ACTIVE MATRIX LIQUID CRYSTAL DISPLAYS: TRADE DISPUTE

            AMLCD, or Active Matrix Liquid Crystal Display, is the high performance evolution of LCD technology and this flat panel screen delivers superb brightness, contrast and clarity. Using an array of thin film transistors (TFT) that control each individual pixel, AMLCD technology is able to achieve enhanced display quality given that the voltage used to power each pixel is not transferred to surrounding pixels. Additional offering of crisp displays, AMLCD flat panel screens can be made smaller and lighter than their LCD and CRT (Cathode Ray Tube) counterparts. In addition, a consumer or industrial LCD monitor utilizing AMLCD technology is more energy-efficient. These combined advantages have made AMLCD technology an increasingly popular solution for consumers and industries alike.

             AMLCD technology has been especially beneficial in military and healthcare fields, where display quality and physical size can be a matter of life or death. For people working in tight quarters, such as an operating room or fighter cockpit, AMLCD technology is a compact, reliable solution. On the other hand, a custom-designed industrial LCD monitor utilizes the latest technology in order to benefit military, transportation and industrial markets alike.

    1.    Evaluate the Commerce Department’s decision to impose duties on Japanese manufactured AMLCDs. Has this decision helped or harmed US industry? What is the likely impact on the US consumer?

Answer: The US Commerce Department imposed a 62.67% of duties on AMLCDs imported from Japan to US in 1991. This decision has been taken by the International Trade Commission as they got complain from a small US manufacturers of AMLCD about dumping activities of the Japanese suppliers who are exporting same product in US. According to US Antidumping Act of 1921, dumping occurs when imports sold in the US market are priced either at levels that represent less than the cost of production plus an 8% profit margin or at levels below those prevailing in the producing country. The US manufacturer main claim was that the Japanese suppliers were dumping their products in US market as they were used to sell their imported products less than their market value and at less than half of their production cost. After investigating the above scenario of charges of imported AMLCD, the International Trade Commission got the result that the Japanese producers were used to sell AMLCD lower than the total cost and this trade activity was against the US Anti dumping Act. This decision had been taken by the ITC to protect the small US manufacturers from unfair foreign competition.

             But the ultimate decision of imposing this duty could not help the US AMLCD manufacturers because they required large amount of investment to get success for their local industry for which they did not get support in terms of subsidies from the government. On the other hand this duty affected the American laptop computer manufacturers because they were used to import LCD screens from Japanese suppliers mainly through joint venture operations. This duty increased the total manufacturing cost of the laptops by 30 percent. For these laptops 50 percent of the total cost is accounted for the AMLCD screens which are the mostly expensive component than the other parts of laptops.

             This increased manufacturing cost would have negative impact both for the manufacturers and consumers as well. Because this situation will put limitations on the consumers not to get the high quality product with low price from the producers and this may create direct and indirect customer dissatisfaction.

   2.  What, if anything, could the US government do to keep US computer manufacturers from moving their manufacturing operations offshore? Should the government take such action?

Answer: The decision of imposing an antidumping tariff on AMLCD screens imported from Japan made the suppliers asked the U.S. Court of International Trade to overturn the ITC decision that the American industry had been injured and thereby throwing out the 62.67 percent, specifically levied against Hosiden and collectively against all other Japanese supplier like Hitachi, Matsushita, NEC, Seiko Epson, Sharp, and Toshiba. Not only these firms, the other US computer manufacturers like Apple, Compaq, IBM, and Tandy were also filed a separate appeals with the Court of International Trade and all attacked the ITC finding that a U.S. industry in AMLCD panels exists, let alone that it could be injured. During that time IBM was studying the possibility of assembling computers using active matrix flat panels there. But now IBM has none on the market but, in connection with its joint venture with Toshiba, is expected to introduce laptop/notebook models using AMLCDs. The other two computer manufacturers Apple and Compaq decided to move their production outside the United States. They showed the logic that these third countries do not levy tariffs on imports of AMLCD from Japan and on the other hand the US does not levy tariffs on imports of finished laptops from those third countries.

       The computer manufacturers of America asked the Court of International Trade to set higher antidumping duties, and also to subject imported electronic subassemblies for AMLCD panels to the stiff penalty tariff. In order to motivate the US computer manufacturers from moving their manufacturing operations offshore the US government should revise the decision about the charges imposed on AMLCD. They can go for tariff classification and impose different duties on the basis of subassemblies. This tariff classification can offers a number of planning opportunities. For example, AMLCDs customs duty rate is 62.67% can be broken down, and imported in separate consignments – such as display drivers and controllers – which attract lower rates of customs duty

       The US Commerce Department in its final antidumping ruling should exempt the electronic subassemblies from the penalty duties.

   3.  What criteria should the US government apply in targeting industries for antidumping protection?

Answer: In US a group of small companies are involved in manufacturing AMLCD and their target niche market is Defense Department for whom they are only producing their product on limited basis. AMLCD is an important component for computer displays, camcorders, medical instruments, high-definition television, auto dashboards, factory control devices, aerospace instruments and the instruments for military. Among these products, US Airforce uses AMLCD screens for cockpit instrumentation and flight simulation devices and US Army needs the screens for its battle tank, and the Navy uses them in its shipboard command system. As the US AMLCD companies basically produce their product for Defense sector, the US government could impose antidumping charges for those AMLCD Japanese firms who are used to export the product which are used by US Defense Department. But the US government imposes duties on imported AMLCD from Japan to protect their domestic companies from unfair foreign competition. This decision by ITC affected the other industries like computer manufacturers, communications equipment and consumer electronics goods manufacturers.

   4.  If you were the CEO of a small US firm interested in AM-LCD manufacturing, what factors would be important in your decision to enter the AM-LCD market? Under what conditions might you enter the market?

Answer: If I were the CEO of a small US firm I would definitely be interested to enter the AMLCD market. The main factor that would be important in my decision to enter into the AMLCD market is the potential market growth rate of this product in near future. Active Matrix Liquid Crystal Display markets were over $19 billion dollars in the year 2000 and this huge market is expected to grow more and more. The possibility of traditional CRTs in desktops and televisions being replaced by AMLCDs is also creating the opportunity for the current growth of the AMLCD market.

In US a number of small local companies are engaged in this business but they are highly focused in supplying the specialized niches that is Defense Department except the other large companies like IBM which is producing AMLCD with the joint venture of Toshiba and offering the product in mass scale. The small US companies have made investments only to support their limited basis production and these companies do not have capabilities to go for mass production of AMLCD and sell those products on commercial basis. But there are possibilities of these US based firms to compete with those Japanese producers through attaining government and private funds to reproduce AMLCD technology and to improve the current manufacturing process. To be successful in this AMLCD industry as a CEO I would like to benchmark the business activities of IBM and other successful producers in Japan. High risks are involved in producing AMLCD screens but these risks have been overcome by the Japanese leading technology and the long payback period of investment. These strategies by the Japanese manufacturers and IBM’s joint venture entry strategies can be followed by my company.  However, the continued and growing investment in R&D for the development in next generation display device and additional AMLCD capacity features can also be the way so that none of the existing companies can find a worthy successor to AMLCD industry.

  5. Should the US government urge the pentagon to support production of AM-LCD’s? Explain the reasoning behind your answer.

Answer: The US government should ask the Pentagon to support the production of AM-LCD’s.

       Some US government experts visited the AMLCD plants in Japan and recognized that the US manufacturers are able to catch up with Japanese producers. They recommended, if the US companies can obtain government and private funds then they will be able to reproduce AM-LCD’s technology and improve manufacturing process. AMLCD companies need heavy investment and it’s not possible for the US government alone to provide full support to these companies by giving subsidies. So it will be better for the US government if they can persuade other investors like Pentagon to invest in AMLCD industry. The US manufacturers sold maximum of their screens to Pentagon  and in order to get grater value from these AMLCD companies Pentagon can go for partnering with them through investment. 

      The Pentagon also anticipated that the AM-LCD project meet it’s criteria for the “selective production” and this plan allows the Pentagon to commit funds for purchasing critical defense materials from selected contraction when projects meet certain standards. The firms obtaining contracts for AM-LCD production would be expected to find commercial buyers for the screens to keep their manufacturing cost effective and to avoid high priced products. 

      Pentagon’s funding decision to AM-LCD production may be a twist to encourage and attract other US investors to finance AM-LCD production to cultivate a customer base for the screen. From the upward consultation we can observe some chances or demand of the AM-LCD screen in the US market and how the business can established and successful within the home country.