Flat-panel TV industry faces bumpy road ahead
Though LCD panel prices remain solid, the average selling price of televisions continues to decline, which is bad news for consumer electronics retailers and all television brands.
Update:This blog has been corrected to reflect that the total flat-panel display business value represents global sales.
SAN DIEGO--This year could be a turning point for the flat-panel TV industry, as it decides how it will face the dual threats of market saturation and rapidly declining prices.
The total flat-panel display business in the worldwide in 2007 was $102 billion, up from $11 billion in 1998, according to DisplaySearch. And while that growth is encouraging, it's not necessarily good news for all sectors of the market.
One of the success stories is the rise of LCD (liquid crystal display) televisions, which finally overtook CRT (cathode ray tube) TVs in units shipped in 2007 for the first time ever. Other good news for the industry: the prices of the actual panels coming out of the factories owned by Sharp, Samsung, and others, were actually up last year, something that hadn't happened since early 2003, according to DisplaySearch. Panel suppliers engineered that by creating a shortage through carefully controlled inventory.
But the picture for the year ahead isn't as rosy for everyone.
"It's going to be a tough year for (original equipment manufacturers), brands, and retailers," Ross Young, president and founder of DisplaySearch, said here at the U.S. Flat Panel Display conference put on by his firm.
That's principally because the average selling price of flat-panel televisions in retail stores continue to drop, thanks to second- and third-tier TV makers that are driving down prices, as well as the growing power of Wal-Mart Stores and other mass-market retailers in the consumer electronics space.
Wal-Mart in particular is positioning itself as a place to buy traditional top-tier brands, not just cheap imports. It's expanding all consumer electronics offerings in its stores this coming year. Goldman Sachs analyst Matthew Fassler, who follows the CE industry, called it "a well-coordinated set-up" that displays and promotes brands like Samsung and Sony.
"Clearly, there's the beginning of a market-wide shift here, which for specialty retailers, doesn't bode all that well," Fassler said.
Sony first started offering specific models of its LCD TVs to Wal-Mart (and also to Target) midway through 2007 on a limited basis. Last week, Stan Glasgow, president of Sony Electronics in the U.S., told CNET News.com that his company would be expanding the number of TV models in the deal with Wal-Mart by 40 percent.
There seems to be a number of shifts occuring, including one back toward the established brands like Sony, Sharp, and Samsung, and away from the smaller players.
"This could be a shake out year in LCD TV market," DisplaySearch's Young said.
More than others, he added, it will probably help Sony in particular. "They're well positioned in the high end of market, and well positioned to take lots of share. They're making a lot of aggressive moves with OEMs, which makes things more difficult for second and third tiers."
The signs are already pointing that direction. After a poor showing in the first half of 2007, Sony rebounded in a major way in the most recent holiday season and despite its tradition of charging higher prices than its competitors, came away in the fourth quarter of 2007 as the top supplier of LCD TVs.