Sony and Samsung's Big HDTV Bet
The two electronics giants will join forces on a $2 billion factory for liquid-crystal display panels. It could up the ante on rivals
With the recent spate of announcements from television makers that they will rapidly expand capacity, you'd think people were snapping up glitzy new flat-panel TVs in droves. The latest news came on Apr. 10, when Korea's Samsung Electronics and Japan's Sony (SNE) announced they will jointly finance a $2 billion megafactory for producing liquid-crystal display (LCD) TV panels. The plant will be able to manufacture the largest glass panels of any TV manufacturing facility in the world. Advertisement
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DIZZYING CHOICES. Those buyers will be choosing between the old-fashioned cathode ray "boob tube" and flat-panel sets. Even if they decide on flat panels, they'll have a dizzying number of choices, from LCD, plasma, and other competing technologies -- many from dozens of brands. For years, LCDs have been the dominant technology in sets below 37 inches, while plasma was favored for larger screens. One reason: the LCD plants were originally designed to make PC screens, so they were built to make smaller screens. But now both camps are trying to encroach on the other, using new technologies and new plants (see BW Online, 09/12/05, "War of the Screens").
With the glass panel accounting for a large part of the cost of goods for a flat-panel TV, companies now are racing to build super fabs that can cut ever-bigger sheets of glass at costs lower than competitors' plants. The new Samsung-Sony venture, for instance, will be able to cut eight 46-inch panels from one sheet, or six 55-inch panels. That compares to Sharp's latest plant expansion, which will cut just six 46-inch panels.
Scale is important because it puts pressure on competitors to cut prices, even as the company applying pressure maintains rich profit margins. For instance, Sony introduced its new Bravia flat panel last fall at under $3,000 for a 40-inch set. Rivals, who were charging $3,500 for comparable sets, couldn't match the price for months without losing money.
CONSUMERS WIN. Sony quickly shot to No. 1 in the market, from No. 4. Samsung, which also ranks in the top-five most popular TV brands, and Sony are using less-common sizes to strain rivals' profits, too.
BREAK FOR LCD? At a recent display conference, set manufacturers predicted some 32-inch sets will retail for less than $1,000, while 42-inch HD sets are likely to fall below $2,000.
Sony and Samsung's big bet also may help change the television market. While plasma technology has dominated the larger set sizes, LCD technology is likely to gain some ground. With lower prices, LCD sets are likely to move into the market's sweet spot, now for sets between 42 inches and 60 inches. Analysts say LCD technology may grab the lion's share of that market in short order, pushing the makers of plasma sets into ever-larger displays for homes, outdoor advertising, and other locations.
