January 10, 2008 / 1:29 AM / 12 years ago

Plasma TV makes comeback

LAS VEGAS (Reuters) - Given up for dead less than a year ago, plasma TVs are making a comeback, with manufacturers boosting sales forecasts amid a continued shortage of LCD TVs and surging demand in developing countries.

A Panasonic flat panel 150-inch High Definition plasma television, what the company calls the world's largest, is displayed during the Consumer Electronics Show in Las Vegas, Nevada January 7, 2008. Given up for dead less than a year ago, plasma TVs are making a comeback, with manufacturers boosting sales forecasts amid a continued shortage of LCD TVs and surging demand in developing countries. REUTERS/Steve Marcus

“Plasma isn’t going to disappear,” said Jeff Kim, an analyst at Seoul’s Hyundai Securities. “It is still competitive in large formats, and will compete until 2010.”

In less than two years, plasma-display technology has gone from dominant format to afterthought, then back to a viable option. In early 2006, plasma was the cheapest and most available choice in the 40-inch flat-panel TV market due to lower production costs and an ability to make larger panels.

But only months later, LCD makers ramped up large-size production and quickly overran the market with LCD screens. Plasma makers then saw prices plummet and profits vanish.

South Korea’s Samsung SDI and LG Electronics, the world’s second- and third-ranked plasma panel makers, were particularly hard hit in 2007 due to price falls.

Plasma screens use tiny charged gas bubbles to display images and more natural color, while liquid crystal displays (LCDs) use crystals sandwiched between glass and a back-lit unit. Plasmas offer crisper picture quality but use more power and are heavier; LCDs offer brighter images but can be blurry.

Now, plasmas are on an upswing again, as flat screen TVs are snapped up in wealthy and developing countries alike.

LG said this week it intended to make 6.5 million plasma panels in 2008, up from 3.5 million in 2007, on rising demand.

The company, which posted a 24 percent operating loss margin in its display division in the second quarter of 2007, also said it may post single-digit operating profit growth by the end of the year.

Panasonic brand maker Matsushita Electric Industrial Co also expects strong sales momentum in the United States in 2008, following sluggish sales through the summer, on demand for high-definition TVs, its regional head said.

“Someone asked me, ‘What’s going on? Why all these new displays? I thought plasma was dead!’” said Yoshi Yamada, chief executive of Matsushita’s North American unit, referring to crisper images and low-energy consumption screens on display at the Consumer Electronics Show in Las Vegas.

“Don’t underestimate plasma technology,” he said.

LCD SHORTAGE, CHINA DEMAND

“Plasma’s success is essentially due to lack of supply in LCD,” Hyundai’s Kim said, referring to tightness in LCD screen supply due to LCD makers’ decision to cut back investment after the industry suffered severe losses due to oversupply in 2006.

With demand skyrocketing for flat screens of all sizes, plasma has found a lucrative niche supplying developing countries with relatively small TVs at competitive prices.

LG launched a 32-inch plasma TV last year that sold well, particularly among Chinese eager to buy flat panel TVs ahead of the August Beijing Olympic Games but unwilling to pay for LCD.

“We estimate that 80 to 90 percent of worldwide demand for our 32-inch models came from China,” Simon Kang, head of LG’s display division, told Reuters.

And the outlook is good elsewhere. “We see a lot of potential in markets such as Latin America and Southeast Asia, where consumers will eventually replace their CRT (cathode ray tube) models,” Kang added.

NICHE MARKET

Still, manufacturers won’t stick with plasma unless they earn significant profits. The plasma market could face another slump in 2009, when big LCD makers’ latest production lines start mass-producing 50-inch panels, further eroding prices.

“The best option for plasma makers is to look for premium products with Full-HD features,” said Jae H. Lee, an analyst with Daiwa Securities.

Samsung, the top flat-panel TV maker, echoed that view.

“Plasma has to find an appropriate fit in the marketplace,” Timothy Baxter, executive vice president of consumer electronics at its North American operations, told Reuters.

He said plasma, which had until now been marketed as a cheaper alternative to LCD, is repositioning itself with the addition of high-definition features.

“Plasma is certainly well on its way to becoming a very niche high-end product,” said Paul O’Donovan, an analyst at Gartner. “It won’t disappear, but it will move into the very high end of the market”

In a market where bigger screens have higher price tags, O’Donovan said Matsushita’s 150-inch plasma display, unveiled at CES, exemplified that drive to the very high-end.

But Matsushita may not be as concerned about the difference between plasma and LCD — mostly because a vast majority of buyers don’t really care about the underlying technology — and is preparing to expand its lineup to include 40-inch LCD TVs.

“Plasma and LCD technologies have grown closer together as engineers work to overcome the disadvantages of each. It has become more difficult for consumers to tell them apart,” said Matsushita executive Toshihiro Sakamoto. “What will count next is design and how easily consumers can use TVs to link to applications.”

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