Bracing for a strong year in flat-panel sales, television manufacturers are taking steps to avoid out-of-stock conditions that restrained 2005 growth levels late in the year, and are adjusting assortments to reflect declining margins in smaller screen sizes.
Meanwhile, more and more of the relatively new vendors to the U.S. market with goods from China, Taiwan and Korea are expanding distribution behind aggressively priced models, fueled by the notion that “educated consumers need justification for the prices being charged by some of the major brands today,” said Rey Roque, Westinghouse Digital marketing VP. “While familiarity with a brand certainly is important, we believe that the velocity [of sales growth] is being driven by price points.”
A number of newcomers to the market have recently seen their distribution expand beyond warehouse clubs, TV shopping networks and non-traditional CE channels to reach big-box electronics, TV/appliance and some specialty A/V retail channels.
Industry watchers said the added competition will lead to continued price-cutting this year, and explosive unit-sales growth for both the LCD TV and plasma categories.
Scott Ramirez, Toshiba TV marketing VP, said he expects “the LCD market will double from 4.2 million in 2005 to 8.4 million in 2006. More than half of that total will come in screen sizes measuring 26W inches and larger, he said.
Bruce Tripido, Sharp display devices product marketing director, said the key LCD screen size in 2006 will be 37W inches, stepping up from 32W inches in 2005.
Plasma sales will grow from 1.6 million in 2005 to about 2.6 million in 2006, Ramirez predicted. The screen size “sweet spot” for plasma will remain at 42W inches but the 50W-inch segment will grow significantly as price points continue to compress, Ramirez said.
As new fully integrated models arrive, companies are already making price adjustments.
“We've provided guidance to our retailers on April, May and June compressions on 27- through 32-inch screen sizes,” said Westinghouse Digital's Roque.
Meanwhile, V, Inc., which has focused distribution on Costco, Sam's Club, BJ's and Wal-Mart, reduced pricing on its 42W-inch Vizio HDTV LCD set to $1,499 and its 50W-inch plasma to $2,299 as part of a “March Madness” promotion.
“Our approach is to offer products with a picture quality that is state of the art, and at the same time to be priced with other companies that don't have as much of a brand,” said Jeff Shindler, V, Inc. business operations and marketing VP. “So far it's working.”
The biggest challenge in 2006 will be ensuring that flat-panel TV supplies keep pace with demand.
Flat-panel vendors said pricing will certainly continue in 2006, “but the compression level will slow a little bit this year in key screen sizes compared to what we've seen over the past couple of years,” said Sharp's Tripido. Demand, however, will continue to be strong.
To avoid being caught short at key selling periods, Toshiba is increasing production capacity this year and in plasma TV has elected to stay with the same screen sizes it offered in 2005 to maximize supply levels, Ramirez said.
Toshiba has moved plasma and LCD TV component assembly and plasma final assembly to Asia and will now use its factory in Mexico exclusively for final assembly of LCD TVs. Ramirez said Toshiba is going with dedicated factories for digital chassis production and final assembly to improve production efficiency.
Hitachi, meanwhile, “has implemented a new forecasting system to roll six months ahead, so the company's salespeople are more in tune with the buyers,” said Bill Whalen, Hitachi senior product marketing manager. “It's a better communication system.”
Meanwhile, the next phase of the DTV tuner mandate, which arrived March 1, accelerated price cuts ahead of schedule early in the year as some companies sought to clear out non-complying analog-tuner-only models in 24-inch and larger screen sizes.
Westinghouse Digital's Roque said his company, which has done well with Best Buy and regional TV/appliance stores, is “starting to re-engage a push into the specialty A/V channel after an earlier aborted attempt with those accounts.
“We've shown a 47W-inch and a high-end 56W-inch LCD TV, and as we get into these larger sizes A/V specialty becomes a better fit for us,” Roque said.
Citing a large influx of competitors in small-screen LCD TVs and dramatically reduced profit opportunities, many first- and second-tier manufacturers are reducing or dropping the segment.
Westinghouse Digital, for example, will focus primarily on high value mid- to large-screen sizes this year to avoid the price compression in the smaller screen LCDs. The company is leaving the 20-inch segment, and will have only a 19W-inch model as its smallest screen size.
Similarly, Sony is focusing on 26W-inch and larger LCD TVs in its BRAVIA family, but will offer a pair of LCD PC/TV monitor hybrid pieces starting in the 20-inch screen size this year.
Sharp, however, continues to offer models in the 13-inch, 15-inch and 20-inch screen sizes, “but we don't have as many SKUs in the smaller screen sizes as we once did,” Tripido said. Sharp's strategy for 2006 is to continue being the fullest-line LCD TV supplier out there.”
In larger LCD screen sizes, most manufacturers are stressing new video processing technologies as a way of rising above the competition.
Ramirez said Toshiba is looking to expand its LCD TV market share from 5 percent to “double digits” in 2006, using a new REGZA TV series, which will feature a new advanced PixelPlus video processing technology.
Hitachi, meanwhile, will focus this year on driving its LCD TV offering up market by introducing some new innovative features including a 120Hz refresh rate that will make images sharper and crisper than the competition, said Hitachi's Whalen.
“You need a lot of technology behind it to make that happen,” said Whalen. “It's high technology that's demonstrable that will command a premium price point.”
Meanwhile, the LCD/TV combination category proved to be a hot segment in 2005 and early 2006, according to Tamaryn Pratt, principle analyst with Quixel Research. She said more companies, including Sharp and Philips, will be joining Toshiba in the category this year.
Toshiba, meanwhile, continues to offer a four-model assortment of “combis” out of its 15-model LCD TV lineup in 2006, Ramirez said.
The LCD TV category benefited directly from plasma TV shortages in 2005, said Jonas Tanenbaum, Samsung flat-panel TV senior marketing manager.
“In years past that didn't take place because large LCD wasn't predominant enough or was at such a price delta that it was cost prohibitive,” he noted.
Due in part to continued lean plasma supplies early in 2006, Samsung saw “a dramatic increase in the sale of 40W-inch LCD TV when we repositioned our LCD pricing at the end of January,” Tanenbaum said.
Manufacturers “will learn a heck of a lot in 2006” about the future of the flat-panel market by evaluating sales when both LCD TV and plasma models are in full supply, he said.
Samsung's overall TV strategy this year will be to focus on price points that have historically been hot for the TV category and will offer “more than ever different technology solutions at each of those price points.”
As an example, he said Samsung will offer at the $2,499 price point an HDTV plasma TV and an entry-level 40W-inch HD LCD TV.