Plasma panel market loses pace

The long-dreaded slowdown in the plasma panel market now is at hand, with shipment growth declining dramatically in 2009 compared to 2008, according to iSuppli Corp.

Global plasma panel shipments will increase by a mere 6.7 percent in 2009. This compares to 19.7 percent growth in 2008. The figure presents iSuppli's annual forecast for plasma panel shipments for the period of 2008 through 2010. Note that this figure covers plasma panels, and not shipments of end products that use the display technology (i.e. plasma TVs).

Global plasma panel shipments will increase by a mere 6.7 percent in 2009.(Click to view full image)

Market exits
"On the supply side, two of the three Japanese plasma panel makers—Pioneer and Hitachi—have announced plans to withdraw from the business," said Riddhi Patel, principal analyst for TV systems at iSuppli. "This leaves only Panasonic as the sole plasma panel maker in Japan, and even this company just delayed its new Amagasaki production line."

The market exits of Pioneer and Hitachi come after the reorganizations at Korean plasma makers Samsung SDI and LG Electronics, which already had caused panel shipments to slow down.

"On the demand side, sales growth for TVs and other plasma-display products is not what it used to be," Patel added. "Weak consumer spending and business purchases are discouraging plasma panel makers from ramping up production. The economic downturn is affecting both retail and business purchases."

Call for new strategies
Demand is bound to recover at some point near the end of this year or in 2010. However, 2009 is going to be slow across the board for plasma panel makers.

Quarterly plasma panel shipments will continue to follow the seasonal pattern, with sales rising during the 2H of the year. However, 2H sales will grow at a far slower rate than in previous years.

To remain competitive amid current market conditions, plasma panel makers must alter their product strategies.

While continuing to improve the picture quality and performance of their products, plasma panel makers need to place greater emphasis on reducing costs. They can achieve both goals by using better phosphors, single-scan technology or changing or enhancing the cell structures of their panels.

One market trend is moving in favor of plasma makers: Consumers are demanding larger-sized TVs. This plays to the strength of plasma, with holds a price advantage over LCD TVs at larger dimensions.

However, the TV market also is moving toward the full HD resolution, slimmer form factors and wireless connectivity. To compete with LCD, plasma makers and TV brands must make strides on these fronts.

Key success factors for plasma panel makers and TV brands include the following:

? Increased focus on 50-inch and larger sizes;
? More stress on new business areas beyond consumer TVs such as digital signage, retail signage and more;
? Cutting costs;
? Making full HD resolution standard on all products.

Slowdown in 32-inch
After moving out of the area to focus on larger sizes, plasma TV OEMs re-entered the 32-inch market in 2H 07 because they detected a gap in the LCD TV makers' offerings that they could capitalize on.

However, with 32-inch HD LCD panels having come into ample supply, demand for PDP panels at this size has dropped dramatically. Even in emerging regions, there has been a slowdown in 32-inch plasma sales as consumers began seeking larger sets.

The outlook isn't much better on the 42-inch front. While this size initially represented the sweet spot for plasma TVs, declining prices for LCDs—along with limited availability for full-HD plasma panels—is impacting plasma's place in the market. As the LCD makers continue to move to newer-generation fabs and their growing capability to produce even cheaper panels at the 40-inch and larger size range, this will squeeze the plasma market even further.

"For now, the sweet spot for plasma has moved to the 50-inch and larger market, where the cost benefits of choosing plasma give it an advantage over LCDs," Patel said. "But, just as in the 42-inch size, this advantage eventually will evaporate."