What They Say
DSCC’s Bob O’Brien published the Editor’s Notes from the DSCC Weekly Review as a blog post. He considered the cost reduction pressures, particularly the development of the Chinese economy, on the world economy and especially on TV pricing. He points out that there is a US government statistic that tracks TV prices over time and he points out that in the past 25 years,
“there were only twelve individual months where the TV index increased, and only one instance when it increased two months in a row. There was never a 12-month period where prices increased, and the annual price declines ranged from -4% to -25%”.
Over time the overall Consumer Price Index (CPI) went from 154.4 in January 1996 to 261.6 in January 2021. On the other hand the TV index went from 65.8 to 1.37, a decrease of 98% or an average of 14.3% per year price decline.
However, for the year to May, TV prices rose by 6%, the first annual rise ever. This has been driven by rising panel prices and he points out that the opportunities for cost reductions for LCD makers is now limited and some materials such as glass are increasing in cost.
He goes on to suggest that the stop in price reductions may mean the end of the last few decades of global low inflation.
What We Think
Interesting thoughts from Bob, here. There are, I think, three key enablers for the move to lower cost TVs. One obvious one is the dramatic reduction in LCD pricing, but that has partly been driven by the efficiencies driven by new generations of factories. That has (probably) come to and end now. A second one has been the switch to digital electronics and the impact of semiconductor cost reduction and a dramatic reduction in assembly cost. An analogue CRT TV had a lot of individual components, high voltages and was complex to assemble. The advent of LCDs reduced assembly costs significantly.
I would expect some continued savings in TV hardware from semiconductor developments, but while hardware gets simpler, the software in sets gets more and more complex and that may help to balance out the overall cost.
In digging around on this article, I found this interesting short article on the ‘hedonic model’ used to account for changes in TV technology over time.
As for the end of low inflation for global economies, the vast sums pumped into economies to reduce the impact of the pandemic will certainly add to money supply and that may cause inflation – but I’m not an economist and even economists rarely agree, except in retrospect – and not always then! (BR)
This shows the TV CPI Trend compared to other technologies to 2015. Go here for an interactive version.
