Replacement market to drive LCD TV sales

TV manufacturers are banking on the replacement market to push up demand for LCD sets in the Middle East by 80 per cent even though global growth rates have fallen to between 10 and 25 per cent.

"Globally growth rates for LCD TVs have fallen while the Middle East has done better," said Brian Liu, Sales Vice-President for the MEA region at TV manufacturer AOC. "According to our projections, growth rates will be high at up to 80 per cent in the region compared to between 10 and 25 per cent in other parts of the world."

AOC, primarily a manufacturer of major electronics brands, announced its Middle East plans last week, revealing that it intends to set up a complete knock down (CKD) unit in the region.

CKD provides a complete kit to assemble a product and the system is used to avoid high taxes. Saudi Arabia or Egypt are potential destinations for AOC.

In the Middle East, growth and sales will eventually switch from CRT monitors to LCD because of the huge replacement market.

Abby Thomas, Senior Manager, Marketing, the Middle East, Panasonic Televisions, said: "The replacement market will take another two years to develop in the region. As prices fall consumers will realise it makes sense to purchase an LCD model.

"At the end of 2008 there was a drop in CRT sales but the proportion lost shifted to LCD. In the emerging market, consumers will purchase a flat TV and then move on to bigger sizes."

Most major manufacturers hope to reap in profits from the region's replacement market.

Sharath Kumar, LG's Sales Manager for TV Products, said: "A decrease in demand compared to last year is expected in developed markets due to the global recession, while emerging markets are expected to keep growing due to the replacement of CRTs with flat panels. Despite the global recession, LG will maximise sales by exact demand forecasting and a competitive pricing policy."

Ashley John, Senior Manager, Sales and Marketing, Sony Gulf's TV group, agreed. "The severe price erosion over the past five years has encouraged consumers to move from CRT to LCD. It is now affordable and consumers are opting for bigger sizes."

LCD manufacturers are introducing higher frame rates to boost performance and profitability, according to Hisakazu Torii, Vice-President of TV Market Research at DisplaySearch. "This is mainly because of the rapid pace of commoditisation in the category. This year 120 Hz frame rate models will account for 29 per cent of LCD TV revenues worldwide, while 240 Hz will grab about five per cent of revenues. By 2013, 120 Hz will account for 31 per cent of LCD TV revenues, while 240 Hz will account for more than 20 per cent."

DisplaySearch, a research company, says the first quarter of 2009 saw better than expected results for the LCD TV segment. This was mainly because increased stimulus spending by governments, particularly in China, and improved the outlook for TV demand. Although total TV imports are projected to decline slightly to about 200 million units worldwide, the LCD segment is poised for growth.

TV manufacturers in the Middle East have seen imports grow compared to last year, said John.

"The growth rate for Sony has been at 20 to 25 per cent in terms of units, and market share in the MEA region is at 26 to 27 per cent. We don't compete in the CRT or plasma segments so this is only the LCD segment."

Panasonic, which makes LCD and plasma sets, has witnessed a first-half growth rate of 150 to 200 per cent compared to the same period in 2008.

Thomas said: "In the Middle East there has been no decline in imports and in fact according to our projections for the next three months there will be growth. Globally markets such as Europe and the US are affected and this is impacting imports.

"LCD had a growth of 400 per cent compared to 2008 while plasma achieved 200 per cent. We have also observed that the bigger the size of the TV the higher the growth rate in the region."

Despite uncertain economic conditions, close competitor LG saw growth and is hoping to achieve a larger market share.

Kumar said: "Globally LG is aiming for a 16 per cent market share in flat panel TVs and sales of more than 21 million units in 2009. By category we plan to sell 18 million LCD TVs, giving us 15 per cent market share, and three million plasma TVs, or 19 per cent market share.

"The economic situation will certainly have an effect on all manufacturers as consumers spend less but we are investing heavily in research and development. Rather than resisting the changes in the marketplace we are embracing them."

Display Search has raised its forecast for 2009 worldwide LCD TV sales from 120 million to 127 million units as LCD takes share from CRT at a faster pace and the transition to flat panel technologies speeds up in the global TV market.

Despite this, LCD TV revenues are still projected to decline by about six per cent in 2009 due to price erosion and the strong shift in volume to discount retail channels, such as Walmart in the US. This is a much shallower decline than previously forecast due to faster growth of advanced technologies like 120/240 Hz and LED backlight models.

Developed markets started 2009 with strong growth and emerging markets are moving from CRT to LCD faster than expected.

DisplaySearch's 2009 revenue forecast for LCD TVs has been increased from $66 billion (Dh242bn) to $76bn, primarily based on rising LCD panel costs since April.

Paul Gagnon, Director of North America TV Research, said: "This is good news for global LCD TV revenues overall, but could have a negative impact on demand in developed markets such as North America where consumers are more sensitive to sale promotions and prices. Emerging markets offer tremendous growth opportunities even at current price levels."

The plasma TV segment is expected to fall by about two per cent year-on-year to 14.1 million units in 2009 after 28 per cent growth in 2008. This outlook is down slightly from DisplaySearch's previous forecast as a result of increased consumer preference for sub-40-inch screen sizes amid heightened price sensitivity during the recession.

Penetration by 1080p, the shorthand name for a category of HDTV, continues to rise. It is expected to account for 32 per cent of plasma TV imports in 2009 but will quickly accelerate to more than 50 per cent in 2010 and 80 per cent by 2013.

DisplaySearch's total global TV forecast is 200.4 million units in 2009, down three per cent year-on-year, the first decline in total imports in recent memory as the global recession and rising unemployment continue to take a toll on demand.

But the slowdown will be temporary as world economy emerges from recession and new markets enter the initial stages of the flat panel and digital TV transition.

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