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‘Big Three’ Emerge in LCD Market

And then there were three.

Earlier this week, Japan's newest, biggest display manufacturer, Japan Display, began operations. Japan Display is the joint venture, announced last September, among Sony, Toshiba, and Hitachi. The three companies merged their LCD operations with $2.6 billion from a Japanese government-backed fund. (See: What Does LCD Merger Mean for Apple?)

Japan Display officially opened for business the same day as Samsung Display, which is a spinoff of {complink 4750|Samsung Corp.}'s display business. Samsung's spinoff and the Japan joint venture instantly position the two display makers — along with {complink 3074|LG Electronics Inc.} — among the three biggest LCD makers in the world.

With the LCD market struggling to turn a profit as demand and ASPs drop, display manufacturers are consolidating facilities, looking to cut overhead. Just a few weeks ago, another display juggernaut, {complink 4907|Sharp Electronics Corp.}, got an injection of cash from global EMS provider {complink 2125|Foxconn Electronics Inc.} (See: Foxconn Shores Up Display Supplies.)

But the LCD market has taken a turn for the worse, according to IHS iSuppli,. For the first time ever, on an annualized basis, the US LCD TV market is expected to decline in 2012:

    Shipments in 2012 of flat-panel TVs into the American market are forecast to decline to 37.1 million units, down 5 percent from 39.1 million units in 2011, according to an IHS iSuppli U.S. TV market tracker report from information and analysis provider IHS. Only last year, shipments had inched up 1 percent from 38.6 million units in 2010…

    The U.S. flat-panel TV market has never encountered a down year, even at the height of the recession in 2008 and 2009. The decline starting this year suggests that demand may have crested for the mature U.S. TV market, which is driven by consumers replacing their older sets with models boasting newer features—unlike other parts of the world where a vibrant, untapped market exists for buyers making their first-ever purchase of flat-panel sets.

While the consolidation will prop up the LCD market, it might hurt consumers. Fewer suppliers means less competition on price, so LCD prices likely will plateau. Samsung has made its intention clear to focus on next-generation display technologies such organic-light-emitting diodes (OLEDs). (See: OLED Technology Gets a Boost in Samsung-Universal Deal.) OLEDs have a number of technological advantages over LCDs. They are lightweight, power-sipping, and can be manufactured on flexible substrates such as plastic. They are still extremely expensive, however. IHS iSuppli reports:

    AMOLED TV prices will remain dramatically higher than those of liquid crystal display (LCD) TVs during the next few years because of manufacturing yield issues, combined with inflated material costs due to the small pool of suppliers. A 55-inch AMOLED TV will be priced at $8,000 in 2012, more than twice the $3,700 average expense for an equivalent LCD TV. And although AMOLEDs deliver a dramatically superior viewing experience compared to LCDs, consumers are unlikely to buy large quantities of AMOLEDs until their prices fall to within a 20 percent premium of comparable LCD TVs.

In the meantime, the display that is getting the most buzz in the market is {complink 379|Apple Inc.}'s Retina display. The patent for the technology is owned by Apple, but Samsung, LG, and Sharp are licensed to manufacture the Retina. LG and Sharp have reportedly had difficulty meeting production demands for the Retina, forcing Apple to declare a shortage of its new iPad the day of its release. (See: Apple Watch: Blame the Displays.)

14 comments on “‘Big Three’ Emerge in LCD Market

  1. FLYINGSCOT
    April 12, 2012

    I like the way the Japanese government supports its high tech business. Ii wish other countries would follow this model in a significant way.

  2. Barbara Jorgensen
    April 12, 2012

    @Rich: I think competition will force the prices of OLEDs down, and right now, the supply and manufacturing base is so tiny, it is going to take a long time. Samsung's biggest competitor, I believe, is LG. Both companies were instrumental in bringing LCD prices down, part through manufacturig efficiencies and part through head-to-head price competition.  But OLED production requires an entire infrastructure that just isn't there yet. The materials (inks, actually) aren't common and not many companies produce them; there are few OLED factories set up; and there are yield issues with larger-sized screens.

  3. jbond
    April 12, 2012

    The key to large growth in the LCD market is clearly going to be in emerging markets and not the U.S. OLED is definitely going to be the future. The question is when can they get a functional supply chain set up to bring the prices within reach of consumers. The OLED technology is seeing millions in R&D dollars, particularly by Corning Inc and Dow Chemical to name a few. The fact that OLED can be used on a flexible surface should make for some very unique opportunities.

  4. Barbara Jorgensen
    April 12, 2012

    jbond: I agree. I remember that by 1995, everyone in the US was going to own an HDTV. The reality was closer to 2005 when LCD prices came down. As good as OLED technology is, I'd double the ETA of any mass-market OLED estimates.

  5. Noel Bauman
    April 12, 2012

    @Barbara: I agree with your assertion that AMOLED displays offer a superior viewing experience, but not under all conditions.  I recently purchased a Samsung Galaxy SII phone and the display is wonderful…indoors.  However, sunlight almost completely washes out the screen outdoors.  That will be less of an issue with for an indoor TV application, but window light/glare is still a consideration. 

    I also agree with your statement about the consumer sales will only pick up once the price of an AMOLED TV gets within that magic 20% premium range.  This is a problem not only for OLED panel manufacturers, but for all high-tech industries (except for possibly drug manufacturing). 

    Basically, my premise is simple:  Technology has come so far in recent years that premium-worthy product differentiation is much harder to come by now.  For example, color was a great improvement over black-and-white.  Digital signal was a great enhancement over analog signal.  Flash > CD > cassette.  And so on.  However, how much of an improvement (to the average consumer) is 1080p over 720p?  Blu-Ray over DVD?  LED over LCD or Plasma?  Only deep-pocketed consumers can find the value in the premium products, and those consumers might sit on the sidelines during a down economy.

    So how are high-tech companies to succeed in developing the “next big thing” when competing as much against their own “last big thing” as each other?  The ROI on such significant R&D is not good.  I guess they can use engineered obsolescence…effectively eliminating the old design by forcing the components to become obsolete.  Or shortening the MTBF to force a quicker product turnover in the market.  But neither of those are attractive options.

    Please understand, I don't think the world is flat.  And, yes, we really did need more than 64K of RAM.  But, I would be curious as to your thoughts on the future success of such technology development efforts in an established market such as TV.  Thanks.

  6. _hm
    April 12, 2012

    Very good coverage. It will be very interesting to see how Japanese and Korean companies and governement gets involved. Japanese organizations will give very good fight to Koean organizations.

  7. Daniel
    April 13, 2012

    Bolaji, narrow downing the market players can end up in monopolistic nature of business and finally customer may lose their choices.  If more players are there then there would be always a chance for health competition in terms of price and quality of products.

  8. Taimoor Zubar
    April 13, 2012

    I think OLEDs tend to lead in terms of their display quality and power consumption. As the production increases the price would come down. I agree that OLEDs would dominate in the future and penetrate very swiftly.

  9. Taimoor Zubar
    April 13, 2012

    @FLYINGSCOT: I agree that the Japanese government has certainly taken a step in the right direction by investing in display companies. Displays will be a critical component in the future and I'm sure the investment will pay off very well for the Japanese economy and might establish Japan as the world leader in display products.

  10. Barbara Jorgensen
    April 13, 2012

    NoelB: Thanks for your well-thought out comment. In general, OLEDs are supposed to work better in sunlight (than LCDs) becuase they are not backlit, so it surprises me that your experience with them hasn't been optimal. But I do know that the larger the screen, the lesser performance OLEDs have. This could be one of those situations and if so remains a problem for overall adoption of the technology.

    I agree with your point about technology reaching a plateau of sorts. It is hard to imagine the next product that is going to shake up the marekt like the PC did. And, while OLEDs have a number of advantages over LCDs, they don't revolutionize screen technology. Flat-screens are way better than CRTs, but when you get to the point where we are today with LCD TVs, it may not matter whether it is an OLED or an LCD in your living room. But I think there will always be a group of early adopters out there that will buy them anyway, and that's one of the things that keeps the market growing 🙂

  11. ITempire
    April 14, 2012

    This is really a big development in LCD market which I think still has a lot of potential and consumers in many countries have'nt yet shifted to flat panel displays. When the lifecycle of any product (LCDs in this case) reaches maturity stage, the competition becomes intense and to grasp decent margins, new ways have to tried out to cut down overhead costs. So merger sounds good to me. This is also an indication that there was no further room for overhead cut down and merging production facilities was best way out.  

    However, the best of three, in terms of quality looses out as it has to share its expertise with the partners in venture.

  12. itguyphil
    April 15, 2012

    I think so. They already have a pretty decent stranglehold on the small to medium consumer base. Their displays are excellent. I find myself staring at their TVs whever I go through the electronics section at any store.

    Why not try to take over the new thing too?

  13. itguyphil
    April 17, 2012

    Well yes, same here.

    As long as the quality continues to improve and they impress me with their product lines, let's hope it stays this way.

    Who do you see as their main competitor in this space??

    SONY?

  14. itguyphil
    April 22, 2012

    Rich,

    Thanks for the reply. I am unsure of whether or not I read your post wrong but is Sony considering exiting the display industry for software dev?

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