Living LCD Large

Two things were highly visible at Samsung’s Consumer Electronics Show (CES) booth earlier this month. One, that the company is staking a large part of its business on large screen flat TVs, and two, judging by the looks of awe from attendees, picture quality has improved and these ever-sliming devices will see continued demand from consumers in 2006. Specifically, the Seoul, Korea-based consumer electronics giant is focusing on liquid crystal displays (LCD) in the flat TV space. Samsung’s LCD business, one of its strongest units in Q4 2005, saw a 12 percent gain in sales to $3 billion (3.01 trillion won) – a sign that despite price declines for LCD TVs, consumers spend is on the rise. “We just returned from the consumer electronics show. It was a very positive show and strongly toward TVs,” said Joe Virginia, VP of Samsung’s LCD business. “It’s more than just technology on display. These products are selling through the channel. They are going into consumers’ hands. “Traditionally in the past, the [LCD business] has been in the IT market, notebook computer displays and desktop monitor displays comprised the majority of all of our sales,” he continued. “Those are good markets, no question, but the real big nut right now is television. If you can crack into a 188 million unit television market, you are talking about a market that is larger than the combined notebook and monitor market. For manufacturers such as Samsung or any tier one manufacturer, that’s a market to be keenly interested in.” According to DisplaySearch data from Q4, LCDs enjoy the highest growth rate of all displays, climbing at a compound annual growth rate (CAGR) of 41.5 percent for 2005 through 2008. In contrast, the firm predicts the overall display rate will be 14.8 percent. As for TV displays, this past Black Friday – the busiest retail day of the year and the kickoff to the five week period when the majority of TV sales occur – saw LCDs take 27 percent of the total TV shipments and 31 percent of total sales, according to NPD December 2005 figures. That reflects a tremendous gain on 2004 Black Friday numbers, which showed 5 percent shipment and 10 percent sales. The figures also represent a gain on the plasma TV market, which saw a 5 percent shipment share and 22 percent sales share on the most recent Black Friday. Virginia credits the gains to price declines, particularly on larger LCDs, 26-inches and above, which pulled in $66 million in 2004’s five-week holiday spend and recorded a 380 percent jump for the same period in 2005 to $318 million. “The ASP in holiday 2004 was $1,649. The new price in holiday 2005 dropped 22 percent to $1,283 [according to NPD] for 26 inches and larger,” he said. “So that’s a 380 percent growth in sell through, versus a 22 percent price decline. It is clear that we participate in a price sensitive market. That’s something LCD’s are pretty familiar with.” Investment from powerhouses like Samsung, LG.Philips LCD and Sony are also key. Samsung recently announced that its second Gen 7 thin-film transistor (TFT) LCD panel line began mass production. The company plans to invest a total of $4.1 billion (4.1 trillion won) in the line for the production of panels for LCD TVs of 32-inches and larger, with the investment covering two phases. Phase one includes a $2.4 billion (2.4 trillion won) investment to reach a monthly production capacity of 45,000 substrates, with an additional $1.76 billion (1.76 trillion won) invested in a second phase to add another 45,000 substrates to capacity for a full-scale production capacity of 90,000 substrates per month. Phase two is expected to conclude during the second half of the year. Samsung also operates another Gen 7 line through its joint venture with Sony, called S-LCD. Production commenced at Line 7-1 in April 2004, with the full capacity of 60,000 substrates per month reached last October. Last November, the company said it would increase capacity at the line by another 15,000 substrates by July. “Consumers are purchasing like you wouldn’t believe. Then you have companies like Samsung rapidly investing with our partner in Sony for even more capacity,” Virginia said, noting that the average fab price has jumped from $1.5 billion for Gen 5 to $3.3 billion for Gen 7. Improved visual quality is also another factor in adoption, noted Virginia. This year’s CES saw LCD contrast ratios of 1,200:1, compared to 500:1 just a few years ago. Enhanced picture couldn’t come at a better time. The FCC mandate moving TV from analog to digital is about to take affect; blue-laser DVD is on the horizon, demanding high-definition quality; and several sporting events, like the Winter Olympics and the World Soccer games, that pull in viewers by the stadium full are just around the corner. “We’re really impressed with what we saw during the holiday season. There are a series of external forces that are just making our hands rub together at the thought of how popular these displays are going to be this year,” Virginia said. Data on 2005 from DisplaySearch estimates that 20.3 million LCD TVs were sold, a number that is expected to see a CAGR of 57 percent over the next five years with a 40 percent share of the total TV market expected in 2009. The phenomenal growth has even suggested revisions of previous estimates. The firm had suggested 36 million LCD TVs would be sold this year, but reported at CES that it would be revising that forecast upward. “You have to realize a year ago we were around 5 percent or 6 percent. By 2010, the real belief is that 100 million LCD televisions could be sold,” Virginia said. “It’s a really hot market. It’s not a market for the timid. It’s not for those that don’t have the type of financial posture Samsung has. But it is a lucrative market,” he concluded.