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ON Targets Slow, Steady LCD TV Growth

ON, Korea’s third-largest supplier of television products and current licensee of Thomson’s former Proscan brand, recently announced new strategic supply arrangements with Chi Mei Optoelectronics (CMO) and Hisense to ensure product availability through 2008.

TWICE interviewed former 15-year Thomson executive Pat Deighan, who is now ON’s U.S. marketing and sales VP, to see how the launch of the Proscan LCD TV line has progressed since reaching shelves of select retail partners a little over a year and a half ago.

In the U.S., ON currently markets Proscan-branded LCD and LCD/DVD combination televisions in screen sizes from 15 to 52 inches. The new supply agreements will help supplement its current resources with a guaranteed 500,000 units, in addition to helping expand its screen size range to 65 inches. The company was also said to be exploring the possibility of adding product categories beyond LCD TV in the future (although Deighan could not discuss those details at this time).

The following is a question-and-answer interview with Deighan:

TWICE: How are you positioning Proscan in the market under ON’s leadership?

Deighan: We are handling Proscan a little bit differently from the way Thomson did. They had launched it as a limited-distribution premium brand. It was intended to help Thomson go after the parts of the market that RCA couldn’t touch. [ON] thought about continuing that direction, but by that time so much had changed in the market and a lot of startups were coming out of nowhere with flat-panel lines. Some of the tier-one brands that had been powerful for years were starting to struggle. So, we didn’t think that was the best way to bring Proscan back to the market, after being away for about five years. Our approach now is to add a value with the brand, our feature sets and our cabinet designs by offering affordable price points in the middle ground of the market. RCA and Magnavox had that middle-ground covered for years and for various reasons lost it. So we came into the market by offering the retailer an opportunity to make a little bit more money on our product.

We are very selective in distribution. We are targeting to be about a 2 percent share player with Proscan. We are not looking to be a 7 or 10 percent share brand like Vizio or Olevia. They’ve done a phenomenal job at building share quickly, but we’ve seen what can come with that level of uncontrolled growth.

TWICE: Proscan is now handled by Sears, Aaron’s Rents, Electronics Expo, Canadian Tire and DBL Distributing. Are you looking to expand your distribution further?

Deighan: We’ve been very selective. We’re not looking to go into four or five national accounts over night. We are talking to one more national account for placement in 2008.

TWICE: A few years ago Thomson also licensed its RCA brand for TVs to TTE. How are you positioning Proscan against that line today?

Deighan: I would call RCA a direct competitor. TTE has a long history with RCA and TTL in China. Our products side-by-side are comparable in every way — features, designs, panel quality and longevity — and (on price) we are positioned either right with them or below them. But we have a structured distribution arrangement. We do not target their accounts in any way. We are not looking to go after one big retailer and have that be the dominant part of our business. We are also not looking to be a 7 percent player and be distributed everywhere.

TWICE: What assurances can you give retailers that you are going to be a player in the U.S. market for the long term?

Deighan: ON Corp. has been in business since 1998. They’ve been selling in Australia, South Africa, and they sell to a major online retailer in Europe (Kesa). Additionally, we signed a long-term license with Thomson for the Proscan brand. Regardless of what RCA is doing today, the RCA/Thomson family is a well-known entity in the industry. Thomson is heavily involved with us. They carefully evaluated ON’s financing and resources before issuing the Proscan license. The last thing they wanted was to license the brand to a company that was going to flood the market with cheap TVs and then disappear; leaving them a mess they would have to clean up.

TWICE: How do you support product warranties?

Deighan: Coming from Thomson, I recognized that in order to succeed long-term parts supply and warranty support is critical, and with some of the history in the marketplace that is a very big concern at retail. We offer a one-year parts and labor warranty. In conjunction with Hisense we have a support network in place throughout the U.S. to handle warranty claims. We supply parts out of Cleveland, Ohio.

TWICE: You recently reached additional supply arrangements with CMO and Hisense for LCD TVs. Why?

Deighan: Since March of last year, the No. 1 concern at retail has been supply. Every retailer wants to know, “Who are you aligned with?” and “Who do you have agreements with to assure supply?” We have secured additional panel supply from CMO and we’ve secured assembly production from Hisense. A lot of the products we have out today we made ourselves at a factory in Shenzhen, China (board development and final assembly). Panels for those came from LG.Philips and AUO. In order to get to that 2 percent level we needed a second source. That’s why we made these additional deals. Now we can do that, where as a year and half ago when we were starting out in North America, we probably couldn’t.

TWICE: ON is a Korean company. Why doesn’t it use Korean manufacturing?

Deighan: To be competitive in the U.S. market you’ve got to go with the companies that are the most cost effective and efficient. Many of those are the large Chinese companies like Hisense that can give you the quality you need at pricing that is affordable. But we use LG panels in some models.

TWICE: What do you currently carry in the Proscan product line?

Deighan: Models currently in the ON line include a 26-inch 720p ($499 suggested retail), a 32-inch 720p ($599), a 42-inch 720p ($999), a 42-inch 1080p $1,199) a 47-inch 1080p ($1,399) and starting in June a 52-inch 1080p ($1,999, subject to change). We will look at offering step-up features such as 120Hz frame rate technology in 2009, but right now it is still developing and still in the stratosphere on pricing. Most of our business is done in the 32-inch, 42-inch and 47-inch screen sizes.