The Display Business Environment in Europe: Together but Different
This article, the second in an occasional series that looks at business environments around the world, describes historical, economic, and other conditions that affect display companies doing business in Europe.
by Jenny Donelan
THE first thing to understand about the business environment for display companies in Europe is that there is not one environment, but many. While every region of the world has its internal differences, these differences are especially pronounced in Europe, where countries have their own laws, languages, and customs that in some cases go back more than a thousand years. The 28-member European Union has created a measure of political and economic uniformity, with the Euro its most visible result, but the EU has not homogenized Europe. The EU has also been losing favor in many member countries.
That said, the European business “environment” does have some common characteristics that distinguish it from other regions, such as Asia and North America. These include a proud history of scientific research and discovery that continues to this day, a stronger manufacturing presence than might be guessed, and a consumer culture that favors long-term relationships over the next new thing. Europe is slowly and steadily recovering from a poor economy, although many of the southern nations are not yet in anything resembling recovery mode.
In terms of environmental issues, Europe, and specifically the European Union, has tended to promote policies more proactively than is the case in North America and Asia. Restrictions on incandescent bulbs began in Europe, by EU directive, in 2009, and they were banned outright for home use in 2012.1 (In the U.S., the bulbs are being phased out as well, but far more slowly.) The EU has a non-binding objective to cut energy use to levels 20% below business-as-usual projections by 2020 and has, in addition to the light-bulb laws, instituted numerous measures pertaining to recycling, emissions levels, and water quality.2,3 Across the region, regulations and standards tend to be set at an EU level, which makes navigating any hurdles somewhat more predictable than would have been the case pre-EU. That said, the Nordic nations and the German-speaking countries tend to be the most sensitive to environmental issues – they are the “California” of the EU.
Material Foundations
Many core display discoveries have been made in Europe. This year marks the 125th anniversary of the discovery of cholesteric liquid crystals, a joint effort between Austrian chemist Friedrich Reinitzer and German physicist Otto Lehmann.4 Years later, George Gray’s research team at the University of Hull in the UK made major research contributions that led to liquid crystals being usable for displays.5
Materials continue to be an area of strength in this region. The Fraunhofer Institutes in Germany currently contribute significant research to OLED, LED, and liquid-crystal technology, and Novaled is a powerhouse in OLEDs, with an emphasis on lighting. Germany’s Merck, founded in 1668, is the world’s largest producer of liquid crystals. Another German firm, OSRAM, a mere 100 years old, is a major player in LEDs.
Europe is also home to a number of equipment companies, including Germany’s Aixtron, a maker of deposition systems; France’s ELDIM, which makes cameras and measurement equipment; and Sweden’s Micronic Mydata, which manufactures pattern generators and surface-mount technology.
Measurement instrumentation has been a European specialty for years; in addition to ELDIM, there are Instrument Systems, LMT Lichtmesstechnik Berlin GmbH, X-Rite, and BYK-Gardner, all located in Germany. (For an update on recent consolidations in the German instrumentation industry, see the May/June Industry News.) Much of the experimental work is performed by the companies. “There is not much R&D at universities related to instrumentation for display applications,” says Richard Distl, a Managing Director of Instrument Systems, adding that his company puts a lot of effort into R&D on its own, with current projects including 2-D color measurement for homogeneity analyses of displays.
Well-established display system integrators in this region include Barco (Belgium; projectors and digital signage), Conrac (Germany; industrial, marine, and ruggedized displays), and GDS (Italy; digital signage and more), which compete globally in their respective markets. The French-Italian semiconductor company ST Microelectronics (with headquarters in Geneva) does a reportedly hefty business making the MEMs gyroscopes and accelerometers for the iPhones 4 and 5.6 When it comes to making the products that end users love to buy, Finland’s Nokia is probably the prime example. This 150-year-old company began as a paper mill and transformed its portfolio over the years to include electronics, including the hugely successful Lumia smartphones. The company’s smartphone business was recently purchased by Microsoft.
Such acquisitions are a familiar story in Europe. According to market analyst Bob Raikes of Meko, “Once out of the R&D phase, [European] companies often end up being bought by the global display makers.” As examples, he offers Liquavista (a Dutch company originally spun off from Philips) being acquired by Samsung (and later by Amazon), Germany’s Novaled by Samsung and Cheil Industries, the UK’s Cambridge Display Technology by Sumitomo in 2007, and Scotland’s Forth Dimension (a maker of near-to-eye technology) to Kopin in 2011.
It should be noted that acquisitions do not always mean that operations cease in the home country. Nokia, for example, will retain many operations in Finland post-acquisition. Instrument Systems continues to operate in Germany since being acquired by Konica Minolta, as does Cambridge Display Technology in Cambridgeshire, UK, since its acquisition.
Continental Manufacturing
Europe does not spring to mind as a hotbed of manufacturing. Common associations for this region tend to be more along the lines of limited land for building, strict environmental regulations, and some of the world’s highest paid workers. But, in fact, manufacturing in Europe still makes sense in many markets, says Raikes, pointing out that being close to the people who are buying the goods and having access to the latest technology and skilled workers can offset the cost savings of assembling in Asia. “There are also tariff barriers,” he says. “TVs imported to Europe from Asia carry a 14% duty, unless they come from Korea, in which case a free-trade deal with the EU will bring the duty down to 0% by 2016.”
One of Europe’s answers to low-cost manufacturing, a sort of “onshore/offshore” movement, has been Eastern Europe. A minor manufacturing boom began there about 10 years ago, notes Raikes, with most of the factories geographically arranged in a ring that is referred to as “JOG,” for “Just Outside Germany.” To paraphrase writer Mark Morley in his Driving B2B blog from October of last year, Eastern Europe is an appealing location for manufacturers for several reasons. First, many of its countries – Hungary, the Czech Republic, Slovakia, and Slovenia – border Western Europe. Second, costs for both services and labor tend to be low, and many local governments are eager to offer incentives to incoming manufacturers. The transportation infrastructure, in terms of roads and waterways, is in place.7 Last but not least, some countries, Hungary and the Czech Republic most notably, have a long tradition of precision manufacturing as well as scientific innovation. Hungary, in particular, already has manufacturing momentum, and companies from all over the world, such as Foxconn, Denso, Philips, and others have manufacturing operations there.7
Manufacturing does exist outside Eastern Europe as well. Nokia has operations in Finland; Barco has factories in Belgium, etc. There is a certain eagerness on the part of many countries to renew economic opportunity in the form of homeland manufacturing. The UK’s Raspberry Pi is a poster child of sorts. This credit-card-sized computer, designed to plug into a TV and keyboard and enable word processing, spread sheets, etc., was created by a not-for-profit group primarily to enable accessible computing for kids on a global basis. The first Pis were made in China in 2011, but operations have been “resourced” to a Sony factory in Wales. In October 2013, UK production exceeded 1 million boards, a piece of news that was widely and fondly reported around the world.8
Retail Conservatism
Electronics buyers in Europe like good design and good value and are unlikely to replace electronics as rapidly as do their North American and Asian counterparts. Says Raikes: “They are happy to pay for good products as long as they are likely to last – think of the success of German cars!” Display companies looking to expand into Europe, he notes, should be aware that buyers tend to be less tolerant of product failure and may require a higher level of warranty and service than North Americans.
Another factor to consider is that for European electronics consumers, bigger is not always better. Homes in Europe tend to be more compact than in North America and apartments are more prevalent, so the very largest TVs may simply not be practical here. It is worth noting that 3-D did not induce Europeans to buy new TVs any more readily than it did North Americans, so it will be interesting to see how UHD will fare. There is some promising movement. In January of this year, Eutelsat Communications launched the first dedicated demonstration UHD channel in Europe9 Reporter (and Information Display contributing editor) Steve Sechrist wrote in a Display Daily blog that “4K content and delivery, long considered the gating issue for mainstream UHD adoption, is developing at a fast pace in Europe as evidenced by the recent IFA in Berlin.” He noted new UHD satellite and cable signal announcements, Internet delivery of UHD signals, and new SOC chips and STBs designed to enable 4K content delivery.10 If the quality and value are there, Europe can be very forward-thinking, Raikes notes, pointing out the previous successes of 3G and mobile technology in general.
In terms of consumer confidence, this is recovering, but slowly (Fig. 1). Southern Europe continues to be in an economic slump. Greece and Spain had unemployment over 25% at press time, Raikes says, and France, Italy, and Poland were all above 10%. Northern Europe is faring better. “Germany, in particular, is doing well,” Distl says. “Capital equipment industry and machinery is very healthy and this is driven by export sales, mainly.” A few countries in Europe are struggling, he adds, but even outside Germany, the overall outlook is more positive than negative. “I see this when talking to customers and others,” he says.
Fig. 1: Consumer confidence is higher in Sweden and Denmark than in the other depicted nations, but almost all countries show an upward trend in 2013. Source: European Commission/Meko.
Another factor to note is that retailers tend to be national rather than regional. Key electronics retailers are MediaMarkt/Saturn in Germany and Benelux, Dixons in the UK, and Darty in France. This is a reflection of both local tariffs and buyer tradition. Global retailers such as Best Buy have not been successful in Europe, with the exception of Amazon, says Raikes.
Lofty Goals
Because Europeans – at least some Europeans – have money to spend, and there is a long tradition of technical excellence at both the commercial and the university level, Europe can look very tempting to a display company looking to sell or make displays there. Even though total display sales have dropped somewhat since 2010, the EMEA market for TVs, desktop monitors, and digital signage still tops 100 million units for 2013, according to data from Meko. But Raikes likes to compare Europe to the Alps – from a distance, they are beautiful and compelling, but once you are in them, you face harsh conditions. Mistakes are easy to make unless you know the territory quite well. If you are willing to make the effort to learn, however, and play according to the local rules, you may find it a rewarding landscape.
Acknowledgment
Information Display thanks Bob Raikes of Meko, a European market-research consultancy with special expertise in displays (www.meko.co.uk), for his invaluable contributions to this article. •
2http://www.eea.europa.eu/highlights/an-overview-of-eu-environment
3http://europa.eu/pol/env/flipbook/en/files/environment.pdf
4http://www.nobelprize.org/educational/physics/liquid_crystals/history/
5http://www.hull.ac.uk/chemistry/research/LCgroup/history.htm
6http://www.edn.com/design/consumer/4396870/Teardown—Inside-the-Apple-iPhone-5
7“Why Eastern Europe Could Benefit from the ‘Perfect Storm’ Currently Brewing in the High Tech Industry,” by Mark Morley: http://www.gxsblogs.com/morleym/2012/10/why-eastern-europe-could-benefit-from-the-perfect-storm-currently-brewing-in-the-high-tech-industry.html
8www.raspberrypi.org.shtml
9http://news.softpedia.com/news/Europe-Welcomes-the-First-4K-UHD-TV-Channel-320926.shtml
10http://www.display-central.com/free-news/display-daily/in-eu-4k-content-delivery-gets-ready-for-prime-time/