[opendtv] News: Signs of a Glut and Lower Prices on Thin TV's

http://www.nytimes.com/2004/11/29/technology/29lcd.html?th

Signs of a Glut and Lower Prices on Thin TV's
By ERIC A. TAUB

Published: November 29, 2004

  While hanging a television on the living- room wall may have 
captured the imagination of American consumers, it has yet to empty 
many pocketbooks.

That may soon change as a glut of liquid crystal display flat-panel 
televisions, called L.C.D.'s, enter the market, a result of a boom in 
new factories. According to several manufacturers and analysts, the 
prices for L.C.D. flat-panel TV's will drop in the new year, falling 
by as much as 30 percent by the end of 2005. The prices of plasma 
flat-panel TV's are also expected to fall significantly.

  That is not a message that the electronics retailers want to be 
heard during the holiday shopping season. They are hoping that the 
price cuts that have already occurred will spur more people to buy 
flat-panel sets, and many are already offering discounts to increase 
traffic in their stores.

"We do not want to talk about predictions of price drops," said Lee 
Simonson, the director of  Best Buy's television division. "We want 
people to buy now."

Flat-panel TV's still represent less than 10 percent of the 29 
million TV sets to be sold to dealers in 2004. Of the flat-panel 
sales, 73 percent are L.C.D. sets and 27 percent are the larger 
plasma models.

  Flat-panel sets have become hot items with consumers. According to a 
survey by the Consumer Electronics Association, an industry trade 
group, a plasma television is the most desired holiday gift this 
season.

Manufacturers, like the makers of other consumer electronics, are 
investing heavily to expand their production capacity, hoping to 
capture market share. Earnings, they reason, will come later, 
although until recently, these sets had proved highly profitable. In 
the first three quarters of 2004, the LG.Philips LCD Company made 
$1.4 billion in profits from L.C.D. televisions, although the company 
reported a drop in earnings in the third quarter from the 
year-earlier period. Another manufacturer, AU Optronics, made $900 
million in the three quarters, according to DisplaySearch, a 
technology research company.

  This windfall has given them the cash to build next-generation 
plants capable of creating even larger screens at lower per-unit 
costs. Each new generation L.C.D. plant costs $1 billion to $3 
billion.

  Next year, AU Optronics and another L.C.D. maker, C.P.T., both based 
in Taiwan, will complete new plants for making 32- and 37-inch 
displays. To cut construction costs,  Sony and Samsung are in a $2 
billion joint venture to build the world's first L.C.D. plant 
designed to produce eight 40-inch or six 46-inch displays cut from 
one large piece of glass.

  "The plant building boom is due to a herd mentality as big sales 
numbers have been forecast," said Chris Chinnock, president of 
Insight Media and editor of the Microdisplay Report, an industry 
newsletter. "We've seen this cycle of shortfall, investment and 
oversupply for 10 years. Everyone sees the opportunity at the bottom 
of the trough and thinks they can do better than their competitors."

  Bharath Rajagopalan, general manager for TCL-Thomson Electronics, 
owner of the RCA brand, said: "L.C.D. production is becoming a 
commodity game. There is an inordinate amount of competition and 
price erosion."

Ross Young, president of DisplaySearch, predicts that there will be a 
53 percent increase in capacity during 2005, and he says that will 
put a lot of pressure on pricing. A 42-inch L.C.D. set that costs 
close to $4,500 today will be $3,100 next year, and $2,250 in 2006, 
he says.

  Tasso Koken, vice president and general merchandise manager for 
Sears home electronics, predicts that in 18 months, a 20-inch L.C.D. 
TV from a well-known manufacturer will be under $299, down from $700 
to $800 today. "The 2005 price drops in L.C.D. will make the 2004 
reductions look like a walk in the park," he said.

As prices for all televisions fall, the industry expects that each of 
the competing technologies will carve out its own market niche. The 
ultimate victim may be the tried-and- true picture-tube TV.

So far, average consumers do not seem to care which technology they 
are buying. "Generally speaking, the consumer has no understanding of 
the differences between L.C.D. and plasma technology," Mr. Koken of 
Sears said.

But there are important differences. Plasma displays use a grid of 
hundreds of thousands of cells filled with a xenon and neon gas 
plasma. An electrical charge illuminates colored fluorescent 
phosphors, creating an image. Because of the difficulty in producing 
very small grids, plasma sets can be produced cost effectively only 
in larger screen sizes.

In an L.C.D. panel, liquid crystals are sandwiched between pieces of 
glass. An electrical charge twists the crystals to block light or to 
allow it to pass through to the screen. L.C.D. sets do not display 
motion as crisply as plasma TV's, and have more limited viewing 
angles.

Many industry executives expect that later this decade, L.C.D. units, 
which are typically 3 to 5 inches deep, will completely replace 
smaller-size picture-tube sets. Next year, Sony expects to double the 
number of flat-panel TV's it sells in the United States, while 
decreasing its picture-tube offerings by 20 percent, according to 
Mike Fidler, a Sony senior vice president. The picture-tube business 
is expected to remain profitable for the company for the next three 
years, but then decline as the price of L.C.D. TV's falls below $500, 
Mr. Fidler said.

  Falling prices for larger screen sizes may force plasma sets to be 
sold only in sizes around 60 inches, where they maintain their price 
edge over L.C.D. screens. Plasma panels contain only electrodes and 
phosphors, so they can be made in larger sizes without a 
proportionate increase in price, according to Ed Wolff, a vice 
president at Panasonic.

  But some are not so sanguine about the future of plasma. Mr. Fidler 
of Sony says that L.C.D. TV's will drop so much in price that plasma 
will go away in three to five years.

Given the uncertainty of whether customers will take to mounting 
their TV's on a wall, some companies like RCA are hoping that a 
less-expensive large-screen projection TV will remain a viable 
alternative to L.C.D. or plasma sets. A harbinger of that trend, the 
company's recently introduced Projects, a 61-inch projection set, is 
just 7 inches deep.
 
 
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