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Suppliers See TV Opportunities Ahead

Flat-panel TV manufacturers attending the DisplaySearch Flat Panel Display Conference here said despite signs of saturation in some TV segments, significant growth opportunities remain to be tapped in 2008 and beyond.

Paul Gagnon, DisplaySearch’s North American TV market research director, said some 200 million flat-panel TV units were sold globally in 2007, but further growth is expected to slow as developed regions hit saturation points. This means that revenue will level off starting in 2010 before declining in late 2011 and early 2012.

Gagnon said that while upstart brands such as Vizio made significant market-share gains in 2007, the major brands including Samsung and Sony quickly reacted to reclaim their lost ground at the end of the year, in part, using performance and feature innovations to command higher tickets.

Samsung, which ranked first in total TV share last year, took 13.3 percent flat-panel unit share and 17.5 percent of the dollar volume. Sony accounted for 8.8 percent unit share and 16.7 percent of dollars, Gagnon said.

In the fourth quarter, Sony surged back into the No. 1 spot in U.S. unit and revenue share for LCD TV, replacing Vizio, which fell to No. 3, he said.

Randy Waynick, Sony Home Products marketing senior VP, said even though there was a lot of discussion last year about third-tier brands coming on strong, “a lot of those people are very quiet today and contemplating exiting the industry because of consumers’ choice, because value still holds a place.”

Waynick said that for a number of reasons Sony was able to double its unit share to 21.1 percent in the fourth quarter, from 12 percent in the first quarter of 2007, and did so selling premium products at 60 percent higher average selling prices than the rest of the industry.

Going forward, Waynick pointed out that Sony expanded its LCD TV line with a broader range of screen sizes, including smaller displays for secondary room placements, and added a new advanced user interface and add-on module system that, among other things, will enable TVs to access the Internet for a variety of new content offerings that Sony is putting together with a host of partners.

For plasma TV, Bob Perry, Panasonic Display senior VP, said 2007 was a stressful time for TV manufacturers and retailers, but stated plasma technology still has significant upside potential.

Consumers are for the most part agnostic about display technologies and will “vote for LCD when they want a small TV, but in larger screen sizes they vote with their wallets,” Perry said. “Consumers are making specific votes in purchasing patterns in consumer electronics and other value-added categories such as appliances as well.”

Going forward manufacturers will have to cope with a shifting retail landscape from high expertise, high service environments to venues with low service and low expertise, Perry said, adding that consumers are moving their purchases more and more toward warehouse clubs and mass merchants, “and while the numbers may not show it there is clearly a trend moving toward the Internet or a node retail environment.”

Content delivery systems will also change in dramatic ways, Perry predicted, adding, “The current environment we are in today will not be the TV environment 10 years from now. It will be dramatically different, and TV manufacturers such as Panasonic and others are just beginning to figure out how to deal with that environment.”

He said, “Consumers are buying PCs — we are fully saturated. We have plenty of them at home. They love their PCs. They hate the customer support experience, drivers, viruses, clunkiness and the lack of simplicity from entertainment.”

The No. 1 challenge for manufacturers going forward is differentiation. Perry said consumers are agnostic to some degree about display resolution.

“We see consumers adapting 1080p in larger displays because they are being coupled with Blu-ray, but think about it from the consumer experience. There is no 1080p broadcasting. It is unlikely in the next 10 years that there will be 1080p broadcasting and the odds that you are going to download a 1080p movie from a Web site or server and watch it in 1080p are in fact zero. You simply don’t have that much time to wait.”

“So 720p, while it is being pushed very hard, needs to maintain a value gap in relation to 1080p, and while 720p is pushed very hard, it will actually consume a larger percentage of the overall market,” Perry said. “1080p will be an important step particularly in larger screen displays and displays that accomplish that step well.”

As for the changing content delivery landscape, Perry said Internet-connected TVs will soon be squaring off against two-way cable TV systems. He pointed out that manufacturers soon will be introducing Tru2Way (OCAP) enabled TVs for video on demand, pay-per-view and a host of interactive applications, despite the lack of a government standard, but there is a possibility that such a standard will not exist 10 years from now as consumers continue to choose the methods of delivery they prefer.

Scott Ramirez, Toshiba TV marketing VP, called the saturation of the flat-panel TV market “a myth,” adding there is a lot of room for growth but it is time to change in order to survive.

He pointed to Toshiba’s recent decisions to exit the rear-projection, plasma and CRT businesses in favor of “concentrating engineering on LCD TV” as an example.

Ramirez forecasted growth in the LCD TV category to 23 million units next year.

“Sales are increasing at a decreasing rate and in a few years, we are going to get down to single digit growth,” Ramirez observed, adding that the single biggest battle ground will be in the 40- to 52-inch screen size range, which will be up more than 350 percent this year.

He said everything 40 inches and smaller will be commodities “whether we like it or not” and everything over 52 inches is not a major part of the industry.

LCD trends going forward, Ramirez said, will be “black is the new black, 1080p is the new 720p, 120Hz is the new 1080p, and there is no real volume over $2,499.”

“In 2007, more than nine out of 10 televisions that went out the door went out at $2,499 or less,” Ramirez said. “If you are going to concentrate your business this year, that’s where it has to be.”