Delay the inevitable?

In Display Monitor back in March 2010, we reported on a talk by Paul Kedrosky, an economist from the US, at the US FPD conference in which he said that ‘the function of governments is to delay the inevitable’ (and he also said that there could be a major restructuring in the eurozone!). That comment came back to me this week as I have been watching the efforts of governments in Europe to cope with the current crisis. I have heard the actions of the eurozone governments described as ‘kicking the can down the road’ and that also has resonance!

I shivered this week when I heard that the markets had been negative about buying German government bonds. On the other hand, an understanding by the country that fundamental change in the way that the zone is inevitable might help the zone to get the re-structuring that the zone desperately needs.

I thought of the comment again when I was reading the story this week about the initiative of the Taiwanese government to foster discussions between the panel makers, AUO and CMI. David Barnes, who I often quote in this publication, has pointed out that the development of scale in the LCD industry has not delivered a great advantage to those that have developed the scale. There is an advantage, but it is small and is probably more about the ability to develop technology rather than simple cost saving based on volume.

It has also been understood in recent years that simply combining a number of small vendors together gives little advantage. Years ago, we said that a company with several small fabs is not the same as a company that has one new big fab. That logic, and the fierce independence of local entrepreneurs, are the main reasons why CPT and Hannstar remain as separate companies, despite their difficult few years. Hannstar has been one of the most flexible in using its capacity to address different markets and opportunities – an example of the Darwinian view that it is the most adaptable that survives, not necessarily the strongest.

It seems to me that CMI and AUO have very different cultures. I have visited CMO in the past and AUO several times, and they are very distinct to me. CMO, of course, became CMI when HonHai/Foxconn took over. A merger between two companies that are broadly of the same scale, as AUO and CMI are (rather than a CMO/Innolux large/small deal) would be a very difficult one because of clashing cultures. We have heard a number of stories that the CMO/Innolux merger took a long time to get sorted out, assuming that it is now!

On that basis, I would be amazed if we saw a merger between the companies. However, there might be some mileage in the kind of deal that Japan tried, to pool technology to try to help the PDP industry to survive. As it happens, this initiative didn’t work and Panasonic’s recent announcements effectively ‘officially’ kill off any prospect of a future for the technology (although it has been obvious and clear for a number of years that this was inevitable).

That seems to bring me back to the point that this action in the PDP market (which was probably coordinated by MITI, the Japanese industry department) served only, at best, to ‘delay the inevitable’, which confirms Kedrosky’s view.

(I had a good hunt around for the phrase he used to see if it was a quote from someone else, but Google said that there were ‘no results found’, so I’m including it in this blog!)