As material prices for the manufacture of LCD panels drop, the overall cost of production of LCD panels will drop. Procurement managers track this and will extract as much price decreases as possible. These managers know that a lower price will bring forth added demand. But sometimes, little decreases in price won’t do a thing to demand. Take for example a 32″ LCD TV: if the current price is $1499 and that drops to $1449, I’m pretty sure very few will notice. However, when the price drops from $1049 to $999, most will notice and there will be a large increase in demand for it.
Although DisplaySearch is right in saying that overall LCD TV prices are falling slower than last year, this is nothing new. Because LCD TVs were rather new to the TV market, prices were high in the beginning and when it started ramping in 2005 and sold about 20 million units, prices started to come down, and fast. This year, we are looking at about a 50 million LCD TV market and prices will drop, but drop a little slower as the market slowly begins to stabilize. Once LCD TVs hit the 50% mark of all TVs, I’m sure pricing trends will track in a similar way to notebook PCs and LCD monitors.
US consumers are generally known to go for the largest screen size they can purchase, but I think this is a bit too simple. There are more discerning consumers of TV than last year and the year before that. Consumers now actually dig into the different technologies and brands will see that size is not the only thing that matters. Pricing is key and the fact that 32″ LCD TVs, not 37″ or 40″, are the most popular size attest to this assumption. Get 37″ down to $999 and you’ll see consumers migrate to that size. Combine an acceptable level of screen performance, box design, usage simplicity, and price and you’ve got a winner. Plasma TVs have hit the spot with “HD” 42″. I put HD in quotes because in most cases these HD-ready units have a discreet pixel format of only 1024 x 768, instead of the required 1280 x 720 or 1366 x 768. These units will need scaling of HD content, which is done quite well and for most consumers the quality difference is minimal enough to want them to save $500 for a Full HD unit.