- The Washington Times - Monday, August 15, 2005

SAN FRANCISCO

Bud Werner and his wife are longtime movie buffs. For more than a year, he pined for a flat-panel television, thrilled by 60-inch screens thin enough to hang on a wall and turn his living room into a minimovie theater.

But he couldn’t overcome sticker shock — some flat panels were selling for as much as $20,000 at first, as much as a new car. Like a lot of fans of flat-panel TVs, Mr. Werner, who owns a sign-making business, held off buying.

Until now, that is.

Prices for flat panels have finally begun to tumble — by as much as 35 percent in the past year — as soaring demand for the two leading flat-panel technologies — plasma and liquid crystal display, or LCD — attracts a host of new competitors.

“I’m excited,” said Mr. Werner, 54, whose patience was rewarded this month when he bought a 50-inch plasma television at Best Buy for $3,800. “We already have the wall picked out where it’s going to hang.”

Lesser-known brands — such as Westinghouse Electric Co., Regent USA’s Maxent, Syntax Corp.’s Olevia and Norcent Micro Inc. — are slashing prices to compete against more-established names such as Sharp Corp. and Sony Corp., forcing them, in turn, to charge less.

Semiconductors and other TV components also are getting cheaper, and the industry continues to find ways to trim production costs.

Now, a 42-inch liquid crystal model retails for about $4,200 on average, and the same-sized high-definition plasma sells for about $2,900, said Riddhi Patel, senior analyst for ISuppli, a market research firm in El Segundo, Calif.

Still too expensive? Price-conscious consumers shouldn’t worry, analysts say, because flat-panel prices have not bottomed out.

Some major retail chains continue to charge a premium for plasma and liquid crystal sets, pocketing 25 percent profits on larger models, Miss Patel said.

“There is plenty of room for retailers to squeeze more out of their profit margins and attract customers,” she said.

Proof that flat-panel TVs are a boon to retailers can be found in their earnings statements. Best Buy Co. saw an 85 percent jump in first-quarter profits, due, in part, to skyrocketing sales of flat-panel televisions, and struggling electronics retailer Circuit City Stores Inc. saw triple-digit increases.

Representatives for Best Buy, Wal-Mart Stores Inc. and Costco Wholesale Corp., did not respond to requests for comment, and Bill Cimino of Circuit City refused to discuss profit margins, although he did say more price reductions are expected.

The price war, meanwhile, is taking a toll on flat-panel manufacturers. Sony blamed increased competition from Asian manufacturers who produce cheaper goods, including flat-panel TVs, when it reduced its full-year forecast by 90 percent. Last month, Sony, Toshiba Corp., and Hitachi Ltd. reported quarterly losses.

Some manufacturers have agreed to share risk and expense. Hitachi and Matsushita Electric Industrial Co., the maker of Panasonic televisions, began jointly making LCD televisions in February, as did Sharp and Fujitsu Ltd.

Despite the competion, the companies continue to invest heavily in flat panels knowing that once the market matures, they stand to cash in.

About 20.8 million flat-panel TVs will be sold this year worldwide, almost double the 10.9 million units sold in 2004. Sales next year should rise 47 percent, iSuppli said.

Thoughtraditional televisions have served consumers well for a half-century, flat panels are appealing because they take less space and can be hung on walls.

Misperception also might play a role.

When it comes to picture, most analysts say CRTs are just as good as flat panels, yet many consumers are under the assumption that flat panels are all high definition and thus offer better picture quality. In retail showrooms, flat panels typically display high-definition digital content, so they look superior to traditional sets.

Consumers don’t always know that some flat panels can’t receive high definition, or that traditional televisions can get such programming.

When it comes to performance among flat-panel makers, paying more doesn’t necessarily mean a better picture, said Eric Haruki, an analyst for research firm IDC.

More than 90 percent of the world’s LCD panels are supplied by five companies, so top-tier brands and generics often share the same components, Mr. Haruki said.

Greg Gudorf, Sony’s vice president of television marketing, insists that top-tier manufacturers have an expertise that lesser-known brands can’t match.

“What is their manufacturing expertise in processing video signals?” Mr. Gudorf asked. “That’s where Sony’s heritage comes in. We know how to make a picture look good.”

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