The largest-selling type of panel for flat-panel TV is the 32-inch WXGA LCD, with production up and demand still not satisfied. It is also the only TV panel size whose price is increasing, as we discussed in this space last week.

Ken Werner
Senior Analyst and Editor

But the 32-inch LCD-TV segment is highly competitive, and set-makers are justifiably nervous about raising prices. Is there a solution for this conundrum? Yes. Well, maybe.

As reported in Digitimes today by Rebecca Kuo and Rodney Chan, AUO, CMO, Chunghwa Picture Tubes (CPT), and LG.Philips LCD (LPL) have either entered into conversations with TV makers about building "smart panels" or have actually started working on them.

Smart panels integrate drivers, controllers and (perhaps) other functions on the panel. In small LCDs - such as those used in cell phones - the integration is often literal, with circuitry being fabricated on the display glass in low-temperature polysilicon (LTPS). In TV panels, more-or-less conventional chip-on-glass ICs would be mounted on the display glass during panel production instead of on a separate circuit board.

This smart-panel model could certainly cut production costs. But it also requires panel suppliers and set makers to work together closely, as the panel makers would be shipping panels that are actually semi-finished display products. To put it mildly, sharing of trade secrets does not come easily in the LCD panel and TV industries.

Nonetheless, the motivation is great. AUO has started low-volume shipments of TV-use smart panels to Qisda (formerly BenQ), and AUO is rumored to be talking to Sony about a smart-panel deal that could get smart panels shipping by the turn of the year, industry sources told Kuo and Chan. No comment from AUO, though.

According to the sources, CPT and mainland China TV maker Xoceco are planning to ship smart panels, as are CMO and its TV-making clients. The sources also say that LPL is talking to European brand-name TV vendors and assemblers regarding smart-panel collaborations.

But although smart panels can help cut production costs, and the required collaboration would help set-makers lock in a supply of 32-inch panels, which will remain tight in 2008, some panel-makers think the difficulties would outweigh the benefits. Laying on engineering teams to integrate the systems of set-making clients onto the smart panels could be a significant commitment. And, since TV specifications change rapidly, panel makers would constantly be revising their smart panels. In short, the panel makers would be taking on many of the problems of their set-making customers. As a result, the more skeptical panel makers think smart-panel sales will only account for a few percent of most panel-makers’ revenues.

But what would happen, you ask, if the set-making and panel-making divisions of Samsung and LG, for instance, were to realize they’re in the same business and tear down the walls that separate them? They would then be able to function as integrated TV-set-on-glass manufacturing companies. Wouldn’t that give them a substantial advantage over competitors such as AUO and CMO, who are not in a position to do the same thing on a similar scale?

Yes, but the various divisions, actually separate companies, within many of the Asian electronics giants are intensely jealous of their identities and prerogatives. The company that best integrates its panel-making and set-making businesses is Sharp, and it’s Sharp that would find it easiest to become a maker of integrated TVs on glass if its management thought that would be in the company’s best interests. Interestingly, Sharp was not one of the companies mentioned in the current round of reports and rumors.

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