Korea: Set to Duel in Digital TV

Samsung and LG are harnessing growing TV demand in a bid to overtake Sony and the other Japanese outfits. What's certain: the market is surging

by Moon Ihlwan

Could the Koreans do it again with TVs? Time was, Japan dominated in memory chips, flat-panel displays, and virtually all things consumer-electronic. Just over a decade later, things look decidedly different. Korean companies absorbed the technologies from their Japanese mentors and found ways to beat them at their own game -- first in memory chips, then in flat-panel displays, and more recently in cell phones.

Now the Koreans see a golden opportunity in the crown jewel of home electronics: digital TV. "It was enormously difficult for latecomers to catch up to leaders in the analog era, when accumulation of manufacturing technologies and experiences was vital," says Vice-Chairman and Chief Executive Yun Jong Yong of Samsung Electronics. "For digital, we are [all] racing from the same starting line."

The battle for leadership in digital TVs has taken on greater importance in the run-up to this summer's World Cup soccer tournament (see BW Online, 5/21/06, "Advertisers Kick it Up for the World Cup"). With flat-panel display prices falling rapidly as a result of massive investment in production facilities by the Koreans, Taiwanese, and Japanese, consumers are snapping up large, sleek televisions to replace bulky tubes before the games kick off on June 9 in Germany. The U.S. requirements that manufacturers equip all 25-inch sets or larger with digital TV tuners will also accelerate the switch.

HIGH HOPES.

Both Samsung and compatriot LG Electronics have said they want to be at the head of the pack, outdistancing rivals Sony (SNE) and Matsushita Electric Industrial (MC). Unlike Sony, which focuses on liquid crystal displays (LCD) for thin-screen technology, and Matsushita, with its emphasis on plasma, the two Korean giants have hedged their bets, and are in both technologies (see BW Online, 9/12/05, "War Of The Screens").

Samsung has set tough targets for itself. Last year, it placed either the No. 2 or No. 3 in LCD, plasma, and rear-projection TVs, trailing Japanese rivals. This year it wants to be No. 1 in all three categories, by selling a total of $8.8 billion worth of digital TVs, a gain of 40% from last year. And in 2007 Samsung aims to be the first company to top $10 billion in revenues from digital TVs alone.

LG's ambitions are even more grand. The company, which ran second worldwide in sales of plasma TVs and fifth in LCD, hopes to pass Matsushita, Sony, Samsung, Sharp, and Philips Electronics to become the leader in both categories by 2008.

TURNING IT UP.

"We will cement our second place in the plasma TV market this year to challenge the No. 1 in 2007," says Yoon Sang Han, LG executive vice-president in charge of the TV, monitor, and plasma panel module businesses. He expects LG's plasma TV sales to more than double to 2 million sets this year, from 877,000 in 2005. He sees sales of 4 million LCD TVs, up from 1.5 million.

The Koreans can expect the Japanese to put up a tough fight. Sony, in particular, is staging a dramatic comeback. Chief Executive Howard Stringer has given top priority to reinventing Sony's core consumer-electronics unit for the digital era, as video technology moves to high definition -- more than double the clarity of analog's standard definition. "The scale of the transition from analog to HD will make the shift from black-and-white to color seem small by comparison," Stringer said earlier this year.

Sony enjoys a strong advantage over Korean rivals in terms of brand recognition. Many consumers still have fond memories of the company's Trinitron models, which dominated the analog TV industry for decades. And while Sony lagged behind competitors in developing flat-panel technologies, its thin-screen Bravia TVs have become hot sellers in the less than 12 months they've been on the market (see BW Online, 4/26/06, "Sony's TV Star in the Spotlight").