DELL leads the industry to new standards.
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TECHWEB News
OEM Executives Call For LCD Standards
(03/11/99, 7:58 p.m. ET)
By Andrew MacLellan, Electronic Buyers' News
Getting behind a growing industry effort to draft common mechanical standards for notebook PC flat panel displays, Compaq Computer Thursday joined arch-rival Dell Computer in endorsing the cost-saving measure.
A meeting of such competitive minds brought into sharp focus the need for uniform specifications to streamline the myriad product options that now daunt OEM purchasers. And with the LCD market entering the first phase of what many predict will be a prolonged parts shortage, senior computer industry executives say the time for standards is now.
Speaking in Austin at a conference hosted by FPD research firm DisplaySearch, Dell repeated its plan to help build a coalition of PC companies aimed at lightening the load for suppliers currently carrying scores of similar LCD models. Dell first raised the issue last December, expressing frustration at having to wade through so many product variants -- each designed to comply with a unique OEM request.
Picking up the message, a Compaq executive Thursday said that because the notebook PC industry is maturing, it no longer needs the same number of LCD options that were required to establish the market.
"We've seen revolutionary changes to date, but because of a developing priority shift, some of this is going to slow down," said Ted F. Callahan Jr., a corporate procurement manager for the Houston-based company. "What will help drive an evolutionary market is control of variabilities. ... It does not behoove a company like Compaq to have to have a series of 40 or 50 displays used in one particular product line."
For display suppliers, a slimmer LCD product portfolio would conceivably translate into a more efficient manufacturing process, triggering savings that could then be passed on to OEM customers. Fewer panel variations could also help vendors manage their product mix, resulting in better forecasting.
The driving force behind the standards effort, according to Glenn Neland, vice president of worldwide procurement for Dell, is a determination to increase the penetration of notebook PCs in the computer market as a whole.
In 1998, notebook PCs accounted for a modest 18 percent of overall computer sales. This wasn't higher because Dell was forced to charge 75 percent more for a notebook PC than an equivalent desktop system -- even as it saw the cost of its flat panels drop by 37 percent last year, according to Neland.
Now, with waning LCD supplies bumping display tags up by 20 percent to 30 percent, OEMs may have to pass their rising costs on to customers in the form of higher notebook prices. Reluctant to concede any of the ground they've gained with their portable products, PC makers are urging standards upon their suppliers in an effort to ease the expected increase in materials costs.
To furnish incentive, OEMs are predicting that a standardized industry with improved forecasting abilities would be less subject to the three-year boom/bust periods that regularly afflict LCD makers -- what DisplaySearch calls the "crystal cycle."
"We're concerned about the perceived shortage in the LCD market today, and we clearly need to find a way to bring LCD prices down to increase [notebook PC] demand," Neland said. "We think there is a real opportunity for us to break out of this cycle, and we think the way to do that is through standardization," he added.
Improved Relationships
DisplaySearch analyst Ross Young said such a level of cooperation would be unprecedented in the notebook PC industry, where panel makers and OEMs have often taken advantage of supply/demand imbalances to maximize their own earnings.
"The industry is plagued by poor relationships between suppliers and customers," Young said. "The supplier tends to get bashed in a glut, and in a shortage, OEMs often feel like they're getting gouged."
While recognizing such tactics as past industry practice, Compaq's Callahan said industry standards would prevent suppliers from having to respond to wild market gyrations by introducing better costs controls.
"The current feast or famine situation does not help drive long-term growth in the industry," he said. "In fact, to drive market growth going forward, we need a sustainable market based on a sustainable cost structure."
The proposal struck home with many of the conference attendees, but left some wondering to what extent OEMs will trade an ability to differentiate their products for lower manufacturing costs.
"We're exploring [the standards issue] at this point," said Carl Steudle, director of TFT-LCD sales and marketing for Samsung Semiconductor, in San Jose. "It's very difficult for a manufacturer. Every customer wants something a little bit different, be it size, or clarity, or cost."
Dell's proposal centered around a common standard for screen sizes, mounting holes, screen centerlines, connectors, and integrated drivers. With such parameters laid out, OEMs could still differentiate their products in terms of power consumption, brightness, viewing angle, weight, resolution, and other features, the company said.
Mark Fihn, Dell's senior strategic commodity manager, criticized the industry's use of cryptic acronyms to describe screen resolutions, terms which are difficult to convey to end users. "I want to challenge this industry to come up with a better vocabulary," Fihn said.
The two Texas-based computer giants expect other major PC companies to join in the standards effort but painted it as an evolutionary process, rather than a series of pronouncements that will be handed down to suppliers. A senior Dell executive said several companies are slated to meet in April to draft a list of target areas.
"I think the next step really belongs on the side of the notebook manufacturers," Fihn said. "We need to get together and determine what's an acceptable form factor for us, and we may need to rely on some third-party support to get there." |
