High Prices Curb Consumer LCD Monitor Demand

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The nascent consumer demand for LCD desktop monitors has come to a crashing halt due to massive price increases that have taken place in the category during the past three months, but business sales are helping stabilize the category.

The dizzying downward price spiral experienced by the category until February, when panel vendors began passing along manufacturing cost increases to the monitor makers, had brought the monitors within reach of home users. By February prices had bottomed out and 14-inch LCD monitors were selling for around $799, down from $2,600, and 15-inch models were about $100 more. But the price hikes have pushed LCD monitors up about 30 percent driving prices back above $1,000 for all but the least expensive models.

"When we had 14 and 15-inch monitors under $1,000 we were getting acceptance from [general] consumers, but when we went back up it just died," said Todd Fender, NEC Technologies LCD line product manager.

Despite waning consumer interest, some manufactures are still doling out product on an allocation basis because of healthy sales to the SoHo and small business communities. Research firm ARS, San Diego, reported the increased prices and lower home user interest has not negatively effected the amount of shelf space dedicated to LCD monitors at retail, which has remained constant during the past three months.

"There are still people out there willing to spend $1,100 or $1,200 for a 15-inch and these may be the SoHo people," Miller said.

Steven Baker, senior hardware analyst for PC Data, Reston, Va., confirmed unit sales have remained stable over the past several months.

When prices might again reach the low levels attained earlier this year is still unknown, but vendors and analysts said prices will decrease when new LCD panel manufacturing plants will start coming online in Taiwan at the end of 1999.

"I expect that Taiwanese vendors are now getting ready. Then when they are operating supply will increase and cut into Japan's control of the market," said Erin Rippee, marketing VP for KDS USA. He added, once Japan's dominant position as a LCD panel provider is curtailed by competition from Taiwan, and to a lesser extent Korea, prices will settle back down.

Stanford Resources, San Jose, Calif., is predicting prices may rise slightly in the third quarter, but will stabilize as the fourth quarter begins and even start going back down by the end of the year, said Sweta Dash, senior marketing research analyst for Stanford.

KDS has not yet raised prices, but the company plans a $100 increase for its 14-inch and 15-inch models in the third quarter, Rippee said.

Sam Miller, ViewSonic's chief engineer, said the company has raised prices across the board with the price on its 15-inch model $350 to $1,300 being a typical example. However, sales have not only continued to be strong, but the increase in price for larger screen monitors has renewed consumer interest in the less expensive models, he said.

"We thought the 14-inchers were going to die, but because of the price increase demand has picked up so we've actually reintroduced the VP-140," Miller said.

NEC Technologies ended up raising prices on only one SKU, the 15-inch 1500M which rose $300 to $1,200, and does not expect prices to rise any higher, said Todd Fender, NEC's LCD product manager.

This price fluctuation will push back the date when LCD starts challenging CRT-based monitors with comparable prices by about one year, the vendors said. The generally accepted time is now around 2003, said Rippee.

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