Weakness in the flat-panel TV market and the displays they’re built around imply that the usual holiday discounts for TVs may be even fatter this year.
On Monday, IHS reported that sales of flat-panel displays had fallen compared to year-ago numbers for the second month in a row. And on Friday, IHS also said that the LCD TV panel market declined for the first time ever.
Put the two reports together together, and you’d first conclude that short-term sales of existing LCD TVs will suffer. But the TV manufacturers also appear to be either cutting back on panel purchases, meaning that they either will cut back on manufacturing in an attempt to raise prices. But with last-ditch volumes expected to spike in the holiday sales rush, history would suggest that manufacturers will slash margins to the bone in an attempt to drive sales and market share.
Specifically, sales of LCD TVs, which make up the vast majority of all TV sales, posted a 5.7 percent year-on-year decline to 14.1 million units. That’s a repeat of a June trend, IHS reported. Sales of the panels themselves, which make up most of the manufacturing cost of a flat-panel television, fell slightly from 58.8 million units during the second quarter to 58.0 million in the third.
“LCD TV panel shipments went through a soft period in the third quarter,” said Ricky Park, senior manager for large-area displays at IHS, in a statement. “The downshifting of the market comes as a surprise because the third quarter is usually a time when things start heating up, in preparation for the furious upcoming fourth-quarter selling season. However, consumers have not been buying as many new television sets as originally hoped, leaving TV brands with panels that they haven’t been able to move.”
One of the problems faced by the TV industry faces, is that there’s little to distinguish one set from another: put simply, they’re all the same. CCFL tubes have virtually disappeared—power-saving LED backlights make up 95 percent of units sales, IHS said. And with little else to differentiate them, “the TV market has turned into a game of chicken especially on pricing—an unfavorable circumstance for TV makers,” IHS said. But for consumers, that’s great news.
So what should holiday shoppers expect? Cheap, big, and connected. Last year, Best Buy led off Black Friday with a 42-inch, 1080p display for $200. There’s no reason to believe that this year shouldn’t be any different.
Aside from the holiday season, Super Bowl weekend represents a prime time for buying TVs. This February, sales of sales of 60-, 65-, and 70-inch TVs grew from 1 to 5 percent of all TVs sold, according to NPD. That may not sound like a lot, but NPD also noted that the top five brands—Samsung, LG, Panasonic, Vizio, and Sharp—doubled the number of flat-panel TV models they offered.
In all, the declines should have TV makers worrying about how they’re going to move inventory. “Last year was the first time that global flat-panel TV shipments failed to grow, following a decade of blockbuster expansion and runaway success,” said Jusy Hong, senior analyst for consumer electronics and technology at IHS, in a statement. “This year as recently as May, it appeared that the flat-panel TV market might pull off a rebound even if growth would have been marginal at less than 1 percent. However, with any increase unlikely to take place even in the fourth quarter, it appears more likely that TV shipments will post another year of decline in 2013. If so, this would make it the second year in a row that flat-panel TV shipments retrench—an unthinkable prospect just a few years back, during the flat-panel boom.”
IHS said that Samsung (19 percent), LG (14 percent), and Sony (6 percent) were the top three global TV brands for the third quarter. But major Chinese brands TCL and Hisense tied for third and fourth, respectively, demonstrating that some of the "no name" brands are pushing upward, most likely through lower prices.
We still don't know what deals the holidays have in store. But one thing seems clear: right now, it's looking like a buyer's market.