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LCD Televisions Need Value-Added Benefits

iSuppli forecasts the worldwide LCD-TV market will grow to $84.3 billion in revenue by 2010 expanding at a Compound Annual Growth Rate (CAGR) of 27.5 percent up from $25.1 billion in 2005.

LCD TVs are expected to surpass CRT TVs in revenue by the end of 2006, and by the end of 2009, LCD TV units shipped will exceed those of CRTs on a worldwide basis.

"The declining prices and increases in the size of LCD TVs is the best possible scenario for consumers," said Riddhi Patel, principal analyst for television systems at iSuppli "Rapid growth in LCD TVs is hurting the other flat panel-television technologies -- even at the large-format level (40-inch and above) and by 2007 iSuppli predicts LCD TVs will take the lead in large screen units shipped."

However, despite this robust growth, LCD TVs face a threat: creeping commoditization that is making consumers view such televisions provided by different manufacturers as being interchangeable, and thus having no unique value. iSuppli believes the 32-inch and smaller LCD TVs already have become commoditized and predicts 40/42-inch sets will join them within the next year.

The major consequence of LCD TVs becoming commodities is that profitability is diminished. Consumers simply won’t pay a premium for a commodity product. With new billion-dollar seventh- and eighth-generation LCD fabs coming online and their possible return on investment in jeopardy, manufacturers are trying their best to avoid a quick move to commoditization, Patel said.

One way to avoid this scenario is if the entire supply chain comes together and collaborates to differentiate its products. However, doing so will come at a price of its own. Regardless, I firmly believe that you don't have to add cost to the product to add value to the 'consumer experience.' Once again, configuration and operational simplicity -- by design -- is a real value-added benefit to mainstream consumers.

"On one hand, you want to remain price competitive with the product next to your own on the retail floor, but on the other hand, the cost of manufacturing the product -- because you have added a semiconductor or some type of color improvement to differentiate it -- is not allowing you to do so,” Patel said. Because of this, LCD-TV manufacturers are having a difficult time navigating this situation, she added.

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