Plasma vs. LCD: The Battle Heats Up

The prize: dominating the big-screen, high-definition, flat-panel TV market. LCD makers have the advantage, but plasma producers are fighting hard

by Moon Ihlwan

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One dominant trend in consumer technology this year will be the evolution in TV viewing habits. A growing number of consumers will be able to watch TV when they are on the go, as their mobile phones double as TVs, while telecom and Internet companies will deploy Internet protocol television, or IPTV, to bring all sorts of video entertainment into homes. Yet no other war to lure customers will be fiercer than the one waged between two flat-panel technologies: plasma and liquid crystal display.

The plasma vs. LCD rivalry is not new. Their battle has been going on ever since households began making the shift to digital and high-definition TV a few years back. But the competition will intensify as movie studios and game companies begin to roll out content in the new "full HD" resolution called 1080p.

The race to offer larger screens has up to now been led by plasma. But the LCD camp has had a head start in making screens to the 1080p standard to show the crisp images of the next-generation high-definition DVDs (see BusinessWeek.com, 2/23/06, "HDTV Moves to the Next Level").

Price Parity in One Segment

Lately, in the plasma vs. LCD competition, the balance has tipped in favor of the LCD camp, which has been pouring billions into the effort to make larger panels at cheaper prices. Market researcher DisplaySearch estimates LCD TV display revenues in 2006 at $22.5 billion, up 85%, against $7.2 billion for plasma TV displays, which gained only 28%.

Until two years ago, few had expected LCD to snatch dominance for flat screens larger than 40 inches. LCD panels were more expensive than plasma by as much as 50% in the 40-in. class. Today, though, price parity has been achieved between the two for that segment—although for the 50-in. class, LCD TVs are still some 50% more expensive.

Industry execs believe that at the current pace LCD will displace plasma as the mainstream flat-panel technology in the 40-in. segment, for years the mainstay of plasma. "The big trend this year is the full HD standard and it has been proven that plasma technology is too expensive to make screens with that resolution," says Daniel Kim, Hong Kong-based technology analyst at Merrill Lynch.

Plasma In High Gear

The big question is, can plasma TV remain as a major flat-panel device? The short answer: yes, at least for the next few years. That's because it is easier and cheaper for the plasma camp to meet the 1080p standard in screens of 50 inches or larger, where LCD remains a scarcity due to the lack of mass production. "The battle ground will move to the 50-in. class next year and plasma TV makers can't afford to give up their market shares there," says Kim

Indeed the plasma camp is shifting into high gear for a renewed fight. Matsushita Electric Industrial (MC), which controls more than a third of the world's plasma TV market, announced last week it would spend $2.4 billion to build a new mammoth plasma-display factory in western Japan. "We simply can't lose the flat-panel TV battle," says Matsushita President Fumio Ohtsubo (see BusinessWeek.com, 1/11/07, "Matsushita Sees a Flat-Screen Future").

DisplaySearch expects global shipment of flat TVs to almost triple to 147 million units. To get a bigger pie, Korean plasma rivals LG Electronics and Samsung SDI have also been ramping up plasma facilities. Together the big three had a combined monthly capacity of some 1.4 million plasma panels at the end of 2006.

Doubling Production

The real test comes next year when a joint venture between LCD titans Sony (SNE) and Samsung Electronics (SSNGY) is due to churn out giant LCD screens in mass volume. The LCD panel venture, S-LCD, is now building a $3 billion "eighth-generation" plant with the capability to cut six 52-in.