Consumers probably hoped that the annual 30+% drops in retail prices for flat-panel TV sets seen over the last three years would go on forever. They couldn’t, of course, and our friends at Displaybank reported this week that in Q4′07 the quarter-to-quarter drop in average selling price (ASP) for 42-inch LCD-TVs was 3.7% (to $1,413) and 2% for 42-inch PDP-TVs (to $1,253). For 50-inch PDP-TVs, the drop was only 0.4% (to $1,896).

Ken Werner
Senior Analyst and Editor

The ASP for 32-inch LCD-TVs was down 2.4% quarter-to-quarter to $828, and for 40-inch LCD-TVs the ASP was $1,412.

Wait a minute! Let me check that first paragraph. Yup, that’s right. The market is valuing the extra 2 diagonal inches of a 42-inch LCD-TV - that’s an extra 10.25% in area, at only $1 more than a 40-inch LCD-TV. A year ago, that difference was a couple of hundred dollars, and it’s been declining steadily each quarter.

Far less surprising is that 42-inch PDPs are maintaining a 13% price advantage over 40/42-inch LCD-TVs - about $160 dollars. That’s in line with what Ken Lowe, Vizio’s VP of Product Development, told me a year ago. Vizio makes both LCD- and PDP-based TVs, and Ken said they had found they needed to price the 42-inch PDP product at about $200 less than an equivalent LCD at the time.

Projecting from the quarterly numbers, and without doing any fancy analysis, it looks like the overall price drop this year could be in the range of a very rational 10%. But Witsview’s bi-weekly price analysis shows the new year starting off with more volatility than you’d expect from the Displaybank numbers. In the second half of January, street prices for LCD-TVs from 32 to 42 inches dropped between 1.9% and 3.5% compared to the first half of the month. The street price of 50-inch PDP-TVs dropped 4.4%, but 42-inch PDP-TV prices rose 1.3%.

But LCD panels for TVs are in short supply in many sizes, and set makers have no leverage to push panel prices much lower for much of this year. In the second half of January, again according to Witsview, the price quotes for 20.1-inch TN VGA, 26-inch TN WXGA, 32-inch VA WXGA, and 37-inch VA WXGA panels all showed no change at all from the first half of the month, and 42-inch VA WXGA panels dropped $5, or less than 1%. The LCD panel shortage is sufficiently severe that some set makers are planning to increase production of PDP-TVs to cover the projected shortfall.

All of this points to a good year for panel makers in 2008 and relatively stable prices at the set level.

Given the panel shortage, it’s not surprising that panel makers are projected to sharply increase CAPEX this year, with at least two new LCD fabs coming on line in the second half of the year. Two huge new fabs will ramp up in 2009, Sharp’s Gen 10 LCD fab, and Panasonic’s new Amagasaki PDP plant, which will be able to produce 1 million sets per month.

So the question for 2009 and 2010 is whether panel makers will be able to keep their rapidly growing capacity in line with demand or whether, once again, they will overshoot and glut the market. A new-found rationality and willingness to manage inventory with discipline seems to have taken hold in the panel business, but memories can be short. Perhaps the "eternal plunge" will reappear in 2010 after all.

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