Philips Exits US TV Manufacturing

April 8th, 2008

by Paul Gagnon, Director of North America TV Research

In a move that is not too surprising, Philips has decided to withdraw from manufacturing TVs for the US marketplace, according to an article by the New York Times’ Eric Taub. Instead, Philips will license its name to Funai who will assume all production, sales and marketing of the Philips brand in the US. Funai already sells TVs in the US under its own brand as well as Sylvania, Emerson and Symphonic. Philips’ North America TV unit share in 2007, according to the DisplaySearch Q1’08 Global TV Shipment and Forecast Report, was 6.1%, down from 11.7% in 2006 as the brand struggled between premium brands and low-cost leaders. Funai’s unit share in 2007 was 7.8%, down from 14% in 2006, and thus should be a much stronger player in the North America market going forward. The combined volumes of Funai and Philips, should they remain stable in 2008, would place them near the top of unit volume rankings.

DisplaySearch has been talking about consolidation for some time now. As margins are compressed, rapid flat panel growth slows and top tier brands head down-market in pricing to address the majority market, middle-tier players will find operations difficult. Several long running TV brands run in similar circles as Philips when it comes to top tier brand legacy, but second tier market shares. They either have to find a niche to survive, or leave the market. JVC entered a similar arrangement with Funai for LCD TVs earlier this year.

High volume, low cost players have hastened the market transition to flat panel by making such a desirable product affordable to the masses. But the result is a type of commoditization that nearly requires top name brands to tradeoff from premium features/pricing to basic low cost solutions to compete. In that type of market, only the strongest name brands will be able to command a premium that preserves the margins needed cover their higher overhead costs. Not everyone can compete, and I suspect this is the one of the first of many such moves over the next few years.

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