TV manufacturers facing tough times

TV manufacturers will reduce production volumes to avoid mounting inventory

Despite the enormous popularity of the television, the TV manufacturing industry is not immune to the effects of the credit crunch, and growth is slowing worldwide, according to Gartner's TV Trends report.

The price of energy and food has climbed in recent months, prompting an inevitable decline in consumer confidence levels, said the report. This has affected TV manufacturers which have invested heavily over the past 10 years in high-volume production facilities for flat-panel TVs, especially LCD panels.

Geographically, the emerging economies of China, India, Russia and Brazil are all expected to show a decline in growth in 2010, and will not counter the more severe declines in the developed economies.

This will lead some TV manufacturers, such as Samsung, LG and Philips, to reduce TV production volumes to avoid mounting inventory as sales weaken, Gartner said.

Meanwhile, the report predicts that expenditure on research and development specifically aimed at new display technologies, such as organic light-emitting diodes, will either be shelved or reduced significantly until the economic situation improves.

Gartner stressed that the investment community must continue to encourage new technology providers, but must not expect any significant return before 2012.

However, reducing production volumes alone will not be enough, as retail pricing becomes a critical buying factor for consumers.

To reduce component costs, TV manufacturers are changing the mix of TV screen sizes they make to favour smaller screen sizes of 40in and below, which will usually be high-definition sets but will not offer a wide range of additional functionality.

To weather this storm Gartner urged manufacturers to keep a close eye on the demands from each market, and respond accordingly while keeping a tight rein on inventory levels. Furthermore, investment should focus on technologies such as integrated system-on-chip designs or low chip-count chipsets at competitive prices to help lower manufacturing costs.

At the same time, semiconductor vendors should put local product marketing engineering expertise close to design centres to support TV manufacturers, possibly even putting engineers into the manufacturers' facilities to support and add value to their customers.

The report concludes that TV design and innovation will stagnate for at least two years, and possibly longer. However, the effect on TV manufacturers will last beyond 2012 as some companies will disappear and others will restructure during the next three to four years.