Boom or Bust for LCD-TVs in 2007?

January 7, 2007, 8:34 PM by Scott M. Fulton, III

Scott Fulton, BetaNews: For more on the strangely bifurcated analysis of the flat panel market, we turn to our senior CES analyst, Sharon Fisher. Sharon, with mass production, we're seeing the prices of LCD monitors plummet. What I'm wondering is, are they going down too far? Specifically, is the entry of the mainland Chinese and emerging-market manufacturers into this industry driving down margins so far that the typical Japanese, Taiwanese, and semi-American manufacturers can no longer compete?

Sharon Fisher, BetaNews Senior CES Analyst: LCD TV prices are definitely dropping quickly, Scott, based on a big drop in the price of components. LCD TV monitor components dropped as much as $40 in January due to lower demand, after supplying the big Christmas and Super Bowl seasons, and the larger the monitor, the more the price dropped, according to DisplaySearch.

The smaller TV manufacturers are more nimble and can more quickly exploit these drops in component prices, plus a number of them already have agreements with lower-price retailers such as Costco. With the Internet, consumers have much more of an ability to comparison shop; they can go to a local store, view the different options available, and then go home and check the prices on Amazon and get free shipping, or head down to Costco and often beat the price at the electronics retailer.

LCD TVs are popular with consumers because they're significantly cheaper than plasma TVs of the same size, and the quality of the image continues to improve so that it's almost as good as plasma. DisplayTech estimated LCD TV display revenue to be $22.5 billion in 2006, up 85%, compared to plasma TV revenue, which went up 28% annually to $7.2 billion. In 2007, the firm expects the LCD market to grow 11% to $77.5 billion and to own 84% of the flat panel display market.

The drop in prices is definitely concerning manufacturers, so much so that a number of television component manufacturers, such as Sharp, NEC, Samsung, Philips, AU Optronics Corp. and Chi Mei Optoelectronics Corp., are under investigation by the U.S. Department of Justice for price fixing. The DoJ started talking to these manufacturers in December, alleging that they had colluded to reduce shipments in order to slow the drop in prices.

Scott Fulton: Okay, let's say I'm an LCD producer. The demand is so high for my product that my margins have been pushed through the basement. I decide to limit shipments. That's the sensible decision all my competitors might take. Why am I then subject to investigation and, perhaps, prosecution?

Sharon Fisher: Well, if you decide to do it on your own, that's one thing. That's your prerogative. The DoJ gets involved when they believe that there's some indications of collusion -- in other words, if the vendors are making like OPEC and agreeing together that they will all limit shipments in order to increase prices, or at least keep them from falling so quickly.

Scott Fulton: Then I'll just have to keep a weather eye out, as Willard Scott would say. Thanks, Sharon.