Sony Says TV Prices Dropping Too Fast

[Suhit Gupta]

<div class='os_post_top_link'><a href='http://news.com.com/TV+prices+dropping+too+fast%2C+Sony+says/2100-1041_3-6142785.html?tag=nefd.top' target='_blank'>http://news.com.com/TV+prices+dropping+too+fast%2C+Sony+says/2100-1041_3-6142785.html?tag=nefd.top</a><br /><br /></div><i>"Television prices are dropping faster than expected, and Sony's not too happy about it. Prices for liquid crystal display TVs should drop between 25 percent and 30 percent this year. That's between 5 and 7 percent more than Sony anticipated, Stan Glasgow, president of Sony Electronics, said in a meeting with reporters in San Francisco last week. While this is good for consumers--and it would be hard to find a thrifty buyer sympathetic to Sony's concerns--the quick plunge in prices could hurt the industry as a whole because it could leave consumer electronics manufacturers financially weakened and less able to invest in future technologies, Glasgow argued. "LCDs will continue to experience heavy price erosion, but not at this level," he said. "It is hard to see that business model (of drastic price cuts) sustaining itself." While Glasgow's comments can be attributed in part to the natural disinclination of a manufacturer to cut prices, analysts agreed that the big drop in prices for LCD and plasma TVS has been surprising."</i><br /><br />What sucks for Sony is great news for us. However, I am a bit afriad that Sony will reduce production quantities, thus artificially raise prices. Although, given how many other manufacturers there are, especially the more generic brands, I wonder if there is anything Sony can do about this.

[Jason Eaton]

I think the end part you alluded to about Sony is on the mark. No one company has the power to reverse the trend least they do even MORE damage to themselves. If one company were to try and manipulate the market they in turn would sell less while everyone else fills in the gap.

Which brings us to part two …

LCD display companies would have to band together to create a price fixing scheme to save their investments, which is not looked upon favorably by governments. ( This is a link) (http://news.com.com/LCD+price-fixing+investigation+grows/2100-1047_3-6142839.html?tag=nefd.top)

So, in the end, I can’t help but to think that these companies did this to themselves.

[Felix Torres]

Yes, these companies did it to themselves by not realizing what they were doing: in adopting PC-class technologies and supply chains for HDTV they opened the door to PC-style economics.

HDTVs as following the classic development curve for semiconductors and this curve is characterized by boom-and-bust cycles; you see it in DRAM (absent periods of collusion), hard drives, computer monitors, and now HDTV LCD panels.

This is not a shock.
Most everybody outside of Japan saw it coming.
The reason Sony and Sharp and Matshu****a didn't see it coming is that they've been operating in a greenhouse, protected environment at home.
Japanese consumers buy displays for flatness and crt-ness.
And they wouldn't be caught dead with foreign electronics.
North American consumers, on the other hand, buy for size or price.
And the main market for HDTV in 2006 is NorthAm; what we buy is what sells.
All three of the big japanese CE companies have made mistakes in this arena:

Sony was late to the game and had to get in bed with their worst enemy Samsung to secure LCD manufacturing capacity.
Sharp correctly bet on LCDs but tried to maintain its premium pricing one year too long and let Sony back into the game.
Matsu****a practically bet the company on plasma, and are relying on external LCD suppliers and the JVC sister-brand. Right now JVC LCDs are more desirable than the Panasonic branded ones.

And Samsung made its own mistake; they bet on three of the four candidate technologies for HD displays (they passed on LCoS) and have a strong presence on the two that seem destined to dominate in volume, but were a little to quick to get in bed with Sony and no longer control all their production capacity.

As a result, all four vendors are to one extent or another reliant on external panel suppliers, especially for LCDs. Recent reports have both Sharp and Samsung buying panels from taiwanese merchant vendors like CMO because the panels they are currently making themselves are not what the market is buying.

So, on the one hand we have a serious overcapacity of at least 50% in a market that is already growing by something like triple digits year over year, which is driving prices down as the merchant panel vendors seek to maintain their factory utilization rates high, while at the same time the name vendors have a glut of their inhouse product that customers are not all that interested in, specifically, 37" 720p and 27-in and smaller LCDs.

A perfect storm has hit the japanese vendors: two many of the wrong types of panels and too many competitors with access (in modest quantities) to the right size panels. So Sony and Samsung and LG-Phillips are stuck with home-built panels (mostly 720p) they can't sell profitably, and the need to but 1080p panels from outside suppliers.

And now they're getting squeeze on the one possible out they had; collusion.

Doesn't look good for those guys.

Looking better for the Westinghouses, Toshibas, and Polaroids of the world, who have built their business on merchant panels and don't have the millstones of in-house plant capacity over their necks.

Anybody remember what the commoditization of PCs did to IBM and Apple until they got rid of their in-house manufacturing? That is what we're seeing.

Not many options available to Sony; they own half the production capacity of several Samsung plants, whether anybody buys them or not, whether they have to sell them at a loss or not. Cutting production saves nothing in money and surrenders market presence.

They really have no choice but try to minimize the damage by...heh..cutting prices.

The blood-letting is only beginning; we have at least two more years of 25% anual price drops ahead of us.

[Phoenix]

...The blood-letting is only beginning; we have at least two more years of 25% anual price drops ahead of us.

I certainly hope so. :)

I'm looking for two 1080p HDMI LCD panels - one 32-36", and one 50", and I'd like to get both for a combined cost of around $2300 USD - well, in a couple of years.

OK, maybe I'll be waiting a few years for that. Or maybe I'll have to loosen the ol' purse strings a bit or go with a Sammy DLP on the 50 incher, but that combined price would sure be nice!