According to Walter Zywottek, head of Merck’s chemicals business, Merck’s Japanese competitors have not made substantial enough investments to have a major impact on the company’s liquid crystal business. Zywottek also forecasted that LCs prices will stabilize as flat panel display TVs has largely shifted toward LCD technology instead of plasma.
Merck’s competitor in Japan is Chisso. Merck has a patent for vertical alignment (VA) LCs but Chisso developed VA LCs without infringing on Merck’s patents. This put Merck on the defensive in 2007 as the company has a dominant share, around 70%, of VA LCs. VA LCs are used by LCD manufacturers such as Sharp, Samsung, AU Optronics (AUO), Chi Mei Optoelectronics (CMO) and others and are used to make high-performance LCD monitors and a large portion of LCD TVs. Merck commanded profit margins of more than 53% in 2007.
In addition to Chisso, Dai Nippon Ink & Chemicals could be a competitor to Merck. However, with higher manufacturing costs and lower performance for Chisso VA LCs, penetration into major LCD manufacturers have been slow. The LC business comprised 13% of revenue for Merck and 50% of operating profits in 2007. Merck manufactures LCs in Germany and sells them in South Korea, Japan and Taiwan. This model is susceptible to currency swings. Merck has forecasted 2008 LC revenues to grow 5-10% with expected operating margins to hit 47-52%.
The LC market is clearly lucrative, but due to IPs and technical barriers, even Japan’s best have not been able to strongly challenge Merck, the clear leader.
[tags]Merck, Liquid Crystal, IPS, VA, In-Plane Switching, Vertical Alignment, Chisso, Dai Nippon, LCD Monitor, Sharp, Samsung, AU Optronics, AUO, Chi Mei Optoelectronics, CMO[/tags]