The "standards war" about LCD mother-glass size between LG.Philips LCD (LPL) and Samsung Electronics makes frequent appearances, most recently in an article appearing this morning on DisplayBank’s website. As we reported in IDO several days ago, Chi Mei Optoelectronics (CMO), Taiwan’s second largest LCD manufacturer, has finalized its plans to begin construction of a Gen 7.5 LCD fabrication line in April 2006. In addition, the company has accelerated its construction timetable, so the previously scheduled mass-production start-up date of 2H’07 will presumably move forward.

Ken Werner
Senior Analyst and Editor
of HDTV Retailer

So, how does the standards war come into this? As part of its announcement, CMO confirmed that it would build the new plant around a mother-glass size of 1950×2250mm, which is the same size championed by LG.Philips LCD. This other-glass can be used to make 42-inch displays 8-up or 47-inch displays 6-up with good glass-utilization efficiency. CMO said it would focus on 42-inch panels.

Samsung decided some time ago that it preferred LCD panel sizes of 40 and 46 inches, and selected a mother-glass size of 1870×2200mm. With this size of Gen 7 glass Samsung can make 40-inch displays 8-up or 46-inch displays 6-up with a glass-utilization efficiency of approximately 90%.

Although Samsung tends to make more of this than LPL does, both companies see themselves in a competition to establish a mother-glass size standard, and like to talk about the efficiencies the industry would enjoy if makers of glass, color filters, backlight units, and manufacturing equipment only had to support one size of glass instead of two. Fair enough, but whether a single standard would actually decrease costs substantially is an open question. Samsung-Sony and LPL-CMO (with AUO having a foot in each camp) each produce large volumes and control much of the component production too. As a result, further cost reduction may be approaching the point of diminishing returns.

Where this could matter is at your friendly consumer electronics retailer. If consumers express a strong preference for either 46- or 47-inch screens, or (more likely) for either 40- or 42-inch screens, one camp or the other could suddenly find themselves in trouble. As we think about that, it’s interesting to toss pricing into the mix. At the moment, according to Witsview, 42-inch LCD panels are selling at an average price of $1100; 40-inch panels at $930. That implies a difference in the selling price of finished TV sets of between $340 and $510. Of course, the prices and the difference between them will continue to go down.

So the standards war is not about benevolent companies wanting their industry to become more efficient. It’s about the fear that consumers will prefer the size your company isn’t making. And the way to insulate yourself from that frightening possibility is to make sure that your mother-glass size - that is, your chosen screen sizes - dominate the marketplace and the supply chain. Of course, there’s another satisfactory solution: that consumers like the two “standards” about equally so both can co-exist.

In reality, we are likely to see both sizes flourish. As soon as one size appears to be gaining the upper hand, the other camp will slash prices to drive demand up, potentially swinging demand in the opposite direction. Who wins? The consumer for sure; the LCD makers probably, but we need to see how aggressive the battle becomes.