The LCD Fabs grab all the headlines: who can resist a story about a Gen 10 (!!) fab costing $4.25B designed to produce 6-up 65" LCD-TVs on 2,850×3,050mm substrates? Certainly not Insight Media (see Daily Display, July 20, 2006).

The flip side of the coin, or back side of the display, if you prefer, is often forgotten. Everyone of those 65" LCD panels will need a 65" backlight unit (BLU) before it becomes a LCD-TV. The manufacturing cost of a BLU for a LCD TV is roughly equal to the cost of the LCD panel itself. For example, the Insight Media 2006 LCD-TV Backlight Report forecasts that a BLU for a 55-59" LCD-TV will cost about $510 in 2009. I don’t even want to think about the cost of a 65" BLU. (Hint: cost goes roughly with the cube of the panel diagonal.)

Assembly of a BLU is much more labor intensive than manufacturing LCD panels, once the LCD fab is built. While the cost BLU fab is to support a Gen 10 LCD fab is nowhere near the $4.25B Gen 10 LCD fab cost, the investments still will not be trivial. The investment will also be over a broad industrial base including makers of CCFL lamps, brightness enhancement films, diffusion plates and all the other components used in a BLU. In addition, of course, there will be investments by the BLU maker in assembly plants.

According to a story in the Chinese-language Economic Daily News (EDN) and reported by Digitimes.com, two Taiwanese LCD makers are considering the future of profitability in the BLU market, and coming to different conclusions.

Chi Mei Optoelectronics (CMO) plans to raise the BLU self-sufficiency rate (i.e. the number built in-house compared to the number bought from outside BLU vendors) to 70% in the long term, according to the EDN report.

CMO has decided to increase the rate due to sliding panel prices, the company indicated. Once CMO finishes transferring its LCD module (LCM) production to China, the company’s existing LCM plants in Taiwan will be used to produce BLUs, according to EDN. CH Hsu, vice president of CMO, declined to comment on the report, the paper said.

AU Optronics (AUO), however, has not yet decided to raise its BLU self-sufficiency rate, as it still considers BLU assembly a labor-intensive business. It is not necessarily cheaper for AUO to produce its own BLUs than outsource production, according to BLU makers who were quoted by the paper.

This diversion in views between two major makers of LCD-TV modules shows the future of BLU manufacturing is cloudy. Since the BLU is a labor-intensive product, Insight Media tends to agree with AUO: buy them from low cost suppliers in China rather then build them in Taiwan. –MB