Global Economics

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

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. panels from a single glass sheet. The plant in Tangjeong, south of Seoul, is slated to be completed next fall (see BusinessWeek.com, 11/28/06, "Samsung and Sony's Win-Win LCD Venture").

The S-LCD's new plant joins an existing eighth-generation plant run by Sharp (SHCAY), the No. 3 LCD TV maker after Samsung and Sony. Sharp says it plans to double monthly production capacity at the plant in western Japan to 60,000 glass sheets by July and to 90,000 sheets in 2008. President Lee Sang Wan, in charge of Samsung's LCD unit, predicts consumers will be able to buy a 50-in. LCD TV next year at the price of a 40-in. set in 2006.

Less Price Challenge This Time

Such pricing would be a tough challenge for plasma TVs. Yet there are signs things won't pan out in the same way in the 50-in. TV market. For the 40-in segment, LCD manufacturers in Korea, Japan, and Taiwan inundated the market with panels until supply exceeded demand by 60%. In contrast, "Even with the supply from S-LCD and Sharp, the LCD volume in the 50-in. class would be only a quarter of that in the 40-in segment," says Seo Young Jae, senior manager in charge of flat panel products at LG, which makes both LCD and plasma TVs.

Efforts by plasma TV makers aimed at cutting costs and improving quality will likely pay off as well. All major plasma TV makers, including Matsushita, Samsung, LG, and Pioneer are due to bring out 50-in. and bigger sets in the 1080p standard this year. With LCD TVs expected to focus on the highest definition resolution in the segment, plasma could also sell TVs with cheaper HD 720p resolution—good enough for many viewers, Seo points out.

"We don't expect one technology will win over another, at least for the next few years," says David Steel, vice-president at Samsung's digital media unit. "With the bigger market and faster rate of growth, LCD has the momentum. But still, with 13 million to 14 million TVs being sold a year, we have a completely viable plasma market."

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