Sony Pulls the Plug on Rear Projection

December 20th, 2007

By Paul Gagnon, Director of North America TV Market Research

Sony began spreading the word to its retail customers this week that end is at hand for its role in the rear projection TV business. Sony has long been a top RPTV brand and consistently ranks in the top 2 brands during our quarterly Global TV survey and was #1 worldwide in MD RPTV during Q3’07. Sony’s roots run deep with RPTV as it produces many of the key technologies, including the LCD and SXRD chips that go into the light engine on MD RPTV’s. So why are they exiting with such a strong market position and solid core competencies?

RPTV has a poor outlook worldwide and especially in the US which represents the vast majority of global shipments. Plasma and LCD have both been growing share above 50” as consumers vote their preference for flat panels with their pocketbooks despite the substantial premium for comparable sizes and resolutions. This means that RPTV manufacturers have to lower prices even further to maintain a compelling price differential, which in turn impacts margins. We are projecting a 54% decline in global rear projection TV shipments in 2007 to about 1.8 million units and 50%+ Y/Y declines throughout our forecast. Not a great market outlook.

An additional reason is the need to focus resources on the highly competitive core LCD TV business where competition is intense and margins are thinning. RPTV development resources can be moved to LCD development and assembly lines can be retooled for LCD TV production. Sony will sell-through existing inventory, which seems like it should last through the Super Bowl, but perhaps not much further. Sony will remain in the front projection business, so the 3LCD and SXRD chips being produced will still have an end product to go into, though this is a considerably smaller market.

Sony now joins other brands who have exited the category, including long time RPTV veterans like Toshiba, Hitachi and Philips. Samsung and Mitsubishi both look to be the biggest beneficiaries of Sony’s RPTV exit as the two strongest brands in the space. Both brands incorporate DLP technology, so an increase in their business will also benefit Texas Instruments though any lift will be short lived as the category continues to decline, falling below 1 million units worldwide in 2008.

It looks like a good move for Sony from a resource allocation perspective, and there is a lot to be said for jumping the ship before it sinks. A key implication for Sony, though, will be how to handle customer demand for TVs larger than 55” since LCD hasn’t fully entered that segment at a competitive cost and Sony does not have PDP like Samsung. We may learn more about Sony’s strategy after CES.

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