Display Industry Analysis

1. Conclusion

TFT-LCD industry needs huge capital expenditure. Therefore fixed cost level is so high comparing to other industries. All players always compete to produce more than competitors because they produce more, it means total cost can be lower than other competitors. And they always compete to get a much lower cost structure based on higher generation fabrication facilities. So they should make enough cash flow for next generation's CAPEX by existing production facilities. In addition, it is hard to borrow money from banks because LCD industry is recognized so risky for lending money now. Cash flow is most important to stock prices of all players in this industry.

Another important factor is the current price of LCD in the market. More dominant players have much lower break-even point than other competitors. In case LCD price is much higher, it doesn't matter. However LCD price gets lower than break-even, the players without competitiveness will face tough time. Should this circumstances keep going on, eventually some of them will be run out.

Therefore we can tell that they are more important than net income that cash flow, break-even point based on technological & operational development, current TFT-LCD price.

2. Scope of work

* Definition : Analysis on global display industry, especially TFT-LCD makers

* Description of business entity : Top 5 global display manufacturer, which are Samsung electronics, LG display, AUO, CMO, Sharp

< chart >

* Defining the accounting topic : most important factors influencing stock price

* Standards or metrics of accounting to be considered : In most of manufacturing industries, I think that stock price depends on the operation profit and net profit. In addition, very interestingly in flat display manufacturing industry, especially TFT-LCD manufacturers have more complicated elements which give severe effect on their stock prices. Because display industry requires enormous CAPEX investment continuously, market comes to change into oligopoly model. Therefore game theory is very important for market participants to banish opponents effectively and strategically.

* Enumerate the various risk factors :

a. display panel price : In present market, LCD panel manufacturers are limited to major 5 companies globally. However there are many users - TV, monitor, mobile phone manufacturer. In addition, electronics industry is so sensitive to technical change & economic cycle, which is fluctuated so frequently. Some professional research institute has given price expectation, through this data we can guess supply-demand