Will Rising Panel Prices Spoil the LCD TV Market?
June 22nd, 2007By David Barnes, Vice President of Strategic Analysis
Sometimes we get it wrong. At the beginning of Q2’07, we forecasted the average unit price for a 32” 1366 × 768 LCD TV module would fall from $305 to $304. Our latest PriceWise (free data available from www.displaysearch.com/free/pricewise.html) shows the typical price will be closer to $307 this quarter. Looking at this more closely, we notice this is less than a 0.5% gain. Nevertheless, given the pace of cost reduction panel makers have accomplished in recent quarters, they would benefit even if prices stayed level. An actual price rise is good news for panel makers, and the stock market has taken notice, but its effect on LCD TV set prices is more interesting to me.
LCD TV brands started the year hoping to see more price discipline among retailers than they saw in 2006. More recently, Sony segmented the retail market by announcing it would offer different models to discount or warehouse chains than it would supply to consumer electronics stores. Such action will reduce potential for consumers to exercise price guarantees as they did in 2006. With different models on sale at Costco and Best Buy, for example, consumers will not be able to use the discounter’s price to lever a refund from the electronics retailer. Perhaps more important, such channel segmentation signals that even premium brands accept discount retailers as major factors in the market and that the discount channel must be served. A global brand cannot keep or grow its share without appealing to the “price buyer.”
In the past two weeks, Tweeter, a high-end audio-visual retailer in the US, declared bankruptcy (under Chapter 11), and other consumer electronics retailers reported weaker earnings. Circuit City executives admitted that they bet wrong on demand for high-end 1080p TV sets. Most consumers were happy buying lower priced 720p sets, and discount stores were happy to sell them.
If the bargain-hunting consumer is a major force in the LCD TV market, how will rising panel prices affect demand in 2H’07? If the price rise is not too great, contract assemblers, brands and distributors should be able to absorb it. Our information on the 32” LCD TV value chain indicates that it is becoming more like the PC chain than the traditional CE (consumer electronics) chain. Some panel price fluctuation is possible in this case. On the other hand, if brands decide they must raise prices in 2H’07, they may create a wider separation between discount and specialty retail channels. We may see less costly sets offered at discount, and higher performance sets offered in specialty CE stores.
www.displaysearch.com