Newsmaker: Westinghouse plugs in to LCD TVs

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But in Japan, a lot of your potential customers are going to work for your competitors.
Woo: But it's one of the largest markets in the world for flat television. There is an inherent consumer requirement for thin and flat. Westinghouse is selling a lot of TVs, so we have to be a global player and Japan is one of the largest markets.

We're in the No. 4 position in the U.S. now, but we probably have 10,000 retailers compared to like a Sony or a Sharp with 30,000 stores, but we're running equal volumes.

Executives at some of the larger companies have been saying that the severe price pressure of 2006 will slow down in 2007. Is that possible or is it wishful thinking?
Woo: It's how you look at it. If you're looking at it on an average basis, who knows? But the more interesting phenomenon when you get down with the details is where it's going to occur. We believe that the large TVs, 40 inches and above, is where you're going see the greatest amount of compression.

For every single plasma plant that's being constructed there are probably 10 LCD plants being constructed.

But that sounds scary because the most price compression will occur in the most profitable segment.
Woo: That's the industry pressure. The panel makers have built enormous capacity and the glass has to go somewhere. Everyone wants share in the standard-size television market; 42-inch used to be a big TV. Most people now view 42-inch as a midsize television. So the most activity will be in the 32- to 42-inch segment, and 42-inch just launched in the past year from the LCD side, so this is the year where there'll be compression.

I think it'll be pretty substantial, so it will be great for consumers. And I can say this, there will be plenty of supply.

How about CRT?
Woo: CRT is still out there, and there are still factories and they're still producing and the price points are pretty low relative to flat-panel technology. But you'll see a move now from LCD to capture even more of the market. Smaller sizes of LCD, 26 inches and below, will begin to reach price points that just will eliminate CRT as the other option.

Such as?
Woo: You have a computer monitor. When the price ratio of the LCD monitor to the CRT monitor was 4-to-1, it was interesting. People started buying when it was 3-to-1. We started getting volume. When it was 2-to-1, it was over with CRT. LCD saw 100 percent volume increases. CRT volumes declined so much they had to close factories.

I think that you're going to reach closer to the two-times point for smaller LCD TVs in the coming year. You're not going to see a 26-inch LCD for $199, but you're going to see very, very aggressive 26-inch pricing to the point where consumers will say, "You know what, I could spend 'x' and buy that, rather than this big thing."

What's the ratio now?
Woo: 26-inch LCD is like five, six hundred bucks. 26-inch CRT is $200. And all of a sudden, it's the end. By the way, we were the No. 1 27-inch last year. Our 19-inch is No. 1 in the U.S.

One thing that people are still stumped by is that, when the PC makers got into TVs, people assumed they would do well, but they haven't. What happened there?
Woo: Let me say this. There's good and bad from PC. The good thing about the PC business model is the way they approach the supply. The supply chain in the PC industry is so incredibly efficient and the way they bring the best price to the consumers has been phenomenal. We try to emulate as much of that as we can. It's something that we feel like we got to jump on the traditional CE suppliers who really have their own internal politics and infrastructure to deal with.

The bad thing about the IT is the supply chain. They completely rely on everybody else to make a product. There's no originality. It's completely commoditized. CE manufacturers understand that this is a lot more like fashion and it takes integration with the channel. That's a unique skill of the CE industry, and so when we launched the company, we didn't launch it as an IT company. We launched this company as a CE company and we tried to build that type of relationship with the channels to engage them and try to figure out what consumers want. How do you merchandise, say, 1080p or whatever. This is a very CE mentality, and the IT guys really don't have that.

You have also become big in digital photo frames, a market that took some time to take off. What drove it?
Woo: When we launched, digital photo frames were being sold in catalogs or maybe Sharper Image and stuff like that. We went into the big-box retailers like Best Buy with a product and a way to merchandise it. We'd tell consumers "Look, you have digital photography. Where are you going to show your pictures?"

The initial products we were competing against were ridiculously expensive and very hard to use. They had to have a telephone connection. We just made this thing really simple: put a memory card slot in, turn it on and off, plug it in. Simple. Remote control? Who needs a remote control? Someday we may add wireless, but right now it's about getting people to understand the product. 

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