Can 4K Ultra HD and OLED save the TV manufacturers?
How long can TV divisions continue to lose money before the boards pull the plug?
It had been rumoured for nearly a year but it still came as a surprise when Panasonic - plasma’s staunchest supporter - finally called time on the enthusiast’s favourite television technology.
The Japanese manufacturer’s announcement that they will cease all plasma production by the end of this year and stop selling them entirely by March of next year, highlights just how difficult the TV market has become. In fact the press release from Panasonic made specific mention of the collapse of Lehmans in 2008 and the resulting price competition in the global market. This has resulted in hard times for all the television manufacturers but especially those in Japan, who find themselves squeezed between a saturated domestic market and strong competition from South Korea and, more recently, China.
The decline in the demand for plasma has been precipitous over the last two years, forcing Panasonic to shut all but one of their state-of-the-art production facilities and concentrate more on commercial applications for the technology. By 2013 plasma’s share of the market was tiny and with OLED waiting in the wings, the writing was most definitely on the wall. We should probably be grateful that Panasonic continued with plasma for as long as they did, culminating in this year’s ZT65 - possibly the pinnacle of plasma innovation. However you can only go on losing money for so long before you have to pull the plug, just ask Pioneer.
When that manufacturer exited from the plasma market it was Panasonic who largely took up Pioneer’s mantle and they certainly invested the most. However they weren’t the only plasma manufacturer, with both LG and Samsung producing extensive line-ups. That has changed in recent years with LG slashing their plasma line-up to a handful of models and Samsung reducing their’s significantly as well, although the latter has still kept pace with Panasonic, resulting in this year’s excellent F8500. Publicly both LG and Samsung continue to support plasma but based on market trends there is very little incentive for the South Koreans going forward.The Japanese manufacturer’s announcement... highlights just how difficult the TV market has become.
It’s easy to say that plasma’s decline was inevitable but that doesn’t make its passing any easier. At least the enthusiast can take comfort in the fact that, as swan songs go, plasma’s last year was a great one with some of the best models ever made hitting our stores. It’s hard to tell whether prices will increase as supply dwindles or drop as Panasonic clear their inventory but one thing’s for sure, if you want to buy a Panasonic plasma, you’d better get in quick.
If it’s “so long plasma and thanks for all the great pictures”, where does that leave the TV manufacturers? Well in their press release Panasonic mention promoting the development of non-TV applications and various restructuring measures aimed at reducing fixed costs. The latter statement relates to their decision last year to outsource all their LCD panel production and, with the closure of their remaining plasma factory, the manufacturer will no longer make their own panels. They are not alone in following this strategy and many of the other major manufacturers are in the same position
The simple fact is that many of the TV manufacturers are in trouble, thanks to increasing costs, decreasing margins and saturated markets.The simple fact is that many of the TV manufacturers are in trouble, thanks to increasing costs, decreasing margins and saturated markets. The transition to high definition, coupled with the digital switchover provided consumers with a reason to upgrade their aging TVs but those were largely one-off events. The use of edge LED lighting to create ultra-slim TVs also helped fuel demand, although the fact that many consumers thought their ‘LED TV’ was a new technology might come back to haunt the manufacturers next year. More recent initiatives to increase demand have proved less successful, with 3D proving a failure and Smart TV largely unable to tempt consumers away from their tablets.
So what next? Well clearly the next big thing will be 4K or Ultra High Definition (UHD) which has the dual benefit of being simple to understand (higher resolution) and not requiring glasses. The UHD LCD panels are also relatively easy to make and aside from the upscaling engine, the rest of the technology can be ported over from existing 1080p TVs. That means the Japanese and Korean manufacturers can retain some of that much needed margin, although at the rate prices are already dropping, not for much longer. And that’s before the Chinese manufacturers spoil the party.
UHD means that the manufacturers can retain some much needed margin, although at the rate prices are already dropping, not for much longer.UHD has had some issues however, firstly the benefits are difficult to see on a smaller screen size and secondly there’s currently no content. The first problem means that Ultra HD will be used predominantly for much larger screen sizes and whilst this market is growing, especially in the US, it’s still relatively small. As for the second, we all know content is king and it was a lack of it that helped accelerate the demise of 3D. Whilst UHD content will increase, it will initially be limited to those with fibre optic broadband, satellite subscribers and those that buy a 4K Blu-ray player. It will also take time and that’s the one thing that the TV manufacturers don’t have.
The other big hope is Organic LED (OLED) which, unlike a LCD TV with a LED backlight, is actually a new technology. As is well reported, OLED has had a troubled birth with the panels proving extremely difficult to make. This has resulted in repeated delays and excessive price tags, all of which currently preclude it from the mass market. Of course production costs and thus prices will ultimately fall but by how much and how quickly? Once you’ve got around the thorny subject of an OLED TV not being a LED TV, the benefits are clear to see but when have consumers really cared about quality - despite what they might say in marketing polls. If picture quality really was an important factor, plasma wouldn’t be in its death throes. Besides if all OLED does is replace plasma as a niche product then it will have failed.
If all OLED does is replace plasma as a niche product then it will have failed.The Holy Grail is undoubtedly Ultra HD 4K OLED, a TV with the best of both worlds - higher resolution and superior picture quality. This brings us back to Panasonic who, along with Sony, LG and Samsung, demonstrated a UHD 4K OLED at IFA in September. However unlike the other manufacturers, Panasonic have a new printing process for manufacturing OLED panels that is apparently cheaper and more reliable. Is this why Panasonic are shutting down the plasma factories? Are they retooling to mass produce Ultra HD OLED screens?
It would be nice to think so but one thing’s for sure, if they are it’s the last roll of the dice because the current situation is unsustainable. This doesn’t just apply to Panasonic but to all the Japanese manufacturers, many of whom are still struggling to recover from 2010’s earthquake and tsunami. Sony have just announced quarterly losses of nearly $100 million in their TV division and the numbers are no better for the others.
How long can a TV division continue to lose money before the board pull the plug completely?In this respect Panasonic have shown the way, shifting the focus away from their loss-making TV division and into other areas where they are stronger. Sony however appear to be committed to consumer electronics and of all the major manufacturers they have the most invested in the success of 4K Ultra HD - as they would prefer it was called. At lot is riding on both UHD and OLED next year but just as plasma’s demise was inevitable, so it seems equally as likely that at least one major manufacturer will withdraw from the TV market in 2014.
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