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Market Insight

Samsung Pulls Plug on Plasma

July 09, 2014

Jusy Hong Jusy Hong Research and Analysis Director, Smartphone

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Samsung SDI will halt its Plasma Display (PDP) module production in the second half of 2014 and as a result Samsung electronics will likely stop selling PDP TV shortly after. The PDP industry has been competing with LCD in the large size TV market for more than 10 years and the competition is finally going to the end soon. After Panasonic had officially announced its withdrawal from the PDP business at the end of last year, the remaining PDP manufacturers such as Samsung, LG and Changhong had been weighing when the best time would have been for them to follow suit.

 

Our Analysis

IHS forecasts that PDP TV demand will shrink to less than a million units in 2015 as global brands won’t continue PDP TV sales further than 2014 and will completely disappear from the TV market in the second half of 2016. Therefore it is not surprising news that Samsung will exit the plasma business. We are also expecting that LG will halt its PDP production in the second half of this year. This will make Changhong (COC) the last PDP manufacturer beyond 2014. However, we believe that Changhong will also have to close its PDP business as the entire eco-system for this display technology will collapse after the top 3 makers exit.

Although PDP has superior picture quality over LCD in terms of response time, contrast ratio, color reproduction rates etc., these were not sufficient enough for PDP to survive in the TV market. We can list several factors to summarize why PDP lost the battle with LCD:

  • Economy of scale
  • Investment
  • TV Brand competition
  • Brightness and Power consumption
  • Lack of promotion and marketing
  • High resolution
  • Design

The scale of the LCD industry is much bigger than that of PDP, it covers a very wide range of products from the small size as smartphones to the large size as TVs. On the contrary, TV has been the sole application of PDP from the beginning. This has weakened the flexibility of PDP under tough market situations. The LCD industry in contrast has been evolving rapidly from both technological development and cost reduction, as there are thousands of companies in the LCD industry competing with each other. However, PDP couldn’t parallel the evolving pace with LCD, as the scale is much smaller and the number of market contenders is fewer than with LCD. Consequently, even superior picture quality, faster response time and competitive price advantage that PDP had over LCD in the market for large size TVs didn’t last long, LCD is even cheaper than PDP now for the same size and resolution.

As a result of the above competitive factors spurring it forward, LCD has continued to develop for more than 10 years, increasing in terms of production capacity and technological development, while investment in PDP stopped since 2010. The limited product line-up and capacity of PDP that resulted caused weakening cost competitiveness.

When the TV market transitioned from CRT to FPD TVs, Korean TV brands increased their presence significantly in the TV market using LCD as leverage. On the other hand, Japanese TV brands lost their market leadership. The two Korean TV brands have been focusing on LCD TV as they are also involved in LCD panel business through their subsidiary companies, though some Japanese TV vendors were focusing on PDP as their main TV device. Panasonic, Hitachi and Pioneer were the three TV brands focusing on plasma. Hitachi and Pioneer exited the PDP TV business in 2009 and Panasonic in 2014.

Although Samsung and LG also have been selling both LCD and PDP TV line-ups, the priority has always been on LCD TV. Other Japanese brands such as Sony and Sharp also focused on LCD rather than PDP. However, Sony didn’t have their own LCD panel business, and Sharp didn’t invest on LCD panel business as aggressively as its rivals in South Korea and Taiwan. Panasonic stuck to PDP as a main TV application until 2012.

In the global FPD TV market, the combined market share of the two Korean brands increased to 37% in 2013, from 30% in 2009. At the same time the combined Japanese brands’ market share decreased to 22% in 2013, from 34% in 2009.

Brightness and power consumption were the main disadvantages of PDP over LCD in the past, and LCD TV makers stressed these points in their marketing. This produced negative consequences for the public perception of PDP TV, making it appear old and less attractive TV to the consumer. The high ambient lighting in retail stores also made the PDP look very dark in comparison to LCD. At that time LCD TV makers increased the brightness of the TVs they made to 550cd/m2. This was actually meaningless, as the customer in practice had to adjust the brightness down since this made the TVs too bright for home viewing. Now the average brightness of LCDs has come down to 300cd/m2 which is not very different from PDP. In addition, as LCD technology has moved from using CCFL BLU to LED, LCDs have lowered their power consumption, and this has been a distinction which LCD TV makers have also emphasized in their marketing. This also had a negative impact on PDP.

More recently, large screen sizes, higher resolution and slim design have been the main trends in the TV industry. Due the structural barrier, PDP cannot support UHD resolution so far and it’s difficult to sell a slim designed high-end PDP TV as it is now known as a cheaper type of TV. This is why previously phased out SD resolution PDP TVs in 40-inch and 50-inch screen sizes reappeared in the TV market as a cheaper solution during 2013.

Consumers’ options for TVs have therefore narrowed down between two devices. Conventional TVs such as CRT, Rear-Projection TV, PDP TV and LCD TV with CCFL BLU have either already disappeared or will disappear soon. The only choice we still have in the TV market is between LCD TV with LED BLU or OLED TV. However, OLED TV has only just emerged and still needs some time to account for a meaningful portion of market. Therefore, LCD will continue to monopolize the TV market for the next 15 years and even further. This will be unfortunate for consumers hoping or expecting to see technological diversity in display formats among the TVs they wish to consider for purchase.

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