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Flat-panel prices plummet — profits follow

Bob Moon Jan 16, 2007

TEXT OF INTERVIEW

BOB MOON: Maybe you wondered over the holidays: How in the world can they sell those flat-screen TVs so low when they were so darn expensive not so long ago. Well, today, the world’s No. 2 maker of large liquid crystal displays, or LCD panels, LG.Philips LCD reported a huge quarterly loss. The big reason: Tiny returns on those big-screen TVs.

Just last week, I spoke to LG vice president John Taylor at the Consumer Electronics Show, and it’s not just LCD screens that have plunged from the highest of heights.

JOHN TAYLOR: They were in the stratosphere. When LG first showed a 71-inch plasma a year ago, it was $70,000. Today a 71-inch plasma with better features, better performance is $15,000.

MOON: Is that just a function of competition? What’s bringing the price down?

TAYLOR: There’s really two things that are happing in the marketplace. There’s the marketplace realities of more affordable products as volume ramps up in the industry, as flat-screens become more mainstream across the board, that volume continues to push the prices down. And our economies of scale and our manufacturing efficiencies have allowed us to get this to a very affordable price now.

MOON: I’ll take one.

TAYLOR: Take two. They’re large but they’ll fit in a lot of different rooms.

MOON: What he didn’t mention is cutthroat competition. But that’s exactly what the LG-Philips LCD division reported today: a $186 million loss in the final quarter of 2006. And it’s forecasting big-screen flat-panel prices will fall sharply again this year.

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