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Wait Until Next Year to Buy That Flat Panel TV
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By Franklin Paul

NEW YORK (Reuters) - If a reasonably-priced flat panel TV is on your holiday wish list, you might want to wait until next year.

Shoppers looking for deep bargains on expensive flat-panel televisions will find only marginal discounts as the holiday season heats up, but experts say prices will tumble by some 30 percent in 2004.


Fueled by an anticipated jump in production, that drop may help bring the svelte TVs closer to a mainstream audience by making the screens -- some which cost as much as a new car or a semester of college tuition -- more affordable.


"The type of pricing you are seeing right now is expected to hold fairly constant for the next few months at least," said analyst Sean Wargo of the Consumer Electronics Association. "Next year the price will look quite a bit different."


Currently, flat panel TV sales are still dwarfed by sales of bulky old-fashioned TVs, which cost considerably less. A 27-inch flat panel TV can cost more than $2000, or more than 10 times the cost of a similar-sized conventional TV.


Flat panel TVs come in two forms: liquid crystal displays, or LCD, and plasma. In LCDs, electrical current causes the crystals to align so that light selectively passes through them. With plasma, each pixel on the screen is illuminated by bits of charged gas, somewhat like a neon light.


More and more consumers are drooling at the sight of the high-quality Flat TVs in stores, eyeing them as replacements for older cathode ray tube and projection TVs. But, wary of sky-high prices, most are pondering whether to buy now or wait for prices to drop.


Leading electronics retailer Best Buy Co Inc. this week advertised 42-inch Plasma TVs for $4,000 to $6,000.


"(Plasma's) are cool and people see them in bars and in stores, but they are too high for most people to buy them," said Bob O'Donnell, an analyst at research firm IDC. "If we walked into a store and saw a 42-inch plasma for $1,500, out would come the credit card. But we see the price now and say 'Oh well, maybe next year."'


LOTS OF BUZZ, BUT LITTLE SALES


Despite the buzz, flat panel sales are less than 3 percent of the entire TV market, dwarfed by cheaper cathode ray tube-based TVs.


However, the cost of making flat screens will drop as manufacturers become more efficient. Moreover, retailers, which now include personal computer makers like Dell Inc. and Gateway Inc., will cut prices as they compete for sales of the TVs, which deliver high profit margins.


Global production of LCD TVs will more than double next year to between eight and 10 million sets from about four million in 2003, analyst say. That is out of a total TV market of about 150 million units.


As a result, prices for 30-to-39 inch LCD TVs may tumble as much as 38 percent next year, to about $3,000 from $4,800, IDC's O'Donnell anticipates. Wargo, of the Consumer Electronics Association, sees LCD TVs in the range of 17-20 inches dropping to about $700 next year from around $1,000.


"Maybe less," he added. "It depends on how quickly that capacity comes online."


That rush to make screens is borne of a need to fill demand for flat panel displays in everything from wide-screen TVs to laptop computers to handheld personal digital assistants.


Samsung Corp. is the most aggressive investor in flat screens at the moment. It announced a $16.6 billion spending plan for the next 10 years and agreed to a $2 billion deal with Japan's Sony Corp (NYSE:SNE - news) (news - web sites). to boost production.


TV makers can help themselves by cutting prices, analysts said. Research firm iSuppli estimates global sales of LCD TVs will by 2007 reach 27 million, and 10 million in North America. Global plasma sales by 2007 will reach 6 million.

"If they want to really attract consumers ... they have to lower the prices," said iSuppli analyst Riddhi Patel. "If the (component makers) don't reduce the panel pricing, then the TV makers will have to give up some of their margins."

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ski

We'll see another newcomer in the next 2 years... flexible material that works like an LCD (I wish I had the company name so you can check the stock). Just roll it up, it's easy to move Costs an arm and a leg? I was told it wouldn't cost any more than current LCD/plasma displays, but this will be in the near future.

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djradam

what's this high profit margin?

a $2000 tv costs 500-700 to make?

attgig

well they're talking about high profit margins for gateway and dell...

compared to their profit margins on PC's i'd expect that even 100 bucks per set would be high for them

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LegendKiller

The total manufacturing cost of ONE unit may be $500-700. However, when you consider the # of units that will be defective at manufacturing due to dead pixels, that cost needs to be rolled into the cost of the TV's, yielding an average cost that is higher.

Then, consider over the life that a few more dead pixels appear requiring warranty replacement, which again, jacks up the price.

Finally, after including the previous two examples, I would figure that the average cost of life for an LCD TV would be about 1200. Considering that the company needs their profit margin, BB needs theirs and including S&M expenses, I think that the TV's are fairly priced, if you want to spend that much.

The biggest benefit of supply and age of process is that the product is having fewer defects + more output = lower cost of defects distributed accross the product, which plays out over the whole life of the product (again, figured into initial price).

However, the erroneous conclusion of this article is that you should wait for a big price reduction. This is like waiting for the next processor to go down in price, you will always be waiting for the next price dip on the next new thing within the next time period. At some point in time you will need to spend your money.

For people who cannot afford a 2k TV, then waiting is the ONLY option. For people who CAN afford that much (and likely can afford it in 2 more years), then getting this type of TV now is reasonable.


LK

Showtime

I'd love a wide screen or a 20"+ lcd monitor for christmas but if i can get cheaper after new years.......

-jel

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bachviet

I'm still waiting for the price to drop. I don't mind owning a 20" widescreen LCD if the price is right...

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