The minimalist architect Ludwig Mies van der Rohe used "less is more" to describe a design approach that increases aesthetic impact by minimizing architectural complexity. In a period of economic uncertainty, we’ve been speculating - on the basis of unabashed intuition and largely anecdotal evidence - that U.S. consumers (at least) would start buying more of less. That is, they would shift their HDTV purchases from larger to smaller sizes, thus reversing a well-established trend.

Ken Werner
Senior Analyst and Editor

Last week, our friends at Pacific Media Associates released data confirming that this shift is under way. The market share for 30- to 34-inch LCD-TVs leaped to 24% in February from 16% in January, while 45- to 49-inch LCD-TVs dropped to 14% from 18% and 40- to 44-inch flat-panel TVs (both LCD and plasma) deflated a bit to 18% from 20%.

David Barnes, VP for Strategic Analysis at DisplaySearch, says TV makers plan to sell 29% more 32- and 37-inch LCD-TV sets this year than last. But PC and monitor makers depend on some of the same Gen 5½ and Gen 6 LCD capacity used for 32- and 37-inch TV panels, and they plan to sell 11% more units. Can both of these goals be implemented simultaneously?

No. DisplaySearch expects Gen 5½ and Gen 6 LCD capacity to expand only 19% in 2008. Even with productivity gains, PC makers and TV makers are not going to get all the panels they want. If, as expected, entry-level consumers in China (who are expected to buy lots of sets in advance of the Beijing Olympics) and suddenly cash- and credit-pinched consumers in the U.S. want even larger numbers 32- and 37-inch LCD-TVs, panel supply will constrain the market.

Barnes also reports industry speculation that Tier 1 TV brands may use their captive LCD capacity to strangle newer brands like Vizio and Olevia, which depend on merchant LCD suppliers. Negotiations will be soon be under way for the 3Q allocations that determine what sets will be available for Black Friday promotions, and those allocations will be determined this quarter.

If these are the dynamics that play out on the LCD side, there may not be a 40-inch-class LCD panel shortage, and plasma panel and set makers won’t get the boost they were hoping for in this segment from tight LCD supplies. On the other hand, Vizio’s plans to make and sell 32-inch plasma TV sets may wind up looking brilliant. Maybe less is more after all.

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