Rapid-Fire Price Declines Seen Dominating LCD TVs in 2005

The retail prices for “core” 27-37W LCD TVs will fall up to 60% in 2005, said Douglas Woo, pres. of Westinghouse Digital. Westinghouse has lowered its price 3 times the past 12 weeks, driving the street price for a 27W to $1,199, down from $2,499 at the start of the year, Woo said. The price decline will be less in smaller LCD TV sizes, he said. Yet while retail prices decline, dealer margins will be unaffected -- at least for 2005 -- as manufacturers keep them whole to increase the consumer market for LCD TVs, Woo said.

“Early adopter margins at retailers will not be maintained,” however, and “panel price reductions will really drive LCD TVs in 2005,” said Woo, whose company also is weighing extending its brand to PC monitors: “We have to realize that for retailers to stimulate the market and drive marketshare, they have to be motivated by being incentivized and having their margins protected so that they create a market for LCD TVs.”

The margins that dealers require vary from 6-8% for distributors and 8-15% for online retailers to 10-15% for mass merchants and 17-25% and specialty/regional CE chains, iSuppli Monitor Research Dir. Rhonda Alexander said. Larger CE chains seek 19-27%, Alexander said. But Syntax Pres. James Li maintained margins were closer to 35% at national retailers like Best Buy. Li, who’s pushing for retailers to accept lower margins and share the cost of building the LCD TV market, said rival Westinghouse had to pay Best Buy more than $2 million to secure shelf space. A Best Buy spokeswoman and Woo declined to comment on Westinghouse’s terms with the chain. Westinghouse markets 17-30W LCDs, having recently dropped a 15” because of “panel supply issues,” Woo told us. Westinghouse plans to introduce LCD TVs up to 47W in 2005 using panels sourced from Chi Mei Optoelectronics, he said.

“You have to understand that the market for LCD TVs relative to retailers’ other markets is very small,” Woo said. “They need to have proof of the validity of the business model for LCD TVs and relationship of the people that are supply them. It’s a testing period that occurred in most of 2004 and will continue into 2005.”

Li, however, was undeterred, arguing that distribution channels in N. America “must realize” that new display technologies are “not the same as the good old days of CRT TVs” when margins topped 35%. “The channel must accept profit margins that are reasonable under a 25% cap including all marketing programs,” said Li, whose company sells through regional chains and recently began LCD TVs to Staples. Syntax -- which has widened its LCD panel supplier roster by adding Hitachi, LG.Philips LCD and Sharp to Chi Mei Optoelectronics -- plans to ship 42W and 55W models in Feb. and March, respectively, Li said.

Syntax also sells a 50W rear projection TV based on JVC’s D-ILA technology through online retailer PC Connection at $1,999 under an exclusive agreement that ends Jan. 1, Product Development Dir. Jason Moh said. JVC sells 52W and 61W D-ILA sets through chains including Best Buy at $3,254 and 4,499, down from $4,499 and $5,499 at CES in Jan.

Despite earlier indications that Syntax might test the waters for DVD recorders including those with built-in hard drives, Li said plans have been put on hold. “We want to get all the channels opened up” for LCD TVs and “then we'll work at DVD products."

ISuppli Conference Notebook

EMagin, long a supplier of active matrix OLEDs for military applications, will enter the consumer market in the 2nd quarter with a 0.24” color OLED with 320x240 resolution for digital camera and camcorder viewfinders. The display, which will be marketed by Rohm, is being revamped after being demonstrated at the CEATEC show in Japan in Oct., eMagin CEO Gary Jones said. “When the first chip was made there were a few changes that were needed,” Jones said: “If a piece of the interface doesn’t work right, you have to re-spin the chip.” At first EMagin will handle production of the 0.24” OLED at its factory in E. Fishkill with a goal of eventually moving manufacturing of it to Rohm facilities in Japan, Jones said. EMagin’s E. Fishkill plant is capable of producing 50,000 OLEDs per month, but is operating at about 3% of capacity, Jones said. That’s expected to change with introduction of consumer products in 2005, he said. Introducing a 0.24” display, eMagin will enter a market that’s been dominated by Kopin, which markets an LCD-based model of the same size. “From my prospective, it’s going to be a commodity market with cutthroat pricing,” Jones said. “Rohm will have the ability to outlast just about anyone and they're going to have a lower cost structure.” EMagin also is developing a 0.65” OLED with 1,280x1,024 resolution expected to be available in color and mono versions by year-end. It will feature 65 candelas per meter quartered and 400:1 contrast ratio, Jones said. In expanding into the consumer market, eMagin has hired 3 display designers from Philips’ former LCOS development program in Briarcliff, N.Y., and is opening a sales and marketing office in the Seattle area, Jones said. “We're recruiting pretty heavy for a number of senior positions,” Jones said.

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Texas Instruments is developing a new packaging technology for its DLP displays and is in discussions with a 2nd company, in addition to Amkor, to provide testing and packaging services, DLP Home Entertainment Business Mgr. Dale Zimmerman said. While Zimmerman declined to identify the 2nd supplier, he said pilot runs with the Asian firm would likely start in 2005. Zimmerman also declined further comment on the new packaging. “Getting all those [the new packaging and supplier] time phased to where they mesh is a challenge,” Zimmerman said. “It really isn’t finished yet, but even without that we have enough capacity for 2005. All the work is going to go on in 2005, but whether it contributes substantial value is to be determined.”