LG Suffers Stalled Growth in Flat TV Market
By Kim Yoo-chul
Staff Reporter
It is crucial that LG Electronics immediately implement more decisive measures to stem its falling flat-screen TV market share in the company’s key North American market, industry watchers say.
The Korean company saw its share in the North American flat-screen TV market, including liquid crystal display (LCD) TV's and plasma TV’s, reach 8.2 percent in April-June, losing its share by 0.3 percentage points from the first quarter, research firm DisplaySearch said.
Further, the company's share in the latest quarter was down to 7.8 percent from 8.1 percent in the first quarter in the LCD TV segment, while its share in the plasma TV market slid to 10.7 percent from 13.6 percent between January-March.
"Based on the second quarter result, LG Electronics slightly fell, the victim of its archival Samsung Electronics and Japan's Sony," an LG official said, Monday.
Analysts say Samsung Electronics and Sony have struck back with their own cuts and new low-costs sets, pushing them to better compete with followers with competitive pricing.
"The competitive battle and price cutting among Samsung and Sony has made it a struggle for other competitors such as LG Electronics and even some Japanese TV manufacturers to keep pace," an analyst of television systems for iSuppli said.
In North America, the world’s biggest electronics market, Christmas-like sales campaigns have already begun, sources say. Best Buy and Wal-Mart Stores have started offering Sony's latest 32-inch LCD TVs for less than $700, while new products from Samsung Electronics are selling at beaten-down prices. Funai Electric also rolled out 32-inch TVs for only $499 in early July.
DisplaySearch said the price competition is expected to intensify and it forecast sales of flat-panel TVs of 40 inches or larger are weakening after a strong run.
"Samsung and Sony won’t drop their current strategies ― competitive pricing ― over the next few years as the flat-screen TV market in North America will see a rather positive growth as the faster policy shift to the U.S.' digital TVs to spur idle demand for flat-screens," an LG source said.
"The interesting fact is that the market share of LG and Japan's Sharp in the LCD TV segment was the same with 7.8 percent, meaning we could drop to the No. 4 position in the third quarter without more measures," said another LG official.
Conservative or Aggressive?
Chief of LG's investor relations team Brian Sohn told a conference call about its second quarter earnings that his company will not play that much with the pricing as the market may fall in North America as LG doesn't have that much brand power.
According to internal analysis by LG officials, LG's high-end Scarlett LCD TV sets penetrated some 7 percent of the company’s total LCD TV shipments and LG forecast that is going to be close to 10 percent at the end of the year.
But some analysts say LG needs to implement "flexibility" about its TV strategies in the world’s biggest consumer electronics market as the company grabbed the chance to overtake Vizio to become the No. 3 flat-panel TV producer.
DisplaySearch data shows LG narrowed the market gap with Vizio in terms of TV unit share to 1.3 percentage points during the April-June period from 4.2 percentage points in the first quarter.
"Expanding outsourcing channels is one possible option for LG because it’s number of distribution channels in the North American market is still small compared to those of Samsung and Sony," said an Samsung Electronics official.
Japanese electronics majors Sony and Toshiba have recently decided to farm out more of their LCD TV production to cut costs.
Firms such as Vizio have been expanding their shares in North America, backed by the growing popularity of their low-cost LCD televisions made by electronics-manufacturing services (EMS) providers in Taiwan.
"The trend well reflects the industry reality that almost any EMS firm could produce TV sets of satisfactory quality to general consumers," according to officials, adding that others are thus leaning more and more toward a strategy of minimizing deployment of business resources in the LCD TV business.
"We have acknowledged the advantages of the EMS way, but relying on outside suppliers is a kind of a`double-edged' sword by allowing rivals sticking to in-house production to make technologically-advanced products," a LG spokesperson said.
Outlook Dims in North America
Industry experts say top TV brands will seek to win consumers in North America in the third quarter at a time when they are clutching their purse strings.
Due to continued macro-economic woes, the pace of flat-screen TV sales growth in North America is starting to slow.
For example, LCD TV unit shipments there are expected to rise by only some 27 percent in 2008, reaching 27.4 million units, compared with the 88.8 percent rise in 2007 and the 92.6 percent increase in 2006, according to iSuppli.
"After years of explosive growth, the North American LCD TV market is undergoing a deceleration due to deteriorating economic conditions," the market research firm said.
"Price declines for some key TV sizes, such as the popular 32-inch, have stabilized, negatively impacting consumer demand growth."
With 2008 being a presidential election year in the United States, the government will do everything to minimize the impact of the recession. However, this will not come quickly enough to restore strong growth to the North American flat-screen market in 2008.
By catching such moves, electronics firms offering inexpensive products with Funai recently offering 32-inch LCD TVs for just $500, there, from July.
"Personally, LG will join the price cut rally to keep its TV momentum in North America. Sticking to a premium strategy is good, however, what's important for now is to appeal more to customers," said a local analyst.