts.Most Hong Kong makers specialize in monochrome LCD panels that go into lower-end consumer products, and offer custom designs for its overseas customers. “There is a huge demand for the use of black and white LCD displays in home and consumer appliances such as rice cookers, refrigerators, toys and games, among others,” says Clara Leung, manager, sales and marketing, Clover Display. Demand for LCD displays and modules is growing at the rate of 20 percent annually, says Henry Lo, marketing manager of Katri Far East.



However, some of the bigger manufactures like Truly Semiconductors, RCL Electronics and Katri Far East also produce color STN displays and modules and target key growth areas such as consumer product applications, telecommunications and automotive applications. “The trend is that customers prefer to get the full solution and it is easier for them to incorporate the module into their product,” says Vijay Trivedi, marketing manager of RCL Electronics.



The change from monochrome to color is helping companies’ bottom lines. “One of the main reasons is that China’s mobile handset makers are switching from monochrome to color LCD displays and the value of the product is going up,” says Murphy Cheung, deputy general manager of Truly Semiconductors Ltd. The company claims to have around 20 percent of the China mobile handset market share and expects to double this figure by end 2005.



Despite higher prices, makers expect to see double-digit growth in this market, especially for end products such as consumer electronics, telecommunications and automotive. “Our quality is better than those [products] made in China,” says Chase Cheung, marketing manager of Casil Semiconductor. For makers in the SAR, the main competition comes from China, Taiwan and from some local suppliers.





Hong Kong makers claim to offer better quality products than those made in China. Unlike their mainland counterparts who source locally, most Hong Kong makers obtain their raw materials, such as polarizers and liquid crystal materials, from Japan and Korea. Although prices quoted are competitive vis a vis Taiwan and Hong Kong, “the presence of so many smaller suppliers in China means that they are very aggressive in quoting lower prices,” says RCL’s Trivedi.



Raw material prices are steady at the moment but the trend is that prices could fall gradually over the next few months. “As compared to 2004, prices this year have already dropped by 10 percent,” says Truly’s Cheung.



Strict quality compliance ensures that Hong Kong companies’ products have better quality compliance and less failure rate than their Chinese counterparts. Almost all companies have obtained various QS certifications like QS 9000, ISO 9000 14,000, TS 16949 and TL 9000, to name a few. “We have met all the EU directives on RoHS,” says Lo. Key export markets are the US, Europe, and the Middle East. To remain on top of their game companies are also making big investments in R&D, and are beginning to target the mid-to high-end of the market.



Prices for color STN are expected to drop by 10 percent this year, but are expected to be stable next year. The main reason is that this is now a mature technology and a lot of component manufacturers are willing to reduce their prices. “We have already paid back their development costs so there has been a gradual price drop. Next year prices will be stable because they have very low margins on their components,” says Truly’s Cheung.



While the shift from color STN to TFT is posing a challenge to some Hong Kong suppliers as they now have to match their customers’ requirements in terms of cost and product development, those vendors offering monochrome displays will continue to focus on bigger panels that have higher resolutions and small LCDs with a fine dot pitch. Clover is targeting large monochrome display panels of the size 9 x 9 inches that can support up to VGA. “We are aiming at this segment of the market due to the exit of Taiwanese and Japanese makers who are now focusing their attention on color STN displays,” says Clover’s Leung.