By Kim Yoo-chul
Samsung Electronics and LG Electronics, the world’s top two TV manufacturers, are implementing contingency plans to protect their businesses from new threats.
The TV makers are experiencing a difficult period due to the ongoing transition toward portable devices such as tablets and products with bigger screens, the lack of customized content for high-end televisions and the stagnant demand for digital TVs.
“There is no way out. Even in Korea, LG Electronics is fighting for survival because people aren’t buying TVs. The situation is not much different in Japan and developed markets including the United States,” said an LG executive in a brief interview with The Korea Times.
The executive said the company’s management worries about lower profits.
However, he stressed that stable demand in emerging markets compared to developed economies will counter the falling revenue in key markets.
LG is mulling over restructuring its TV businesses in China and Japan to cut costs and address the declining demand. In developed markets, the company is launching aggressive promotional campaigns.
Officials at Samsung and LG also cited the newly released Google Chromecast as another threat to their businesses.
Google’s latest TV product is a small fob that plugs into an HDMI input on HDTVs. It wirelessly streams video and audio from mobile devices such as smartphones and tablets to the TVs. Chromecast costs only $35.
“Honestly, that product is bad for TV manufacturers because consumers will have no reason to pay more for Web-based TVs by Samsung and LG. Users can access all Google services from their TV screens just by plugging in the $35 stick into their TVs,” said an official who is very famiiar with Samsung-related issues.
The official said the world’s top TV manufacturer will try hard to meet this year’s sales target of 55 million by continuing its aggressive pricing strategy and shifting its focus to emerging markets.
As TV makers defend their business plans, fund managers and analysts say it will take some time for the industry to find new growth momentum.
Manufacturers are shifting toward new hardware technologies such as organic light-emitting diode (OLED) and ultra high-definition (UHD) to achieve a first-mover advantage in the new business areas.
“But the problem is that general consumers are not very interested in purchasing those sets. They doubt that they’ll gain creative value by purchasing premium TV. That isn't essential anymore in households,” said Kim Min-kyung, a salesclerk at a HiMart outlet in Seoul. HiMart is a chain of consumer electronics stores, much like Best Buy in the United States.
“The demand for flat-screen TVs has stalled in Europe but is growing in North America and emerging markets. Samsung will release TVs with different screen sizes of over 50 inches,” said Sung Il-kyung, vice president at Samsung’s visual strategy marketing division, in a conference call to investors and analysts about the company’s second quarter earnings.
However, OLED TVs by Samsung and LG are being sold in the United States at over $10,000 apiece, which is steep for many customers.
“Customers can’t afford those sets,” said another official at Samsung, requesting anonymity.
The difficult situations of TV manufacturers also affect panel makers because of possible oversupply.
LG Display, the world’s biggest display supplier, plans to cut its investment in its LCD-manufacturing project in the southern Chinese city of Guangzhou in order to prevent an oversupply.
Samsung Display, LG Display’s crosstown rival, is also mulling over scaling back its planned $2.4 billion investment in its first Chinese LCD factory in Suzhou amid the bleak TV market outlook.