Shocker: LCD TV prices to fall (even more) in 2008

Shocker: LCD TV prices to fall (even more) in 2008

It is probably not a surprise to you that flat TV prices, whether using LCD or Plasma, are going to fall further, probably at an accelerated pace. It is mostly the way things are: as improvements in manufacturing costs and yields (number of defective devices out of the assembly line), competition forces manufacturers to lower prices to maintain market share.

But most people do not mention the second reason why prices are going to (free) fall next year. I call it “fixed function”. Let me explain to you what I mean by “fixed function”:

During the past years, we went from standard definition (SD) to various high definition (HD) formats. We had 720i, 720p, 1080i and finally 1080p. In this order, each represent an increase in the number of pixels used to display an image. The higher, the sharper. But now, 1080p has become the highest standard for many years to come.

On the way from SDTV to HDTV, manufacturers had plenty of ways to differentiate, racing each other to reach the 1080p Holy Grail (adding HDMI, HDCP and so on too…), at ever larger sizes. Today, a TV simply “sucks” if it is not 1080p. It shows how far we’ve come, but it also points out where we’ll stay – at least for a while.

Because the “function” (1080p, HDMI, HDCP…) is now mostly “fixed”, it drastically reduces the margin for differentiation making diagonal size and price the main battleground. Semi-conductor evolution will take care of the cost of the electronics: the video processing cost should be halved every 18 months (or so), and size can’t grow forever, simply because there are practical considerations such as weight and sheer space in consumers’ homes.

Of course, one could you can argue that “qualitative” feature such as brightness, contrast and refresh rates will continue to be improved. That’s right, but quite frankly; we probably entered the point where the flat TV overall image quality is “good enough”. It will be hard to charge a premium if the improvements are only incremental.

The bottom-line is that the flat TV profit margins will spiral down until:

Shinking profits will eliminate players or technologies (like retro-projected), so expect more companies to get out of this field, more consolidations, more “partnerships” and an exodus towards “high-end” (hear higher-margins) flat TVs in the coming years.

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