Next year is shaping up to be a nightmare for LCD TV makers.
Revenues for LCD TVs sold worldwide in 2009 are expected to fall 16 percent from 2008, to $64 billion, according to an update to DisplaySearch's Quarterly Global TV Shipment and Forecast Report, released Thursday. Next year will be "the most difficult year yet for the TV industry and supply chain," DisplaySearch writes in the report.
The culprits are rapidly declining prices of LCD TVs and lower shipments to retailers due to slackening demand. DisplaySearch expects 2009 LCD shipments to drop to 205.3 million unites, which is a 1 percent decline from the 2008 total of 206.4 million units.
The recession in the U.S., and the instability in the global financial markets, have hit the consumer electronics industry hard. By the second half of 2008, TV prices were already beginning to fall as manufacturers competed heatedly for customers. But as prices drop, so do the margins that TV makers, suppliers, and retailers can bring in.
So far, few have been immune, including some of the biggest names in electronics. Sony's TV shipments fell drastically, leading to layoffs and factory closings last week, Panasonic has said its profits will take a hit, and Samsung has said it is planning on cutting back on investments as its sales and profits fall.
The problems developing in the LCD TV business have been brewing for over a year. When LCD TVs were still a relatively new product and the top tier brands were still charging fairly hefty premiums for their sets, small, lower-tier brands found their way into the mainstream by selling through club stores and discount chains at lower prices.
Customers responded in a big way, driving lower tier Vizio, for one, into one of the top TV makers in the world. Sony, Samsung, Sharp, LG, and others, responded too--by lowering their prices in what became a slow race to the bottom.
But looking ahead to next year, just treading water appears to be a lofty goal. The keys will be taking advantage of emerging markets where LCD TVs are still a novelty, by creating or beefing up a line of lower-end TVs for North American and Western European markets.
It could hold them over until the LCD market rebounds, which DisplaySearch says will happen in 2010. By then, revenues for LCD makers should push back above $70 billion.