ProAVmag

Flat-Panel Blues

?Doesn't anybody around here know how to play this game?? So spoke the immortal Casey Stengel after watching his sad-sack 1962 New York Mets bumble their way to yet another loss during what turned ou 10/18/2007 9:02 PM Eastern

Flat-Panel Blues

?Doesn't anybody around here know how to play this game?? So spoke the immortal Casey Stengel after watching his sad-sack 1962 New York Mets bumble their way to yet another loss during what turned out to be a lackluster 40-120 season.

“Doesn't anybody around here know how to play this game?” So spoke the immortal Casey Stengel after watching his sad-sack 1962 New York Mets bumble their way to yet another loss during what turned out to be a lackluster 40-120 season.

The comment came to mind after hearing the 2007 fiscal year results from several of the display industry's heavy hitters. Most of them were not good, and in some cases, the losses were substantial.

Sony Corp. reported a net loss of just under $2 billion in its games division, mostly because of missed sales targets and excess inventory of its flagship PlayStation 3 product. While its other divisions, including TVs and other displays, did reasonably well, they couldn't prevent a 68 percent drop in operating income from fiscal 2006.

Pioneer Electronics, which at press time had not officially released its fiscal year results, managed to flip analyst's expectations on their heads and turn a projected $40 million profit into a $56.3 million loss for the past fiscal year. The company blamed it primarily on a steep downturn in plasma prices, which also was exacerbated by an overall decline in plasma shipments for the first quarter of this year.

Matsushita Corp., parent company of Panasonic, has made heavy investments in plasma fabrication and expects to manufacture 11 million panels a year by 2008. It managed to increase net income by 18 percent to $1.8 billion for the most recent fiscal year, but missed its target of $2 billion. Former subsidiary JVC — which should be sold to the TGP Group by the time you read this — rang up $64 million in losses for the same time period.

How about the Koreans? LG Electronics, which proudly bills itself as the largest manufacturer of flat-panel HDTVs in the world, incurred more than $140 million in net losses from plasma manufacturing in 2006. Samsung SDI, the company subsidiary that manufactures plasma, reported a net loss of $77 million for the first quarter of 2007, while Chinese LCD manufacturing giant AU Optronics racked up a $152 million loss in the same time period.

Hitachi Electronics' fiscal 2007 net loss of 32.8 billion yen (about $271 million) was, no doubt, a contributing factor in the company's decision in February not to expand capacity at its Kyushu plasma operations, Fujitsu Hitachi Plasma Display Ltd. Also driving that decision was 20 percent in annual decreases in ASPs of plasma HDTVs. Pioneer also shelved plans to expand its plasma manufacturing capacity anytime soon.

Yikes! Is there nothing but bad news coming out of Asia these days? It certainly seems so, given how all of the once-legendary Japanese consumer electronics brands are struggling to maintain profitability.

While Sony's drop in net income is directly attributable to losses incurred both in manufacturing and selling PlayStation 3 consoles, the company still posted an operating profit and remains strong in sales of rear-projection and LCD HDTVs.

Matsushita, under pressure from investors to push profit margins above 5 percent, finally agreed to put its 52 percent stake in JVC up for sale, and likely will see a boost of more than $600 million to its bottom line as a result. In the meantime, JVC could be broken up and sold off, most likely to Chinese interests that see tremendous value in the brand.

Pioneer's losses are attributable to its position at the high end of plasma HDTV pricing. With a small share of the North American plasma market (about 8 percent in 2006) and less manufacturing capacity than the other four plasma manufacturers, the dog-eat-dog flat-panel pricing wars are slamming the company.



1 2 Next

Flat-Panel Blues

?Doesn't anybody around here know how to play this game?? So spoke the immortal Casey Stengel after watching his sad-sack 1962 New York Mets bumble their way to yet another loss during what turned out to be a lackluster 40-120 season.

Yet, it continues to bring out high-end plasma products, most notably four new Elite-brand plasma HDTVs shown in May. Two of them offer full 1920x1080 resolution, albeit at a substantial premium over competitive products from Panasonic and Samsung. And in what must be characterized as a state of complete denial, there will be two new 42-inch XGA (1024x768) plasma sets for 2007, selling for $ $2,700 and $3,200 (MSRPs) respectively.

These products completely ignore the fact that 42-inch XGA plasma is on its way out the door, pushed by 42-inch 1080p LCD HDTVs that are already selling for less than $2,000. And it doesn't help that Panasonic has brought out a 42-inch 1080p plasma for under $2,500 as part of its 2007 lineup.

LG's financial hemorrhaging is directly attributable to playing the “race to the bottom” game. In addition to cutting margins to the bone, according to DisplaySearch, the company had a 36 percent decline in market share for the fourth quarter of 2006, which is the all-important holiday selling season. Samsung SDI saw a 14 percent decline during the same period.

The saving grace for both companies is that they have a plan B, which is their ability to pull the plug entirely on plasma and concentrate on their bread-and-butter business: LCD panel manufacturing. (You can expect that to happen by the end of the decade.)

Unfortunately, Hitachi and Pioneer don't have that option, and must sink or swim in large flat-panel manufacturing with plasma technology – unless executives in each company can be convinced to private-label large LCD panels as a complement to the existing plasma HDTV products.

Sony, which once sourced plasma HDTVs and monitors from former fabber NEC (which sold its fabs to Pioneer), now concentrates on getting LCD panels from its S-LCD partnership with Samsung and from Chinese supplier TPV. That decision looks like pure genius right now. Sony's brand name is still exceptionally strong and has helped the company overcome several missteps in consumer electronics during the past few years.

Panasonic, which is building its sixth plasma assembly line, seems to feel it can stay competitive on volume and pricing, and expects to be rolling out 11 million panels a year by the end of 2008 . The company has taken the lead in annual production from Samsung, and although overall plasma shipments declined in the first quarter of this year, Panasonic still held the lion's share of that business with 31 percent of the market.

So what lies ahead? High manufacturing volume, aggressive pricing, and (perhaps most importantly) distribution channels are driving today's flat-panel HDTV and monitor business. Pricing flat-panel displays at the high end of the market is not wise in this day and age. Three factors — screen size, resolution, and price —essentially fuel plasma (and LCD) sales.

If you can make enough product, you can get it onto store shelves with market-sensitive pricing. LG, Panasonic, and Samsung are in a strong position to do that. Hitachi and Pioneer are not, otherwise, they would also be adding PDP manufacturing capacity.

It may well turn out that a round of consolidation is in order for the plasma business over the next two years, as PDP technology continues to lose ground to LCDs below 50 inches.

Pete Putman is a contributing editor for Pro AV and president of ROAM Consulting, Doylestown, Pa. Especially well known for the product testing and development services he provides to manufacturers of projectors, monitors, integrated TVs, and display interfaces, he has also authored hundreds of technical articles, reviews, and columns for industry trade and consumer magazines over the last two decades. You can reach him at pete@hdtvexpert.com.

Feedback

To comment on this article, e-mail the Pro AV editorial staff at proav@hanleywood.com.



Want to read more stories like this?
Get our Free Newsletter Here!
Past Issues
July 2015

June 2015

May 2015

April 2015

March 2015

February 2015

January 2015

December 2014