Flat panel price cuts: the first battle in a long war

Tags: HDTV, Plasma, LCD

Reuters today has an article about the upcoming war between the LCD and plasma makers for high definition flat panels. Manufacturers are rapidly ramping up investments in LCD technology, which is used extensively in everything from cell phones to computer displays. Meanwhile, Plasma has the bulk of the HDTV market today. But everyone is placing big bets on production facilities for the next battle in this war:

LG Electronics, Samsung SDI, Panasonic products maker Matsushita Electric Industrial and Pioneer Corp. are betting on plasma technology.

"We expect production costs to drop by some 20 percent with the introduction of a new technology called 'single scanning' that halves the number of driver chips required to display images on the screen," said G.W. Kim, a spokesman at LG Electronics.

Pioneer said it would raise efficiency by consolidating different panel sizes into three from six.

Asian LCD makers plan to invest more than $51 billion in production over the next decade, which could lower costs dramatically.

"Nearly all of Taiwan's major display makers focus on LCDs as they think the future mainstream TV products will be below 40 inch," said Ben Lee, head of Nomura International's equity research in Taiwan.

LG.Philips LCD, the world's No.2 LCD maker, unveiled a $5.3 billion plan in November to build an advanced factory line for mass production in the first half of 2006.

Bigger rival Samsung Electronics just started volume production of high-end panels at its joint venture with Sony, while Sharp Corp. plans to invest 160 billion yen to open a new plant in 2006.

Our take? Plasma is still winning now when the top resolution of most programs is 720p. But we are already seeing much higher definition 1080p demonstrations, and at this resolution, LCD technology seems to have the edge. So while plasma TVs will be the hot product for a year or two more, expect LCD technology to start eroding plasma's edge and to become the preferred technology. Why? Because LCDs aren't just produced for TVs -- they also are being bought for the 200 million PCs produced each year as well. As a result, LCDs will have a volume edge over plasma, and that should drive prices down faster.