TV makers optimistic in the face of US downturn

Prices of flat-panel TV should hold up in 2008, their makers claimed at the Consumer Electronics Show in Las Vegas, with sales likely to be propelled by the Beijing Olympics. But analysts are concerned that the US economy may force deeper price cuts on them.

The makers of flat-panel TVs are looking forward to prices holding up in 2008 despite concerns over problems in the US economy, executives said at the Consumer Electronics Show in Las Vegas this week.

"We see sales momentum and steady unit growth this year," said Tom Haga, head of Pioneer's North American. "But we are reading the signs - both good and bad - and steeling ourselves for surprises. This could be a frightening year."

Samsung Electronics, the world's top flat TV maker, expects average LCD television set prices to fall only 20 per cent this year, instead of the 30 per cent seen in 2007, while Pioneer and Hitachi said they expected plasma TV price declines of about 15 per cent to 20 per cent from falls of 20 per cent to 23 per cent the previous year.

Tight supply of display panels are prompting flat-screen TV makers to rein in production for the time being. One example is Panasonic brand-maker Matsushita Electric Industrial, which said on Tuesday it may miss its target of selling nine million flat TVs this year to March. Matsushita plans to take control over the IPS Alpha display joint venture to better secure its supply of liquid crystal displays and is pushing ahead with the building of a new production plant.

Surging demand in developing countries, especially China in the run-up to this summer's Beijing Olympics, is driving flat screen maker's hopes for volume sales of smaller TVs. However, there are danger signs for pricing in the expected rush to upgrade by consumers. Although events such as the Olympics and the World Cup have proved good for large-TV sales, Maximilian Huber, president of Sharp Electronics in Europe, pointed out last year that sales volumes tend to increase at the expense of unit price.

In developed markets, the key to slower price declines is the ongoing shift of consumer preferences to bigger TVs, which are pricier and yield more profit per sale, TV manufacturers said.

"We are working hard at bringing the proportion of TVs bigger than 40 inches to 60 per cent of our total TV sales," Park Jong-woo, president of Samsung Electronics' TV-making division, told Reuters. The proportion of high-margin, large-size TVs at Samsung is currently around 40 per cent, he noted.

Japan's Pioneer, which aims to turn around its loss-making plasma TV business, will phase out 40-inch class TVs for the North American market in the year starting April, Haga said. Japan's Sharp is aiming for 10 per cent profit growth in the year starting in April as it boosts LCD panel plant capacity.

Another source of hope is the end of analogue broadcasts in the US, scheduled for February 2009 - which could further drive up demand for high-definition TVs.

"This is a huge shift, and we have a lot of work to do to show users what the hi-def and connected lifestyle makes possible," Toshihiro Sakamoto, president of Matsushita's Panasonic AVC Networks Company said.

According to Samsung executives, the US LCD TV market is expected to grow 33 per cent to 24 million units in 2008 from about 18 million in 2007 - slower than 2007's 56 per cent growth but still a very healthy clip.

Samsung and smaller peers acknowledged that the US housing crisis and rising fuel prices could dampen appetite for gadgets, some of questionable utility.

"Spending patterns may change, and we will be on the watch," said Makoto Ebata, president of Hitachi's consumer business group. "So far, we see no impact on sales."

That could change quickly, said analysts.

"The way I look at the state of the economy, consumers are just about now to feel the pinch," said Riddhi Patel, principal analyst at research firm iSuppli. "[But] with credit issues hitting home, the consumer is finally saying 'now is the time to curtail my additional spending'."

That could exacerbate price falls in the TV market, as the difference between LCD and plasma technologies and a few inches' thickness of TVs become secondary considerations for shoppers looking to save money.

Small players, who lack economies of scale to weather a dip in demand, are especially vulnerable. Hitachi, which is already straining to cut costs by 30 per cent by March 2009, is counting on demand to remain strong as it fights to achieve an oft-repeated promise to gain profitability in its flat-TV business.

Pioneer, which is revamping its brand with its Kuro series targeting high-end users, fears a slow-down could hit its car electronics business, which has so far made up for losses in its plasma TVs.

But suppliers are not worried yet. "TVs have become indispensable in many people's lives," said Eddie Yeo, head of the TV business unit at LG.Philips LCD, the world's second biggest maker of LCD panels. "So far the impact of the slowdown doesn't look to be as severe as thought."

Image: Pioneer is targeting high-end consumers with its Kuro TVs

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