Blurry Times in the Plasma TV Biz

(page 2 of 2)

How Big is the TV Pie?

It's still not going to be easy for Ohtsubo. The world's top LCD makers, once limited to smaller screens, have developed new technologies that allow them to crank out bigger TVs. Samsung Electronics (SSNKF), Sony (SNE), Philips (PHG), and Sharp (SHCAY) are just as eager to stake their claim in the high-margin sector of the market that plasma once had all to itself. In the first quarter of this year, LCD makers sold more big-screen TVs in sizes 40 in. and up than plasma producers, says market research firm DisplaySearch. (Plasma TVs currently make up only 15% of the global flat-screen TV market.)

With the TV pie set to grow in coming years, it would seem that there's plenty to go around. But the reality is that plasma makers are already feeling the heat from LCD's encroachment. Last year large-screens accounted for 14% of the 44.5 million LCD TVs sold worldwide. This year that figure is expected to rise to 25% of LCD sets, and in 2011 it could be as much as 40%, iSuppli predicts.

Last Year's Models

No wonder some analysts have revised down their plasma TV sales forecasts following a tough quarter for the world's top manufacturers. In the April-June quarter, Matsushita's TV sales volumes were up 31% but overall TV revenues only gained 2%. And the company's declining TV revenues in Japan and North America—where a majority of the world's big-screen TVs are sold—offers a glimpse of how the entry of LCD TVs is weighing on prices and profits in the sector.

Although rising inventories might suggest the need to curb supply, the company says the stockpile comes just before a launch of brand-new models, not because slowing demand has left old sets sitting at warehouses. Other plasma makers aren't holding up as well, with LG and Samsung chalking up sizable losses in the most recent quarter.

No Rest for the Weary

The one thing still going for Matsushita and other plasma makers is price. Displaysearch estimates that in the April-June quarter the average price for a 50-in., high-definition plasma set was $2,191 vs. $2,524 for a comparable 45- to 47-in. LCD TV. But the gap is likely to narrow.

Samsung, Sony, and Sharp have just begun production at new factories of their own where they're able to produce bigger sheets of glass from which more large-screens can be cut, and they're already plotting their next move (see BusinessWeek.com, 8/01/07, "Sharp's Mega-Wager on LCD TVs").

That suggests the best option for plasma makers is to keep innovating so they can stay a step ahead of LCD makers. Analysts note that consumers rank price among their top considerations when shopping for a flat TV, but eventually the price contest could give way to a perception game. Consumers might be less inclined to drop $1,000 on a TV if they think manufacturers will abandon the technology in a few years. Perhaps Matsushita is smart not to neglect its own tiny LCD-TV-making operation, just in case.

Hall is BusinessWeek's technology correspondent in Tokyo
.