Read the data closely and the LCD industry, especially Samsung, Sony (NYSE:SNE) and Sharp (OTCPK:SHCAY) can be greatly encouraged. Plasma is shifting its emphasis out of the 42-43" category towards the 50" market. 50" share rose from 14% to 18% and is expected to increase further to 21% in the current quarter. In other words, despite its optimism that volumes will grow by one-third in the current quarter, the plasma community is recognizing that its traditional advantage over LCD in the 42" class is being all but eliminated.
It's a battle of performance now, not a battle of prices. And with LCD offering full 1080p HD here, and a small and ever-shrinking price premium, plasma needs a new mass market, otherwise volume stagnation will continue and the new plasma manufacturing capacity will sit idle.
More consumers than ever will be buying a 40-something inch TV in the coming holiday season. It's beginning to look like the LCD industry will have cause to celebrate in this segment.
How will LG Electronics, the #2 manufacturer of plasma panels and largest shareholder in LG.Philips LCD (NYSE:LPL) react? Managing the transition from plasma dominance to LCD dominance in this segment is commercially and culturally challenging.
And what about Philips (NYSE:PHG), an opportunistic player in both plasma and LCD end markets? These two CE brands will largely seal the fate of LPL. If they purchase large numbers of 42" LCD panels, then LPL's Gen 7.5 fab will do good business. And if not, LPL is likely to be sitting on even larger 42" inventories at the end of this quarter.