LCD Panel Shortage Slowing TV Price Promotion
If you are having a hard time finding a price that motivates you to buy that new 4K Ultra HDTV you’ve had your eye on, it might be related to an industry wide shortage of LCD panels, exacerbated by a negotiating ploy taking place between a panel supplier and various TV makers.
If the trend continues, some industry experts predict prices for some 2017 4K Ultra HD and Full HDTV models could come into the market at higher than customary markups following year-to-year model line transitions. They also could stay that way longer into the year.
Nevertheless, some market experts say that prices are relatively reasonable right now overall on 2016 models and this might be the best time to buy all year.
For TV bargain hunters, a series of unfortunate events in the LCD panel world began last summer when Samsung decided to shut down a Gen 7 LCD plant, putting a bind on 40-inch screen-sizes through the holidays, according to Paul Gagnon, director of television market research for IHS.
Compounding the matter, a Tawain-based company known as Foxconn, which is owned by Terry Gou’s Hon Hai Corp., recently decided it would stop selling LCD panels, for different reasons, to a few TV makers including Samsung and Hisense. Those companies have been forced to seek alternative supply sources, setting off a chain-reaction of shortages in panel supplies available to other TV brands.
Considering the highly competitive nature of the global television set industry, it’s very rare, and unlikely, that an LCD panel shortage would force increased prices in finished television sets already in the market, but it has been slowing the rate of price declines, the volume of price promotions and specials available to savvy shoppers, according to industry observers.
Retailers and manufacturers continue to offer a few television deals for this popular pre-game TV-buying time, but whether or not such deals will be available in the months ahead is anyone’s guess.
Read more on the LCD TV panel shortage after the jump:
IHS’s Gagnon said: “As far as pricing is concerned, LCD panel prices increased from July 2016 through the end of the year. This has already had an impact on reduced promotions towards the end of the holiday shopping season.”
This is because margins on television sets are already very thin for most TV screen sizes, and manufacturers have fewer options available to help move inventory, he continued.
Gagnon said he expects the impacted TV brands to take a couple of actions.
“First, funds for promotional support are likely to become more restricted, and second, there may be a higher reset with pricing from closeout 2016 models to new 2017 models in the spring than we have seen in a few years,” said Gagnon. “Prices always fall through the year, but if you can start from a higher point on the hill, you might end up protecting profits better on the way down if product costs are increased.”
Although it seems unlikely that these higher costs will result in a price increase on televisions in the market, consumers could see a slower pace of price declines on LCD television sets until the panel shortage is addressed.
Following Samsung’s Gen. 7 LCD panel plant closure, the global panel supply shortage accelerated after LCD panel maker Foxconn began a hardball negotiating tactic with China-based TV maker Hisense.
In 2015, Foxconn increased its position in the global panel supply market by acquiring controlling interest in Japan’s Sharp Corp., including its substantial LCD panel production plants in Asia. Shortly thereafter, Foxconn declared its intention to execute a global relaunch of the Sharp brand for televisons and electronics.
“Foxconn’s goal is to position the Sharp TV brand for growth in 2017 by securing supply internally from Foxconn controlled LCD fabs, but also to restrict supply to possible competitors,” Gagnon said.
The only problem is that prior to the Foxconn acquisition, severely cash-strapped Sharp had licensed the rights to the Sharp and Aquos brands for five years and sold a television assembly plant in Mexico to China’s Hisense for $23.5 million in 2015. Hisense executives have flatly refused to renegotiate the buy-back of the Sharp and Aquos licensing rights by the Foxconn-controlled Sharp.
Hisense made large strides in 2016 expanding its presence outside of its domestic China market, particularly in the United States. In the U.S., the company executed a dual-brand strategy using the Sharp and Aquos trademarks to get a better foothold for products carrying its own Hisense name in retail accounts with assisted selling floors.
Meanwhile, after being rebuffed by Hisense leaders in its attempt to reacquire the North American rights to the Sharp and Aquos TV brands, Foxconn/Sharp announced it will stop supplying Hisense with LCD panels. Top Hisense executives responded that they use many LCD panel supply sources. Therefore, the supplies formerly acquired from Sharp only represented a small portion of its need and can be replaced.
Similarly, Sakai Display Products, an LCD panel production company formed between Foxconn and Sharp, took a tough negotiating style with Samsung Electronics, which is one of its largest customers, over panel pricing and announced it would cut off supply of LCD panels to the South Korean TV manufacturing giant beginning this year.
The Foxconn-sourced panels helped Samsung cover panel supplies in certain sizes it couldn’t readily produce in its LCD panel facilities.
Bloomberg reported Monday that the shortfall created by Sakai Display’s decision, has forced Samsung to go to LG Display, its biggest rival, to acquire some of the LCD panels needed to cover the shortfall, but this could potentially take panel supplies away from other customers. The result is a potential chain-reaction of shortages across the industry. If Samsung increases procurement from its affiliate, Samsung Display, that could decrease supply of LCD TV panels available for Sony and other LG Display customers.
Some believe Foxconn’s actions are a way for it to increase supply of its own Sharp-branded TVs outside of the United States, others think the company is playing a game of chicken. However, Foxconn’s own declining revenue situation at the end of 2016 appeared likely to become a big influence on getting a compromise worked out between Samsung and Foxconn before long.
In the meantime, retailers, including Walmart, are announcing a number of Super Bowl TV deals today.
While supplies last, Walmart is offering a number of Sharp, RCA, and Hisense Full HDTV and 4K Ultra HD models including:
A Sharp 60-inch LED Smart HDTV $499 (was $699) (Walmart.com only).
An RCA 60-inch LED Smart HDTV: $429.99 (Walmart.com only)
A Hisense 50-inch 50H4C LED Smart Full HD TV with Roku: $329.99 (was $399.99) (Walmart.com only)
An RCA 50-inch RLED6090 Full HDTV: $299 (Walmart.com only)
A TCL 55-inch Roku Smart LED 4K Ultra HDTV 55US57: $428 (Sold at Walmart stores; also available on Walmart.com for same-day pickup in store)
A Philips 50-inch 4K Smart LED HDTV: $398 (Sold at Walmart stores; also available on Walmart.com for same-day pickup in store).
A Vizio 70-inch 4K Ultra HD Display E70-E3: $998
A Vizio 65-inch 4K Ultra HD Display E65-E1: $778
A Vizio 60-inch 4K Ultra HD Display E60-E3: $678
A Vizio 55-inch 4K Ultra HD Display E55-E1: $528
A Vizio 50-inch 4K Ultra HD Display E50x-E1: $398
By Greg Tarr
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