Also, while previously there were often contingency plans to extend projects in later years, this is rarely discussed now, unless part of a larger plan already in development. Once an installer is on-site, the aim is to get as much power as possible, to complete the project quickly, and to reap the benefits with a steady return on investment.

Enthusiasm for mid-size range PV installations developed and owned by a third party is particularly strong for municipalities and educational institutions. Because many cities, government entities, and schools are unable to take advantage of tax breaks, developers have been quick to step in with third-party ownership in states where such ownership models are allowed. In such a model, the host leases space to the developer and pays no upfront cost for the solar installation. Electricity is received through a power purchase order at a fixed or fluctuating rate as determined by the contract. The developer then owns and maintains the system, and claims the tax incentives.

The new ownership models and increasing scope for PV projects have developed in parallel. Now, rather than a city/municipality looking at each site as an individual project, such as a library on one side of town and a fire station on the other, these projects are being looked at as one master project, meaning bigger overall projects/contracts, even though each PV array is similarly sized and located at different sites. This type of project can help bring down soft costs as multiple arrays can be bid out as one project and installers can capitalize somewhat on economies of scale when purchasing components.

These models are also leading to the emergence of community-based solar, where community members can purchase ‘shares’ of a PV project to offset their own electricity use even though they are not able to act as hosts. As more areas begin to allow this type of ownership there is a significant potential for further growth in the mid-size project pipeline. In many ways, this is a brand new growth opportunity for the downstream PV market as customers that might be interested in solar, but unable to install it due to living style (e.g. apartment buildings), will be able to invest and in larger-scale systems.

Source: US Deal Tracker

Since then, the cycle has become much shorter and now that markets have matured, competition has become fierce. Production has moved several times to tap into lower costs, and prices have eroded significantly. The markets for some display categories have matured and a few are in decline – even the LCD TV market fell in 2012. In order to make a profit, to say “strike while the iron is hot” is an understatement.  Today, the iron cools off much more quickly than in the past.

With the shorter product cycles, the challenge today is that many products have either become so low-priced that some traditional vendors and channel members do not want to bother manufacturing or selling them or the products themselves have become commoditized (neither option offering attractive returns on investment). Note that the products are not pure “commodities”, since there are still elements of differentiation including branding and design, amongst others.  However, pricing, positioning, and most importantly their perception in the marketplace resemble that of a commodity.

Take the desktop monitor business for instance.  There aren’t many displays available that help end users surf the Internet, e-mail, word-process, use spreadsheets, etc. any better than the next.  It is difficult to convince a buyer to pay 10-20% more for a “similar” product, especially in this economy. There are a few financial reasons including reduction in energy consumption resulting in lower total cost of ownership; however, when the corporate buyer calls the reseller for these types of products, the sale usually comes down to price (or whatever is the deal of the day). Some vendors still play in this marketplace, but their strategy is to sell to a wide range of customers and to make up profits with increased volume. Margins are thin and any disruption in the supply chain or if sales decrease ever so slightly, the margins disappear.

So where are today’s opportunities to make higher profits per unit without taking all the risk of the supply chain and without the daily pressure moving high volumes? They are in the same place they have been for years: vertical markets, consisting of customers with specialized needs, who will pay more for a product that allows them to do their job better, faster, easier, or more efficiently. These customers do not want products “off-the-shelf,” they want “customized” products, or at least the perception and performance of custom products. Sometimes, this customization only requires minor tweaks or enhancements to the product; in other cases it takes knowledge and understanding of the end user and their market to deliver a solution to their problems.

The industry is starting to pay attention to these vertical markets. At the DSE show this year, there were 40 “industry vertical discussion groups”; we can expect to see a similar focus at InfoComm13.

Many vendors have been paying attention to verticals for years, successfully carving out niches, for example by designing in specialized features and addressing unique or semi-unique end-user challenges.  Some of the recent “specialized” display trends are super narrow bezels for video wall applications, high brightness displays for outdoor and sunlight readability, touch for interactivity, and high resolution for medical diagnostics. Not coincidentally, all of these features are tracked in NPD DisplaySearch’s Monthly Large Format Commercial Displays Sell Through Report.

How can vendors and other industry participants identify vertical markets that are growing and develop strategies for entering them? At the NPD DisplaySearch FPD Conference at InfoComm on June 11 in Orlando, industry experts, end users, distributors, and integrators will present and participate on panels addressing vertical market applications and solutions, in addition to NPD DisplaySearch analysts presenting expert data and analysis of the display market.

Interactivity – whether via physical touch, gesture, or other method – has gained popularity over the last several years.  Smart phones with touch screens have literally single-handedly changed the way we expect all interactive devices to work.  Console-based video games have also helped push the envelope with gesture or motion-based interactivity (Xbox Kinect, PS move, Wii remote, etc.)

Regardless of how it is accomplished, interactivity seems to be gaining traction and popularity with end users.  As a result, software companies, integrators and advertisers are noticing. The good news for them is the infrastructure is already very large and growing larger every day.

According to NPD DisplaySearch’s Smartphone Quarterly report, smartphone shipments will reach 937 million in 2013, just over half of all mobile phone shipments. We live in a connected world and for the masses, there may be no going back. “Generation Y” is now driving many markets, and they thrive on interaction. Whether the interaction is social media (Twitter, four square, instagram, etc.), based on an ability to respond to simple surveys, polls or to provide feedback for the chance of winning or earning discounts or prizes, playing games with people at the same venue, or to receive additional product or service information on a new product they just saw; they want it and they want it now, on their device.

How will increased mobile interactivity with these networks affect the digital signage ecosystem? Will public kiosks become extinct or shift their focus to cater to the older generations and to the very young? Will the market for touch overlays and other touch technologies on large screen public displays decline? (According to our tracking of large format commercial display sell through in U.S. distribution channels, in Q1’13, touch-enabled monitor sales declined by 16% Y/Y.)

These and other questions will be addressed at the FPD Conference at InfoComm on June 11 in Orlando. In addition to providing attendees with several sessions of expert data and analysis of the display market, the conference will feature Stuart Armstrong, President of the Americas for ComQi, which provides a multi-channel message management platform for networked content and infrastructure, who will provide insights on the impacts and opportunities for mobile interactivity within the digital signage industry.

As can be seen in the table, the Chinese panel makers financial performance were among the best in the industry in Q1’13.

The strong financial performance of the Chinese panel makers is quite different from the stereotype of Chinese panel makers caring more about investment than profitability. It’s not true that China panel makers relying solely on government support, in terms of investments and monetary policy. This is also different from the perception, summed up by the saying that “Korean panel makers are good at capacity, Japanese are good at technology, Taiwanese are agile, and Chinese panel makers are good at gaining government subsidies.”

What are some of the reasons for Chinese panel makers performing comparatively well?

• Government subsidies, in the form of technology funds or new technology nourishing funds, are a factor, but not the only one. Both BOE and ChinaStar received RMB 50-300 million in subsidies and tax benefits from the government in the past quarter.
• For panel makers, the most profitable sector is TV, while notebook PC and monitor panels lose money; Chinese panel makers have low market share in IT panels.
• BOE and ChinaStar built their Gen 8 lines 2 to 3 years after the Korean and Taiwanese panel makers, which means they were able to get lower prices on equipment. In addition, their depreciation timelines are 7 to 10 years, longer than in Korea and Taiwan. Also, utility and construction providers offer lower cost services, so depreciation per unit is lower. It’s believed that Chinese Gen 8 fab costs can be 20% lower than in Korea.
• More than 90% of BOE and ChinaStar’s production in their Gen 8 fabs is 32.” With a single product in large volume at a single fab means production efficiency can be high, which helps to reduce manufacturing cost.
• Panel makers in China are also enjoying component cost reductions due to depreciation of the Japanese yen, but are also developing local sources of supply, to reduce logistics cost and create competition, lowering prices. It’s estimated that 70% of ChinaStar’s components are provided by Chinese companies.
• According to the Quarterly Large-Area TFT Panel Shipment Report, in Q1’13, 77% of ChinaStar’s LCD TV panel shipments were in open cell form factor, and for BOE the open cell ratio is as high as 90%. Open cell LCD TV panel prices did not fall much in Q1’13 (according to the Monthly Large-Area LCD and PDP Pricing, the 32” open cell fell from $104 in January to $101 in March), which helps BOE and ChinaStar to gain profitability.
• Import duties. China is charging a 5% import duty for LCD TV open cells supplied by Korean and Taiwanese panel makers. Chinese panel makers enjoy import duty rebates when they sell to Chinese TV makers for the domestic market. The rebates help BOE and ChinaStar to sell their open cells at a higher ASP than Taiwanese and Korean makers.

New product launch schedule

Most brands announce new products at the Mobile World Congress, then launch before Labor Day and the summer holidays. This seasonality means that there is a huge demand for components in calendar Q2. In addition, smartphones continue to use customized designs, and generally can’t use standard components.

The component supply shortage is especially serious in China, where most of the brands want to deliver all of their new devices to stores and channels in time for Labor Day promotions, continuing into the summer holidays. If a product is not delivered to channels before the end of April for stocking in stores, annual sales could be impacted.

In our Smartphone Quarterly, we forecast total smartphone sales in China will be more than 285 million units in 2013, for Y/Y growth of 68%. This growth is causing the demand for smartphone components to dramatically increase in Q2.

Upgraded specifications for smartphone displays

The average smartphone display size is increasing, and according to the Smartphone Quarterly, 73% of smartphones will have displays over 4 inches, with Y/Y growth of 95%. Although panel makers are using more large fabs – Gen 5 and even Gen 6 – to produce smartphone displays, the yield rate is low and manufacturing processes are more complicated, while the increase in size limits unit outputs. Finally, most smartphone displays are customized designs, so manufactures have to frequently change the products being produced, which also limits display supply.

Driver IC production

Most ICs for smartphone displays are manufactured in 8 inch semiconductor foundry fabs, but the number of qualified, stable lines is limited. Some IC makers are planning to produce driver ICs in 12 inch fabs, but there is a limited capacity for 12 inch wafer bumping used to produce chip on glass (COG) type of packaging used in driver ICs.

Other smartphone components, including memory and camera modules, are facing tight supply as well. Brands, EMS makers and display module makers are concerned that the inventory levels are not sufficient for the upcoming hot season in China. This is leading them to buy many components, in some cases more than the end market forecast. In our research, we have found that some makers have high component inventories, and the rate of component purchasing is slightly slowing in May. But smartphone demand in China is still growing strong, so even for makers with high component inventories have a chance to reduce their levels before the October holidays.

Standard OLED TV is not positioned well in the market, and Ultra HD (4Kx2K) LCD TVs are clearly a competitive threat. With an inventory overhang of old models from last year, launches of new models are somewhat delayed. Since the timing doesn’t look ideal, and since no case has been made for the benefits of a curved TV, the question is why is LGE moving forward with curved OLED TV at this time? It may be a reflection of longer-term strategic concerns at LGE.

First, there are still plenty of rumors about Samsung’s OLED TV. Some assert that Samsung cannot launch its OLED TV this year, while others say that Samsung will adopt white OLED (following LGE’s technology) because RGB OLED suffers from very poor manufacturing yields. Another viewpoint is that as TV market leader, Samsung would take the tactical decision not to launch a copycat OLED TV even if RGB OLED TV was ready to mass produce. Despite this, it is likely that LGE is worried about Samsung’s response in OLED TV and may be trying to occupy any potential territory available to its rival.

Second, production yield is still a headache for LGE. OLED TV shipments have been delayed in Korea, the first market, and other regions are also facing delayed launch and shipments, most notably the U.S. So, rather than increasing volumes, a value increase is better for such scarce quantities. If the shipment target is also June, LGE may be buying itself more time to improve manufacturing processes.

Third, like Sony, LGE is planning to launch 55” and 65” UHD TVs, following the launch at 84”. LGE may find it difficult to differentiate a hugely expensive flat OLED TV from a relatively cheap UHD TV. A curved OLED TV (with a higher price) would clearly be different than a simple LCD UHD TV. No TV has ever been produced in a concave design, as it requires some sort of flexible display.

OLED still faces the challenge of hitting LCD’s fast-moving target. LGE has not given up on thinking of new ways to compete.

The answer was realistic. Michael Zoeller, European Sales & Marketing Director of TV at Samsung pointed out the hard facts behind the 4K hype:

• There is no 4K broadcast standard
• There is no 4K interconnect standard
• 4K Blu-ray is still not agreed
• No 4K TV released today is future-proofed for even the first 4K formats.

At this point he explained how Samsung’s expansion port and ‘evolution kit’ approach at least means that any of their 4K sets sold today have a fighting chance of being usable when 4K material does arrive.

Compare and contrast with Samsung’s approach when 3D first appeared: immediately Samsung went onto a war footing and out-developed its competition, producing the widest 3D product range within months. I don’t think that Samsung is being complacent today, but it does show how much the market has changed. Samsung’s strategy is now to protect (and recover) margins – a necessary step after the profitless prosperity which has broken retailers’ and TV set makers’ businesses. Samsung has gone from being the upstart to the boss; and we are of course promised more Samsung 4K TV product launches at IFA’13.

Of course, things do not stay still for long. Chinese set makers made their presence felt at the last two big events: IFA’12 and CES’13. They look to me to be poised to break out of their domestic market and are using 4K2K as a first attempt to reposition their brands, having mastered the technology. The new challenge for the Chinese brands is to master marketing in unfamiliar markets: product management of 4K TV will be the first test. If it turns into another price war, there will be no winners.

TV has remained largely isolated from this trend for several reasons: TV capability has been closely tied to broadcasting standards until now, which have evolved at a much slower ‘infrastructure’ rate. After all, changes in broadcasting ultimately require rebuilding of studios, refitting transmitter masts or satellite launches. The industry started to move faster as TV chips became increasingly digital, with CMOS gradually taking over from analog. Moore’s Law powered integration of functions into a single TV IC, but by 2010 this had largely played out.

With broadcast requirements static for the time being, innovations in TV capability have instead been for Internet services and interactivity: Smart TV. These have brought a convergence of functions between TVs, tablet PCs and smartphones. Each can decode and display H.264 video, surf HTML web pages and encode video and audio. A high-end TV really is a large-screen smartphone! The consequence of the TV tracking the capabilities of handhelds is easily seen in the number of processor cores in the latest Smart TVs from Samsung: 2012’s models have 2 cores, while 2013 products will have 4.

A collision occurs when the lifetimes of these devices are considered: a TV typically lasts 6-8 years in service, according to our TV Replacement Study. A mobile phone has a life (at least with the original owner) of around 2 years. So consumers own phones on a single Moore’s law cycle, while TVs are expected to last for several cycles. The capabilities of the TVs can be expected soon to lag far behind. While software updating is feasible, the gap in CPU power will limit its usefulness.

TV owners can be expected to perform mid-life updates to their sets to access attractive services by buying set-top boxes or unobtrusive MHL sticks which do not require an additional remote control and are fed power by the host TV. Samsung has also promised upgrade kits to its premium TV customers – this promise made in 2012 was fulfilled at CES this year. However, the fact that the unit completely bypasses the processing in the TV (it even has its own Ethernet jack) shows just how hard it is to modernize even recent hardware.

Setmakers face three alternatives:

1. Continue as before and hope that consumers do not become sensitized to the rapid obsolescence (and growing uselessness) of their Smart TVs.
2. Give up and keep the processing outside the TV, which effectively becomes a monitor.
3. Rethink system partitioning and seek a way to maximize TV functionality yet isolate unstable and fast-evolving elements.

Arguably the first option is being pursued already in China and Japan, while the second appears to exist in North America, largely because US TV is locked inside pay-TV providers’ set top boxes.

The third would require that the TV becomes a kind of ‘docking station’. Home audio has gone through bleak years recently as it first fought MP3 players head on with increasingly irrelevant CD systems. However, first with iPod docks and then Bluetooth wireless audio links, the category has learned to play nicely with personalized devices. While it may never return to its status symbol glories of the 1970s and 1980s, Hi-Fi is coming back! A visit to any trade show gives a wide variety of systems with attractive and individual design.

If audio is any guide, the shift of video content consumption to personalization and portability will be hard for the TV set to fight. Consumers will reach for their smartphones and tablets to search and watch shorter-form content. The TV needs to retain its relevance by making it easy to screen longer-form content or fetch material with search tasks performed by the handheld. DIAL and Miracast are open standards that allow these functions: DIAL installs a duplicate app in the TV, while Miracast could be the video equivalent to Bluetooth audio. At the same time, MHL allows an HDMI socket to become a transparent expansion port to permit additional decoders to upgrade the TV. (We analyze these and other technologies in the Quarterly TV Design and Features Report.)

Some Chinese set makers are already moving in this direction with their ‘Roku-ready’ TVs which allow a small Roku MHL stick to expand the TV to a Roku-powered Smart TV. Similarly, pay-TV providers in Europe are attracted by the idea of a STB that can be mailed in a small padded envelope.

Set makers need to consider carefully whether the costs and support burdens of Smart TVs will deliver the long-term added value to them (and their consumers). More open platforms may be an interesting alternative to fighting tablets and smartphones head-on.

This expansion of PV demand reduces the risk of policy shock – a critical development for the PV industry, which in the past has relied on as little as two markets to drive global demand – as there are more countries driving significant end-market volumes to compensate for policy-driven downturns in other markets of similar size. This development may also help project developers and component manufacturers, as each country has its own quarterly, or even monthly, phasing, allowing projects/shipments/revenues to be recognized across the year, instead of depending on year-end surges.

However, despite this positive trend, the fact remains that the gigawatt-scale markets remain the primary drivers of PV demand. Given that these markets numbered only five in 2012 and accounted for over 70% of the global market, there is still an element of risk, because problems in just one of these markets could significantly alter total global demand. Over the coming years, this risk will decrease somewhat as more countries enter the gigawatt band. One of the most effective ways that PV industry players can reduce risk is to encourage as many markets as possible to grow to self-sustaining status. Unfortunately, this process may be slowed significantly by trade disputes and local content protections, as policy makers make moves to protect domestic firms at the expense of the end-market.

Figure 1: Number of Countries by Megawatt Install Band

Source: Adapted from NPD Solarbuzz Marketbuzz

Figure 2: Demand share by Megawatt Install Band

Source: Adapted from NPD Solarbuzz Marketbuzz

However, this process is beginning to occur as higher growth rates in emerging regions are rapidly closing the demand-share gap with legacy markets. The figure shows comparative Y/Y annual growth rates between the Western/Japanese (W/J) markets (with the Western grouping encompassing Europe, the US, and Canada) and the Emerging markets (all other global markets). While some of the countries included in Emerging in this analysis are now major drivers of end-market demand (for example, China and India) it has only been in the last few years that these countries have begun to rival legacy markets such as Germany, Japan, and the US.

This is highlighted via the market share data presented, which clearly shows that up until 2011, the W/J grouping accounted for over 90% of global demand every year. This was because during the 2007-2011 period, global end-market demand was growing by strong double-digits globally. Therefore, developed markets maintained their dominance in terms of driving demand. 2011 was the year this began to change as policy changes – particularly in Europe – slowed growth in the overall W/J region while lower prices and positive policy environments in the Emerging region (in this case driven by China) caused Y/Y growth rates to rise to almost 300% and Emerging regions began to gain demand share.

As presented in the new NPD Solarbuzz Marketbuzz report, global Y/Y growth in 2012 fell to single-digits as stronger growth in Emerging regions could not compensate for the annual demand decline in the W/J grouping during the year. While legacy markets overall are still expected to decrease in 2013 – primarily a result of European declines – global growth is anticipated to increase as Emerging market growth increases. In the long-term, a return to double-digit growth rates is anticipated for both major groupings as low installed system prices are driving end-market expansion in new regions and making PV installations attractive in legacy markets even with policy reductions.

Figure 1: Emerging v. Developed Markets Comparative Growth/Share

Source: Adapted from NPD Solarbuzz Marketbuzz