Taiwan’s TV manufacturers would not be much affected by the US raising tariffs on TVs from China, as many of the TVs sold in the US are from Mexico.
The possible impact on Taiwan’s TV makers will also vary from company to company due to different customer bases and overseas production capacities. Among them, TPV Technology, Amtran Technology, Compal Electronics and Innolux may have to overhaul their production lines to maintain their competitiveness as they are currently shipping some models of complete TV sets to the US.
Taiwan’s makers mostly ship TVs to the US on an ODM basis, accounting for 30% of Taiwan’s total TV shipments. In 2018, such shipments to the US totaled nearly 10 million units with the top-two suppliers TPV and Foxconn Electronics taking up 60% of the total.
TPV’s major clients in the US include Vizio and Best Buy. The company currently subcontracts the production of large-size TVs to its affiliated factories in Mexico, while shipping below 50-inch models directly from Xiamen, China to the US. Since smaller-sized TVs account for a higher portion of TPV’s shipments, its production capacity in Mexico may not be sufficient to support the production for all size segments in the country after the US government raises the tariffs.
As a result, TPV is likely to establish production lines in other regions, with plans including renting a plant of Orion Electric’s in Bangkok, or utilizing the production facilities of Chilin Optoelectronics in Tainan, southern Taiwan. TPV acquired Chilin, a LED backlight module and LCM maker, in 2013.
Foxconn’s production advantage
Sony and Vizio are the two major clients for Foxconn in the US. Foxconn has been assembling US-bound TVs in Tijuana, Mexico, since it acquired the Tijuana plant from Sony in 2009, and therefore its TV shipments to the US should not be affected by the increases in tariffs.
Amtran’s major client in the US is Vizio, which accounted for about 20% of its shipments in 2018. However, the ratio of US shipments is likely to drop to 10% in 2019 as Amtran has shifted its focus to cooperate with Xiaomi. Amtran has also set up a factory in Vietnam to produce TVs to support Xiaomi’s exports to India and Southeast Asian markets and its exports to the US.
Vizio also is the primary client for Innolux in the US, taking about 70% of the Taiwanese company’s direct TV shipments from China to the US. In response to the rising tariffs, Innolux is likely to set up assembly lines in Taiwan.
Innolux is also likely to outrace TPV to ship the highest amount of complete TV sets to the US in 2019 due to increasing support from Vizio, Dgitimes Research estimates.
Compal is currently shipping Toshiba-brand TVs to the US. Although Compal acquired a factory located in Ciudad Juarez, Mexico from Toshiba in 2011, and also acquired the right to sell Toshiba-brand TVs in North America in 2015, the company has never utilized the Juarez factory to produce TVs for the US market. Instead, it has been shipping TVs to the US directly from its plant in China. Compal may restart TV production at the Juarez plant in respond to the US tariffs hike.
However, it remains to be seen whether Compal will continue to build Toshiba-branded TVs as it has reached a deal to transfer the rights of selling Toshiba TVs to China-based Hisense.
Taiwan’s TV ODMs are unlikely to lose their orders to rivals in China due to the increases in tariffs because Chinese makers are having fewer production capacities outside China than those of Taiwan’s players.
However, Taiwan’s makers may see their market share begin shrinking as brand vendors including Samsung Electronics, LG Electronics and TCL are ramping up the production of own-brand TVs from their plants in Mexico.―Digitimes