iSuppli's LCD sales data points to the final swan song for CRTs

San Francisco (CA) - A series of reports from technology analyst firm iSuppli suggests that the road to obsolescence has finally been paved for the cathode ray tube. Liquid crystal display panels, iSuppli's projection research analyst Sweta Dash predicts, will eventually displace CRTs as the leading type of television display produced worldwide. But the tube won't go out without a bang, as further data from iSuppli makes clear.

By 2009, according to an iSuppli June forecast, more LCD displays will be produced worldwide than CRT displays. In fact, between 2008 and 2009 is the interval the firm predicts LCDs will truly take off, perhaps by virtue of CRT factories slowing down production. LCDs will constitute 48% of all displays manufactured globally in 2009, it predicts, compared to 42% for CRTs. In the following year, LCDs will constitute more than half the displays in production around the world, with plasma (PDP) and projection displays continuing to split the remaining 10%.

Dash believes fabrication facilities are simply producing LCD displays at a faster rate, which is leading to rising availability and plummeting prices. But the rises and drops are not all steadily linear - in fact, it's more of a roller-coaster ride that happens to average out nicely. Case in point: In the first quarter of this year, Dash notes, LCD panel shipments rose by 7% over the prior quarter, to 10.6 million units. But consumer demand actually dropped that quarter, due to economic factors. The result was increased inventories, which triggered greater than expected price drops. The average retail price for 32" LCDs worldwide was 17% lower in May of this year than just last January; 40-42" model prices fell 14% during the same period.

Then came the onset of FIFA World Cup Soccer (Football) season, which happens once every four years. Suddenly, demand did a forward somersault, as consumers took advantage of the steep discounts. LCDs accounted for 17% of all TV displays shipped in Q1 2006, a 2% jump from the previous quarter. (Recall that shipments refers to transfers of goods from the manufacturer to the retailer. Higher shipments leads to increased inventories, not necessarily increased sales.) For a short time, though, shipments were not enough to meet the demand spike.

The coming dominance of LCD isn't necessarily good news even for LCD suppliers, as Dash said in a speech to attendees of the Society for Information Display conference on Monday. In fact, the downward price trend could actually be dangerous. "Each time the flat-panel market has undergone a reduction in pricing," she stated, "revenue has dropped, profit margin has dipped, and then players have dropped out of the market."

When prices dip low enough to reach a kind of magic price point that sometimes only consumers know - and even then, perhaps only subconsciously - demand skyrockets, shipments increase, and then there's even more pressure to reduce prices further. In early 2004, a 32" TFT LCD panel TV sold for about $1,200, according to iSuppli data. In Q4 2005, that same TV sold for $600; but just as that price approached the $600 level, shipments catapulted from 300,000 in Q1 2004 to 3,000,000 in Q4 2005.

But wait a minute, you may be asking, why all this talk about TVs? Isn't this supposed to be a computer publication? With computer displays having almost completely transitioned to TFT LCD, it's the trend in consumer markets that is setting the stage for who competes in the business markets. Those players that Dash believes could eventually be forced out of the LCD market by virtue of TV sales will subsequently be pushed out of the graphics display market as well.

"The top three suppliers of large-sized LCD panels will always manage to be profitable over the long term," Dash told attendees, "while the smaller ones may not. That's why there's so much emphasis on market share in the LCD panel market."

If only three companies make it through the gateway, then the top five LCD panel suppliers in the latest iSuppli rankings still have some scurrying around to do. LG Philips remains the top supplier with 22.26% global market share, at 2.35 million units shipped in the last quarter, down only a tenth of a point from Q4 2005. Samsung and Chi Mei Optoelectronics follow closely behind, with 20% and 18.7% market share, respectively. But #4 and #5 are hanging on, even though they've swapped positions: AU Optronics takes the #4 slot at 16.79%, up almost 1 3/4% over the fourth quarter, with almost all of that market share taken from #5 Sharp at 13.9%.

When you change your focus to look at LCD-TV units, as opposed to just the panels, the numbers shift very drastically. Sharp - the #5 supplier of panels - is the #1 supplier of assembled LCD TVs worldwide, with 15.23% market share, down from 17.27% the previous quarter. Sharp's prices may not be declining along with the going rate, iSuppli believes. Samsung has captured the #2 slot from Sony, but just by a hair: 12.36% versus Sony's 12.25%. Philips, LG, and Matsushita (Panasonic) round out the top six.

If CRTs are on their way out, then don't tell that to China's TTE Corp. The joint venture between the Chinese TCL and Thomson (which does business in the US under the RCA brand) leapt right over LG and Samsung to become the #1 supplier of television displays in the world, the lion's share of those displays being CRTs. As iSuppli itself admits, 76% of all the world's televisions remain CRTs (down from an estimated record high of 100%), with 32 million shipments per year, and 13.6% of those shipments now coming from TTE. The TCL brand name has just premiered in Europe only last April, with units made by TTE.

The reason CRTs aren't going away tomorrow, says iSuppli, is China (Taiwan). Four of the top 10 CRT producers globally are Chinese, with Korean brands slipping to second place, Japanese brands third. ISuppli analyst Riddhi Patel reported, "With the Japanese OEMs shifting their attention to flat-panel technologies, the CRT market is open for the Chinese and Korean players to dominate by offering products that offer superior price/performance compared to flat-panel TVs." So evidently, there's still a price/performance sweet spot for the old tubes, and as long as the Chinese manufacturers remain strong, that sweet spot might not go away...for at least three years.

Whatever happened to plasma and organic light-emitting diode (OLED) technologies? They'll continue to have their place, iSuppli vice president for displays Paul Semenza believes, just not in the home or the desktop. LCD technology is scaling well, from cell phone sizes up to widescreen theater displays, and it's the very fact that this scalability exists which has driven manufacturers to embrace LCD. In so doing, Semenza argued during his own speech at SID 2006, the OLED market is being relegated to signage, flexible displays, and backlights. The rapid drop in LCD prices is causing pressure for the plasma market to follow suit, iSuppli data indicates, meaning that revenues for PDP producers will continue to fall.

But similar pressures may cause LCD producers to innovate, Semenza believes. "Current LCD technologies are costly and inefficient," he told attendees. "New materials and components represent a big opportunity."