LCD winning in TVs, plasma to fight back

SEOUL Thu May 17, 2007 12:55pm EDT

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SEOUL (Reuters) - As happy consumers hail tumbling TV prices and dream of the biggest flat-screen size their living rooms can accommodate, Sony Corp. (6758.T) and other LCD makers are emerging as the winners of a long, pricey TV war.

But their battle with rival plasma screens isn't over yet and makers of plasma display panels (PDPs) such as Matsushita Electric Industrial Co. Ltd. (6752.T) and Samsung SDI Co. (006400.KS) are likely to strike back as the industry standard moves to bigger TVs.

Plasma screens, which once dominated the 40-inch-and-larger TV market with cheaper price tags and a more natural picture quality, have lost ground as liquid crystal display (LCD) makers have been able to roll out bigger screens at cheaper prices by introducing larger production lines that cut down on costs.

Plasma makers have also until recently failed to offer full high-definition screens in the sub 50-inch market, as it costs more to make the upgrade for plasmas than for LCDs.

As plasma's popularity dwindles, some analysts fear plasma makers are at the risk of becoming a niche market player.

"The 50-inch-and-up market is the only segment plasma has an advantage for now," Hyundai Securities analyst Jeff Kim said. "LCD has won the battle with better picture quality as consumers went for TVs better suited for digital broadcasting."

Japan's Sharp Corp. (6753.T), the world's third-largest LCD TV maker, last month posted a record annual profit for the fourth straight year, while Pioneer Corp. (6773.T) and Hitachi Ltd. (6501.T) have been losing money on their plasma TV business.

South Korean plasma panel maker LG Electronics Inc. (066570.KS) and Samsung SDI also posted quarterly losses hit by sliding prices. LG's chief executive last month denied a market talk that the company would sell its plasma business after its poor performance spurred such speculations.

Confirming the grim picture, plasma panel shipments fell for the first time from a year ago in January-March, down 1 percent to 2.3 million panels, according to research firm DisplaySearch.

But it's not all doom and gloom for plasma TVs.

Leading player Matsushita, which controls one-third of the global plasma TV market, has been able to weather the industry's sharp price falls thanks to its brand name, cost cuts and economies of scale.

The Panasonic maker and maybe a few others can maintain an edge in the upcoming battle with LCD TVs, analysts say.

SECOND ROUND IN BIGGER TVS

Plasma TV sets use tiny pockets of gases to display images and displays more natural color. LCDs use crystals sandwiched between glasses and a backlight unit, boasting of brighter, high-resolution images.

As falling prices encourage consumers to look for bigger TVs, the two technologies are set to fight fiercely again in a new market: TVs larger than 40s-inch.

"The 50-inch-and-up segment will become a battlefield soon -- as early as the second half," said Park Hyun, an analyst at Prudential Securities. "A full-fledged showdown will come next year as LCD has further room for cost cuts."

Sharp and Samsung Electronics built new, larger production lines to tackle the 50-inch grade market where PDPs still enjoy a price advantage.

However, unlike the time LCD overtook plasma in smaller segments, the LCD camp's capacity to make 50-inch and larger panels is not yet large enough to be an immediate threat to plasma makers, Champ Shin, vice president in charge of TV panel sales at LG.Philips LCD Co. Ltd. (034220.KS) said.

"It may take a little longer than the past." Shin said at the Reuters Technology, Media and Telecoms Summit in Seoul. "Above 50 inches, LCD does not have enough capacity to compete."

Plasma makers have no intention of losing this market to LCD.

"PDP has a set of strengths in 50-inch-and-bigger screens in terms of cost and picture quality. We won't let (LCD) take over that easily," said Sky Park, Samsung SDI's vice president in charge of PDP marketing said.

Once the price difference disappears, however, it would deal a serious blow for underperforming plasma makers as the size of ultra-big TV market is limited, especially in Europe and Asia where an average house is much smaller than in the United States.

The market for 40-inch-grade TV to grow to 47 million units in 2010 from 13.5 million last year. In the same period, sales of 50-inch-and-larger TV sets is expected to increase to just 15 million from about 5 million, according to DisplaySearch.

Many LCD makers have also seen losses due to falling panel prices, but their outlook is set to brighten later this year. LG.Philips LCD expects to turn profitable as early as during the second quarter after four consecutive quarters' losses.

"LCD has an edge, but I don't think PDP will disappear. It has its own strength in the larger TV segment," said S.I. Lee, senior vice president of Samsung Electronics, which makes both LCD and plasma TVs.

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