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This is the second part of a summary on the outlook for giant-screen color TVs (40-inch and over), as detailed in the recent industry outlook issued annually by 3M Precision Optics (3MPO), the world's largest producer of lens assemblies for projection TVs, or PTV. (See TWICE, June 23, p. 20.)
As noted in our last column, 3MPO is predicting that PTVs will continue to lead the way in overall digital TV sales for the next several years. The reason is pricing, as the price premium for digital-over-analog is substantially higher for direct-view TVs than it is for PTVs.
In addition, says 3MPO, the cost of adding high-definition resolution and 16:9 picture tubes to direct-view TVs "will perpetuate digital widescreen (direct-view TVs) 35-inch to 40-inch being priced over $300 higher than 40-inch to 49-inch digital PTVs."
Until TV manufacturers get the price premium down, smaller analog TVs "will remain the vast majority of sets sold for the next several years," 3MPO states.
Additionally, it says that with 66 percent of U.S. homes hooked to cable, "it stands to reason" that until digital programming "is widely available on cable, there will be a significant impediment to the transition to digital television." While set makers and the cable industry reached an agreement to work together on a "plug-and-play" standard for digital cable and digital sets, 3MPO cautioned that "based on our understanding of the agreement, one should consider this the start of a journey towards compatibility rather than a contract that resolves all issues."
3MPO is cautiously pessimistic when it comes to industry pricing. Mass-market retailers are now in the giant-screen market and "competition among these retail titans have forced lower prices." Also, while the market impact of giant-screen TVs from China has not been substantial, they "will continue to put downward pressure on digital TV prices, especially on entry-level models."
Citing speculation that some mass retailer will introduce an under-$1,000 digital PTV this year, 3MPO says that while such a move will probably draw customers and "probably impact unit volume positively," it will be "at the expense of profits throughout the supply chain." With demand close to exceeding supply, says 3MPO, the "negative impact on profitability over the long run outweighs the minimal incremental increase in short-term sales volume."
As for the impact of the FCC rule requiring that 50 percent of all giant-screen TVs have built-in over-air digital tuners after July 1, 2004, 3MPO believes that based on industry experience, the added cost of compliance "will have little effect on PTVs" beyond a temporary slowing of price erosion.
As for new big-screen technologies — including direct-view plasma and LCD, along with micro-mirror, liquid crystal on silicon and polysilicon LCD micro-display projectors — 3MPO estimates that as a group they will account for no more than 10 percent of the big-screen market this year. But, if cost and performance goals are achieved, share could grow to as much as 30 percent by 2007.
While this is below some industry estimates, 3MPO says, many of theses displays are aimed at the 40-inch to 45-inch market, a segment accounting for less than 20 percent of giant-screen sales today and will have premium pricing, so "expectations will be further stymied."
Their conclusion: conventional three-tube PTVs "will continue to set the standard for the ratio between cost and performance in consumer applications for several years to come," and will co-exist with new technologies on into the future.
Bob Gerson, TWICE editor-at-large, has covered the CE industry for more than 30 years. He is the founding editor of the publication and its longtime editor-in-chief.