lcd tv prices to fall

Huge battle for flat earth begins
From: By Leo Lewis in Tokyo
January 14, 2006

JAPANESE and Korean electronics makers have entered an unprecedented investment war as the industry prepares for a showdown on large flat-panel televisions.

Within the past two days, the Japanese giants Sharp and Matsushita, owned by Panasonic, have signalled the start of hostilities in the 2006 technology arms race by unveiling spending plans of $US4.7 billion ($6.3 billion).

Their plans for major increases in capacity come on top of similarly sized investments the two companies announced towards the end of last year.

Their immediate rivals, such as Korea's LG Electronics, are equally ambitious in their drive to boost output. LG opened a new plant in September and is hoping to add an entire new production line for plasma panels later this year.

Samsung, which yesterday revealed a stunning 40 per cent spike in fourth-quarter profits on the back of flat-panel TV sales, is mulling over its own plasma production rise and plans a 25 per cent expansion of its LCD panel joint venture with Sony.

Sharp president Katsuhiko Machida justified his LCD expansion plans, which will quadruple production of screens over 81.28cm, by pointing to a global shortage of LCD panels left by strong sales in Asia and unexpectedly high demand in Europe.

When the full extent of Sharp's new production plans comes to fruition in 2008, it will be able to churn out about 22 million LCD televisions a year. Matsushita's plans will allow it to retain its position as the world's largest maker of plasma screens.

All the firms involved in the new investment war know that it will damage their margins. With so much capacity, retail prices of both LCD and plasma televisions are expected to fall sharply over the next two years.

Electronics analysts have long predicted that this would be the critical year for big flat-panel televisions, with the football World Cup in Germany and the launch of three new video games consoles providing households around the world with a perfect excuse to upgrade from cathode ray sets. The switch to digital television, which is particularly advanced in Britain and Japan, is another factor pushing consumers towards the transition.

The market for flat televisions is expected to soar by 80 per cent this year, with worldwide demand topping about 44 million units.

Those same analysts' predictions also point to this year as the definitive battleground in the technology tussle between LCD, which promises higher definition, and plasma, which tends to be cheaper. So far, it has been wealthier households and home-cinema enthusiasts who have dictated the battle lines, and LCD commands about twice the market share of plasma.

The size of the electronics firms' respective investments in factories and supply lines mean that most have now made technology bets they cannot reverse. If the market makes a firm decision between LCD and plasma, several companies will be left explaining expensive white elephants to their investors.

Both Japanese and Korean companies are threatened by the certainty that Chinese manufacturers will soon be able to produce low-end flat screens at a rate that will destroy pricing power in small screens.

The Times