According to a report from DisplaySearch, second quarter global TV shipments fell 8% year-over-year and 32% sequentially. LCD, which accounted for over 85% of the market in the second quarter, saw shipments drop 2%. Since the introduction of the flat screen TVs, the TV industry has become extremely competitive and has faced severe pricing pressure. However, the lower prices haven't been enough to increase demand.
Once premium brands, Sony (SNE) and Sharp have lost market share to cheaper competitors like Vizio, LG (LPL), and Samsung (SSNLF.PK). From early results, it appears 3D TVs in developed markets aren't much of a hit, and demand in these regions, especially Japan, continues to fall. Flat screen TVs do not last as long as their tube predecessors, so the refresh cycle will continue, but TVs will be sold at a significant discount to the prices we saw in the mid-2000's. The TV OEM business doesn't look very attractive, in our view.
Component makers will also feel the pinch from weaker unit demand as TV manufacturers continue to build inventory. Corning (GLW) and GT Advanced Technologies (GTAT) will feel the pressure, though both firms' exposure to mobile devices should help alleviate some of the pain. Semiconductor firms like NXP Semiconductor (NXPI) and STMicroelectronics (STM), which make TV inputs, may face some headwinds as well. We don't currently see much value in any part of the TV supply chain at this time.
For most firms, TVs are just a product in a larger portfolio, but we think the real loser from declining TV shipments is Best Buy (BBY). Contrary to what Best Buy bears and Amazon (AMZN) bulls believe, plenty of consumers still purchase TVs from the big box retailer. For an in-depth valuation assessment of why Amazon's price tag north of $200 per share is justified, please click here. However, without much innovation in the segment, Best Buy is missing out on TV customers coming into the store and the chance to sell other products on its floor to these customers.