BCN, a Japanese consumer electronics market research firm published a review earlier this week of the LCD TV market in Japan ahead of this year's holiday shopping season. The original article is in Japanese but I have covered the main discussion points below including the battle between Sharp (OTCPK:SHCAY) and Sony (NYSE:SNE) and relevant market data.
The keyword for LCD TV manufacturers in 2006 has been "enlarging" screen size. Prices in the best-selling 32"-37" range continue to fall, putting pressure on profit margins. Thus, the larger the panel size, typically the bigger the margin, and so at least in the short-term avoiding a dreaded price war. The theme for manufacturers is "value-added." In addition to larger, better quality displays, expect to see better surround sound equipped TVs as well as more connectivity options and branded component offerings.
The problem in Japan is whether consumers will embrace 40+ inch screens. It's not only a price issue, it's also a matter of space given that dwelling sizes are comparatively smaller than in the U.S. As of August, 40+ inch LCD TVs made up less than 10% of the Japanese market with 32 and 37" only recently surpassing 30-inch and under LCD TVs, with both in the upper 40% range.
Now, let's focus on the heated battle between relative latecomer Sony and the more entrenched Sharp. Sony introduced its new Bravia LCDs last October and from the start dominated sales in the largest screen sizes of 40+ inches. Sharp hurt itself by only having one model in that size range. Sony's market share in this segment exploded from around 10% all the way to 70+ percent by May, ahead of the World Cup Soccer tournament that began in June. Sharp meanwhile took a direct hit and saw its 70+ percent market share bottom out at around 25% in May and currently is now at around 30% (Sony is at about 65%). Toshiba (OTCPK:TOSBF) and Victor (majority owned by Matsushita Electric Industrial (MC-OLD)) are minor players. BCN didn't discuss Panasonic, Matsushita's leading consumer brand.
In a separate report, the latest data compiled by BCN through the 20th of this month shows Sharp still maintains a sizable lead in the overall LCD TV market in Japan against Sony with its market share at 49.4% (versus 51.0% last month) compared to Sony's 23.8% (+1.3% m-o-m). Matsushita came in third at 12.2% for 0.8% month-over-month increase. Note however that Sharp still lost ground, about 1.6%, seemingly to Sony.
For this coming holiday shopping season Sony is offering 7 new models among its X, V and S series LCD TVs. 'X' is its highest quality, largest sized -- up to 52" -- and most expensive at 450,000 to 800,000 yen ($3,800 - $6,800). The V and S series go up to 46" priced at between 400,000 to 500,000 yen ($3,400 - $4,300) and 350,000 to 450,000 yen ($3,000 - $3,800), respectively. Sony plans a near simultaneous global launch between October and November.
Sharp launched its Kameyama 2 panel facility earlier-than-planned in August in order to expand capacity in the 40+ inch range. Its new 52" model will sell for about 600,000 yen ($5,100), its 46" model at around 500,000 yen ($4,300), and its 42" model at about 450,000 yen ($3,800). Its new models go on sale in October both in the U.S. and Japan. Sharp says it is working on improving its image and brand recognition overseas.
DisplaySearch's Q2 data shows Sharp fell to third-place globally in terms of LCD TV units sold. Sony remained in the first spot followed by Samsung in second. On a revenue share basis Sharp fell to the fourth spot as Philips/Magnavox moved into third and Sony and Samsung maintained their first and second place rankings, respectively.
For what it's worth, Sharp is designing and manufacturing mostly in-house -- specifically so in the 40+ inch range. Sony on other hand is partnered with South Korea's Samsung in a joint venture, effectively sharing the risks and rewards. Both Sharp and Sony have committed sizable capital and it's difficult to say which approach is better.
Be aware that LCD TV sales impact Sharp's earnings much more than Sony's, given the latter's conglomerate-like structure. That said, investors seem concerned about Sharp's necessity to commit more and more capital and urgency to both boost margins and expand market share. Sharp just announced a convertible bond sale totaling 200 billion yen ($1.7b), one of the largest in Japan in recent years.
The emphasis at Sharp seems more on boosting margins although adding to its market share is obviously a plus. Pay particular attention to how the high-end, larger-screen segment plays out because this is where the major players are shifting their resources and where margins are highest.
Disclosure: I do not own shares of any companies mentioned in this article.